Teetering on the brink of insolvency, Central Falls, R.I. is asking its unions for major concessions to help the city close its $5.5 million budget shortfall and stave off municipal bankruptcy.
In a letter sent to the city’s police and fire unions today, Central Falls’ state-appointed receiver Robert Flanders asked retirees to accept benefit cuts and healthcare contributions that would trim the city’s pension payment by at least $1.75 million in benefit cuts and increased healthcare contributions.
If an agreement can’t be reached, the city may have to file for bankruptcy, Flanders told the Providence Journal.
Central Falls, a tiny city with a population of just 19,000, faces a $4.9 million budget shortfall, and deficits are projected to grow to $25 million over the next five years. To make matters worse, the city owes $80 million in unfunded pension and benefit obligations.
Moody’s Investor’s Service said last month that it is increasingly unlikely Central Falls will be able to stabilise its finances without a bankruptcy filing.
Bankruptcy would give Central Falls an opportunity to make unilateral changes to its union agreements. Chapter 9 municipal bankruptcies are still relatively rare, however, so it is not clear whether the city would be allowed to alter its retiree pension payments, or whether changes would be limited to contracts with current employees.
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