Updates: The Providence Journal fleshes out the dilemma facing Central Falls, including the fact that it is in the middle of union contract negotiations:
A Rhode Island city facing a severe financial crisis was placed in temporary receivership Wednesday, a drastic step officials said was necessary to balance the budget and restore order.
Central Falls said in a petition for receivership that it faces a $3 million deficit in its $18 million budget, can't afford its pension fund obligations and is hobbled by revenue shortfall and cuts in state aid. The city is in "extreme fiscal stress," the petition states.
"This is a situation that no one wants to be in," City Councilman James Diossa said Wednesday.
Central Falls is the first Rhode Island municipality to seek receivership, said Jonathan Savage, a lawyer who was appointed Wednesday as temporary receiver by Superior Court Judge Michael Silverstein.
The appointment transfers day-to-day operational control of the city to Savage, who specializes in receiverships and says he'll have the authority to recommend the renegotiating of municipal contracts or tax increases.
"Everything that goes on in the city of Central Falls will ultimately need my approval and consent," Savage said.
On Tuesday night, the City Council, in a vote of 4 to 1, agreed to pass a resolution that would ask Providence County Superior Court to place the state's poorest city in receivership.
Receivership is the state-law version of federal bankruptcy. In it, the court-appointed receiver has the power to go over the municipality's finances, approve or reject purchases and payments and, if the court approves, change contracts with unions and vendors.
Savage, speaking to a group of reporters in a conference room at his law firm's Pawtucket office, declined to predict what actions he might ask the court to take, from imposing new contract terms or increasing taxes, until he'd had a chance to examine the city's books and consult with representatives of all the parties who might be affected.
City Solicitor John T. Gannon said the city is the middle of all its municipal employee union contacts. Mayor Charles D. Moreau has been trying to negotiate concessions, but without success.
No joke, Central Fall's motto is "A City with A Bright Future."
Update 6-14-2010: Unions Rescued In Rhode Island--------------------------------------------
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