PROVIDENCE, R.I. (WPRI) – Tucked into the nearly $9-billion state budget that will be debated by the House on Wednesday is a special appropriation of $600,000 in state taxpayer money earmarked for the city of Central Falls.
As it happens, $600,000 is the exact same amount of money that Central Falls is required to repay the state by the end of the 2016-17 fiscal year, under the terms of the court decision that allowed the city to exit municipal bankruptcy a few years ago.
And that’s not an accident: House Speaker Nicholas Mattiello confirmed Tuesday that the $600,000 was included in the state budget so the payment wouldn’t be a burden on the cash-strapped city, Rhode Island’s smallest and poorest.
“Central Falls is a financially distressed community struggling to recover from bankruptcy and it is doing a great job,” Mattiello said in a statement. “We wanted to find a way to assist Central Falls while not changing the law dealing with budget commissions and receiverships.”
Mattiello was referring to the Fiscal Stability Act, a state law passed hurriedly in 2010 after Central Falls leaders surprised state officials by unilaterally filing for court receivership. It lays out a multi-step process for state intervention in the finances of troubled municipalities and has been invoked repeatedly in recent years, not only for Central Falls but for other communities such as East Providence and Woonsocket.
In Central Falls’ case, the city spent about a year in receivership before filing for municipal bankruptcy in federal court in 2011, eventually winning judicial approval for a plan that included deep pension cuts and sharp tax increases.
Under state law, cities are required to reimburse state taxpayers for the costs associated with their receivership, and if they do not provide the money, the statute orders that their state aid is docked instead.
State lawmakers previously agreed to give Central Falls until the end of the 2020-21 budget year to pay off its debt to the state. The state had billed the city a total of $3.3 million as of June 30, 2015, according to a spokesman for the R.I. Department of Revenue.
Mattiello said the request for $600,000 was made by Central Falls Mayor James Diossa and Rep. Shelby Maldonado, D-Central Falls, who successfully convinced the House Finance Committee to include the money in the budget.
A spokesman for Central Falls did not respond to a request for comment Tuesday. Diossa had already excluded the $600,000 payment from his proposed 2016-17 city budget when he filed it on May 12.