Bits and pieces from Flanders’ sweeping Central Falls overhaul

Central Falls could be out of bankruptcy by the end of the year.

Hard to believe? Undoubtedly. But the city’s hard-charging and ever-optimistic receiver, former Supreme Court Justice Robert Flanders, was adamant that it can happen if unions and retirees agree to the five-year stabilization plan he unveiled on Thursday.

It’s still unclear how likely it is they’ll come to an agreement – particularly when the plan includes cuts of as much as 55% in some retirees’ pensions. But Flanders said the two sides have “made considerable progress” since he filed for bankruptcy on Aug. 1.

The centerpiece of today’s press conference, where Flanders was joined by Gov. Lincoln Chafee and local elected officials, was the unveiling of a 69-page five-year financial plan that would close a $6 million shortfall in Central Falls’ $16 million annual budget and, the receiver writes, help the city “avoid financial purgatory.” It would also allow the city to remain independent, making a merger with Pawtucket or another place unnecessary.

We’ve uploaded the PDF to WPRI.com, and you can download it here. The two sides will be back in court Friday as they debate Flanders’ decision to throw out the unions’ contracts and cut retirees’ pensions.

Do you have questions about the plan? Leave them in comments and I’ll do my best to answer. In the meantime, here are some of the highlights from the report.

• Flanders is turning to retirees for slightly more than half the $6.6 million in savings he needs to balance this year’s budget city and those in the years going forward. His plan calls for a $3.6 million cut in annual spending on retirement benefits. Both Flanders and Chafee said that’s because too-generous pension promises are what drove the city into bankruptcy. The police and fire departments take the next biggest hits, with a $1.3 million combined cut.

• The cuts ordered by Flanders would reduce the city’s unfunded pension liability by about half, from $47.2 million to $23.9 million. It’s not immediately clear to me how much it would reduce its unfunded retiree health liability, which was $32 million as of June 30, 2010, but those benefits were cut as well.

• Central Falls taxpayers will be the feeling the pain, too. Their property taxes jumped more than 19% last year and will continue to grow by the maximum allowed under state law in each year going forward. Despite that, tax collection has remained robust for the most part, with 92% of real estate bills being paid. The car tax is a different story, though; the city is only collecting on about two-thirds of the bills it sends out.

• The city’s work force is now one-third smaller than it was in May 2010 thanks to layoffs and attrition, with the number of city workers down by 56, from 174 to 118. All but 19 of those left are unionized. Most of the job cuts – 39 of the 56 – came from closing the library and the community center. The plan calls for the city work force to stabilize at 119 by July 2013, but there will be more shuffling of positions between now and then as some are eliminated and others get added. Union janitors’ jobs will be outsourced, too.

• Even after these cuts, Central Falls’ annual budget will still rise faster than the inflation rate in the coming years, with spending set to rise 5.6% a year against inflation of 2.5%. That’s partly because the state is going to start requiring the city to pay part of the cost of its school budget, which taxpayers have been covering since 1992.

• The plan would restore full funding of the mayor and the city council in 2012-13. Mayor Charles Moreau – who has said he plans to run for a fifth term in 2013 – will make $78,085 a year plus health insurance and other benefits. Councilors will get $3,675 a year but no health insurance and no pensions.

• The city is negotiating a deal with Pawtucket that would allow residents of Central Falls to use the other city’s library, with full borrowing privileges. Central Falls would transfer its annual state library aid to Pawtucket. The Adams Memorial Library might keep the building open with volunteers.

• Speaking of Pawtucket, state Sen. Elizabeth Crowley let slip that Senate President M. Teresa Paiva Weed apparently pushed back – hard – against Governor Chafee’s desire to merge Central Falls into that city. She and the Central Falls’ other two state lawmakers – Reps. Agostinho Silva and James McLaughlin – also defended how Paiva Weed and House Speaker Gordon Fox handled the crisis in Central Falls when I asked about it.

• Rhode Island really is a bondholder’s dream, as The Wall Street Journal put it last month. State law says “the power and obligation of each city and town to pay its general obligation bonds shall be unlimited,” and that appears to be the only reason a municipality can break the new 4% cap on annual property tax increases.

• Fun fact: There are 2,911 buildings in Central Falls, 80% of them residential. Of those, the majority (950) are three-family buildings. Only 4% of the city’s buildings are tax-exempt property. Also, its biggest property taxpayers are National Grid, Rand Associates and Orsam Sylvania.

• As in other places, the housing bubble inflated property values in Central Falls and then crushed them. Its residential real estate totaled $457 million in 2006-07, jumped to $660 million by 2009-10, then slumped to $369 million the following year. The 34% drop in the city’s net taxable property was far larger than its second-worst-hit neighbor, West Warwick (down 20%).

• Nobody can say Central Falls isn’t looking under every couch cushion: The plan calls for the sale of some scrap copper and unneeded equipment for a one-time gain of $85,000 this fiscal year.

• Central Falls owes state taxpayers $1.1 million for costs they covered during the receivership; the plan calls for the city to pay that back by 2020-21.

(photo: Ted Nesi/WPRI)

3 thoughts on “Bits and pieces from Flanders’ sweeping Central Falls overhaul

  1. As a taxpayer, I’m outraged that this pension situation became such a crisis leaving taxpayers (and employees) holding the bag. I don’t want to minimize that CF employees are now holding a much bigger bag of sh** than taxpayers.

    I’d like to point a finger at one of the unmentioned villains in this Theater of the Absurd.

    In the 1970’s, a lawsuit was filed against the City of Cranston by employees who argued that their employee pension contributions should not be placed into the operating budget of city hall, but should rightfully be placed into the pensioners trust fund.

    The “math challenged” judge in that case ruled against the city workers on a basis that default was not imminent. This ruling gave any municipal government in RI a get out of jail free card to not properly fund any pension plan in the state.

    If you want to see how this current crisis originated, look to that 40 year old judgment as the shot across the bow against both taxpayers and employees.

    That judge is likely enjoying his mega pension somewhere in Florida.

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