I-Team: Documents reveal reasons for Central Falls bankruptcy


Hundreds of pages of court documents filed in the Central Falls bankruptcy tell a tale of poor governing, financial mismanagement and labor costs the city can’t afford.

Most of the filing consists of previous statements by the first receiver for Central Falls, Mark Pfeiffer. But the current receiver, Robert Flanders, paints a dark picture of a city that simply ran out of money.

Flanders has 30 days to come up with a plan to make Central Falls solvent once again. And from the bankruptcy filing, he makes clear that a big part of that plan will be severe cutbacks in fire, police, and municipal personnel.

“Given the fact that the majority of the City’s expenditures are associated with labor costs … it must find a way to reduce its annual expenditures on labor as the centerpiece of any viable recovery plan,” Flanders wrote.

Flanders also said the huge unfunded liability in the city pension system was the result of mismanagement.

“Unfortunately, the City historically often failed to make these annual investments into its City-run pension funds … resulting in very large unfunded liabilities,” Flanders said.

Flanders said although the fire, police and municipal unions negotiated in good faith, they couldn’t accept the cutbacks he recommended.

The union representing municipal workers said it’s hiring legal counsel to look into challenging any changes made by Flanders or the bankruptcy judge.

The receiver said the city will have to make sure in the future that it makes all its required contributions to the city-run pension plan to avoid the current multimillion-dollar unfunded liability.

Flanders told the bankruptcy court that he and others did all they could to avoid going to bankruptcy, but he said by the end of this month the city would not have anywhere near enough money to pay its bills.

Gov. Lincoln Chafee said Central Falls, like other distressed cities in Rhode Island, suffered from years of cutbacks from the state.

“Deep, deep cuts in state aid to all cities and towns across Rhode Island, but particularly the distressed communities like Central Falls, Pawtucket, West Warwick, Woonsocket, Providence even, really reeled under those cuts,” Chafee said.

A list of 20 creditors are contained in the bankruptcy papers.  The top one is a firm that boarded up abandoned houses in the city and was the subject of several NBC 10 reports.

The first hearing on the bankruptcy filing will be held Wednesday morning.

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