Central Falls, Rhode Island set to file bankruptcy exit plan delayed by Irene
Central Falls filed for bankruptcy Aug. 1, and receiver Robert Flanders said then that he wanted to submit an exit plan to U.S. Bankruptcy Court Judge Frank Bailey within 30 days. But Tropical Storm Irene forced Flanders to push back the self-imposed deadline.
“Central Falls lost power in the middle of the storm and just recovered it yesterday, and that’s hampered our access to servers and the Internet that we need to formulate the plan,” Flanders said during a taping of Rhode Island Public Radio’s weekly Political Roundtable segment.
“So there’s going to be a slight delay in us getting that before the bankruptcy judge, but our plan still is to get that in as soon as possible – hopefully next week or shortly thereafter – and we’re well along on a five-year plan of recovery,” he said.
Flanders’ plan is likely to meet with heavy opposition from lawyers representing the city’s retirees and unionized workers. They have until Sept. 16 to file a first round of objections. Flanders has said he wants the city to be out of bankruptcy by February.
Flanders has already ordered reductions of up to 50% in Central Falls retirees’ pensions and suggested he will need to slash the police and fire budgets by 40%. Attorney General Peter Kilmartin said last month he’s concerned about the impact that could have on public safety.
No Impact to Public Safety
Assuming the city budget is now balanced, the plan seems reasonable to me and taxpayers have rightfully been shielded.
There should be no impact to public safety. Police and fire fighters should be told (not asked) to accept salary cuts of 40%. Not a single police of firefighter need be fired. Thus, the concerns of Attorney General Peter Kilmartin over public safety impacts are ridiculous.
Any officer, firefighter, or teacher who can find a better job at more money in the private sector would be free to do so. I suspect few would. To prohibit future fights, the unions should be dissolved and collective bargaining ended.
The Way Forward
This is the way forward and unions better get used to it. If public unions do not agree to reasonable haircuts now, they can take larger haircuts in bankruptcy court.
All it takes is for one major city to see the light and there will be a cascade of bankruptcies by cities to get out of onerous public union contracts.
About the author: Mike “Mish” Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management. His top-rated global economics blog Mish’s Global Economic Trend Analysis offers insightful commentary every day of the week. He is also a contributing “professor” on Minyanville, a community site focused on economic and financial education. Every Thursday he does a podcast on HoweStreet and on an ad hoc basis he contributes to many other websites, including UnionWatch.