The legal bill for the bankruptcy of the tiny Rhode Island city of Central Falls continues to grow, according to WPRI.com.
Central Falls first filed for receivership, a form of bankruptcy in the Ocean State, in May 2010. Since then, three receivers have been appointed to oversee the cash-strapped community. The latest receiver, high-powered attorney Robert Flanders, filed Chapter 9 Bankruptcy protection on behalf of the city in early August.
Since May 2010, WPRI.com reports Rhode Island has paid $1.07 million in legal fees associated with Central Falls’ receivership. The state has been billed for $1.2 million in services. The money has been paid to five lawyers and law firms.
According to the Providence Journal, Central Falls is in dire financial straits. The city has an operating deficit of approximately $5.6 million. However, the larger concern is an unfunded pension liability that is estimated to be approximately $80 million. Flanders filed for bankruptcy on behalf of the city after demanding retirees accept dramatic reductions to their pensions.
Central Falls is just 1.29 square miles, according to a profile on the popular website Wikipedia.com, and has a population of just under 20,000. 29 percent of the population lives below the poverty.
In 2010, the city’s mayor, Charles Moreau, requested the state appoint a receiver to assist with returning the municipality to financial viability, an article in the Providence Journal recounts. In June 2010, about a month after a receiver was appointed, state lawmakers voted to authorize the state to take control of any community which files for receivership. Accordingly, Mayor Moreau was effectively stripped of his power.
According to WPRI.com, Flanders says he expects Central Falls to exit bankruptcy within six months. However, the fate of the community remains unknown. There has been speculation by some, including Governor Lincoln Chafee speaking on MSNBC, it could merge with a neighbor, such as Pawtucket, which is directly north of Central Falls. However, Chafee backed off his comments a short time later. Other proposals have suggested sharing services with other area communities to ease the financial burden.
Central Falls is the first community in the history of Rhode Island to file for bankruptcy, and one of just a handful in the nation to take that dramatic step.