PROVIDENCE, R.I.—A Rhode Island city facing a severe financial crisis was placed in temporary receivership Wednesday, with day-to-day management turned over to a lawyer whose tasks will include helping to balance the budget and renegotiate contracts.
Central Falls said in a petition for receivership that it faces a $3 million deficit in its $18 million budget, can't afford its pension fund obligations and is hobbled by revenue shortfall and cuts in state aid.
The city is in "extreme fiscal stress," the petition states.
"This is a situation that no one wants to be in," City Councilman James Diossa said Wednesday.
Central Falls is the first Rhode Island municipality to seek receivership, said Jonathan Savage, a lawyer who was appointed Wednesday as temporary receiver by Superior Court Judge Michael Silverstein.
The appointment transfers day-to-day operational control of the city to Savage, who specializes in such arrangements and says he'll have the authority to recommend the renegotiating of municipal contracts or tax increases.
"Everything that will go on in the city of Central Falls will ultimately need my approval and consent," Savage said.
It's unclear how long the receivership will last.
The compact, square-mile city has a population of about 19,000, nearly half of whom are Hispanic, according to 2000 federal census data. About a quarter of the families lived below the poverty level. Its problems date back years.
"The pension plan is nearly broke," said Joseph Larisa, a lawyer who argued in court Wednesday for the receivership. "It's really reached a breaking point where the budget cannot be balanced, whoever is in charge, by itself. It needs the participation of a receivership."
City Solicitor Jack Gannon said even sharp property tax increases and municipal layoffs can't make up for the cuts in state aid.
"We've laid off people from all departments. At this point, we're down to the bone as far as public safety is concerned," Gannon said. "We can't certainly lay them off any more."
Central Falls' struggling school system became evident in February, when the Board of Trustees voted to fire all teachers at the low-performing high school, where just 7 percent off 11th graders tested proficient in math last fall. All the teachers will be hired back a labor agreement reached over the weekend that requires longer work hours.
Central Falls is also home city to the Donald W. Wyatt Detention Facility, a privately run jail where a Chinese immigrant detained for overstaying a visa was allegedly abused and denied medical care before dying of advanced liver cancer in 2008. A lawsuit against the jail and individual staff members is pending.
The jail makes payments to the city, but has been unable to make good on its obligations after falling into tough times after all immigration detainees were pulled from the facility following the August 2008 death of Hiu Lui "Jason" Ng.
