Central Falls RI bankruptcy deal gives bondholders 100%, cuts public pensions up to 55%.
The city of 18,000 was guided through bankruptcy by a receiver initially appointed before the Chapter 9 filing on Aug. 1, 2011. Bailey said it’s up to the state to decide whether the receiver could be discharged on completion of the case.
Last year, Governor Lincoln Chafee, an independent, ensured that investors holding $27 million of Central Falls debt would be protected when he signed a law giving them a lien on tax and general revenue.
http://www.bloomberg.com/news/2012-09-06/central-falls-rhode-island-bankruptcy-exit-approved.html
Yet “there are great lessons to be learned here,” said Theodore Orson, who represented the state-appointed receiver overseeing the bankruptcy and is a lawyer with Orson & Brusini in Providence. Chapter 9 of the U.S. Bankruptcy Code, which localities can use to cut debt as companies use Chapter 11, “can be effectively utilized to fix what appeared to be a broken city,” Orson said. (I assume this means "make the city toe our line"
The Central Falls approach “is a good sign for bondholders of Rhode Island bonds compared to, say, California,” said Alan Schankel, head of fixed-income research at Janney Montgomery Scott LLC, an investment bank in Philadelphia.
Central Falls is asking citizens and retirees to absorb higher taxes and reduced benefits after Rhode Island Treasurer Gina Raimondo last year spearheaded an overhaul of the state’s pensions. The revamp included measures such as delaying retirement and offering workers 401(k)-type plans.
Under the Central Falls plan, the city’s payroll will fall to 121 jobs from 174 in May, according to Rosemary Booth Gallogly, the state’s revenue director who oversaw negotiations with creditors. Pensions will be cut as much as 55 percent for 133 municipal retirees, while no one will get less than $10,000 a year, court documents show. They will also be required to pay 20 percent of their health-care costs until they turn 65 and become eligible for the federal Medicare program.
http://www.bloomberg.com/news/2012-08-29/rhode-island-setting-standard-for-bondholders-love-muni-credit.html
The city is a mile square and is essentially a gerrymandered fiction designed by absentee slumlords -- initially a cheap-labor reserve for surrounding areas.
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