PROVIDENCE, R.I. – Rhode Island on Monday officially returned control of the financially troubled city of Central Falls to local elected officials, who must now guide the municipality through a recovery plan crafted under state oversight and approved by a federal bankruptcy judge.
State Revenue Director Rosemary Booth Gallogly formally dissolved the receivership in a letter delivered to Central Falls Mayor James Diossa.
“I’ve been waiting to hear that for two years,” said City Council President William Benson Jr., who unsuccessfully challenged the constitutionality of the receivership law and has repeatedly sparred with the receiver. “Them gone is a good thing.”
A state-appointed receiver took over in 2010 to address shaky finances in Rhode Island’s smallest city, including a massive budget deficit and an unfunded pension liability that officials said was $80 million. In 2011, the city, which also had faced a sharp cut in state aid, became the first in Rhode Island to declare municipal bankruptcy. Retirees’ pensions were cut, some by more than 50 percent; taxes went up; city workers were laid off; and union contracts were renegotiated.
The bankruptcy officially ended last fall when a federal judge signed off on the receiver’s five-year fiscal recovery plan. A newly hired finance officer will oversee the city’s budget and make sure it follows the plan as closely as possible. Any increases in spending must be offset by more revenue or less spending elsewhere.
Most of Central Falls’ 19,000 residents will likely notice no change in their day-to-day lives with the receiver gone, though city control is being handed back to a different mayor. Charles Moreau stepped down in September and pleaded guilty to a federal corruption charge; he is serving a two-year prison sentence. Diossa, a former city councilman, was sworn in in January, though not with full authority.
Diossa couldn’t be reached for comment on the end of the receivership.
He and Benson have both criticized the cost of the receivership — which must be repaid to the state. Gallogly, the revenue director, said the reimbursement will be about $3.2 million. The city has already paid hundreds of thousands of dollars more from its own budget for the receiver’s staff.
“I do not see where we’re going to have the money to pay that back,” Benson said.