In the wake of tough economic times, the country, states and cities are all fighting to pay their bills and keep the money flowing into crucial programs. It appears as though there was been an increase in the number of municipalities seeking bankruptcy protection through Chapter 9. In the past, Chapter 9 cases were considered rare and usually involved cities that fell prey to corruption and mismanaged funds; whereas these days many more cities are looking to reorganize their debts for less scrupulous reasons.
Small Town Troubles
A small Rhode Island town filed for Chapter 9 bankruptcy protection yesterday in efforts to resolve their financial troubles. Central Falls, R.I. has been quietly fighting the financial battle for a while now and after many unsuccessful attempts to restructure their debts. Multiple tax increases and reduced services proved to be unfruitful attempts for financial relief. Their next proposed step: to cut the pension and benefits of union workers and retirees. The city voted against proposal to cut pension and benefit by nearly 50 percent.
Even with the fact that Central Falls has entered into bankruptcy protection, city officials say they plan to pass the pension and benefits cuts proposal anyway in hopes of freeing up about $2.5 million. With nearly has $80 million in unfunded pension and benefits obligations, adding to the already total deficit of $5 million, city leaders say the cuts are crucial for the city to “reinvent itself as a viable community.” Other possibilities for restructuring funds include layoffs to teacher, police and fire department employees.