If there can be such a thing as a successful municipal bankruptcy, then the one that Central Falls, R.I., has gone through probably would qualify. The city filed for bankruptcy on Aug. 1, 2011. The bankruptcy ended a little over a year later, and this past April the city came out of receivership. Bankruptcy Judge Frank J. Bailey called the Central Falls process an example for the nation. And there are indeed lessons for public officials everywhere in the story of how three individuals designed and executed Central Falls’ debt adjustment plan.
Gayle Corrigan, chief of staff for the city’s receiver, Judge Robert Flanders, is a CPA with an MBA in accounting. Turnarounds are what Corrigan does, and she says she’d seen nothing as bad as Central Falls. No one knew how much money the city had or how much it owed. There were 54 different accounts, some of which had been forgotten. When Flanders sent her to ask the state for $2.6 million to pay immediate bills, a sweep of all the accounts revealed that the city actually had $3 million it had been unaware of.