Troubled R.I. City in Receivership Loses Democracy

When the state stepped in to take over financially struggling Central Falls in 2010, Rhode Island's smallest city lost something fundamental: its democratic government.
by | January 16, 2012
 

CENTRAL FALLS, R.I. — When the state stepped in to take over financially struggling Central Falls in 2010, Rhode Island's smallest city lost something fundamental: its democratic government.

Mayor Charles Moreau would be forced to give back his key to City Hall, and the City Council was relegated to advisory status — unsure for months whether it was even allowed to convene.

"They're being governed without elected representation," state Sen. Elizabeth Crowley said of Central Falls' 19,000 residents. "That flies in the face of the democratic principle that our country is founded on, not only our little city. Maybe we should have a tea party and dump some tea in the Blackstone" River.

Crowley, a Democrat and lifelong Central Falls resident, uses a twist on Abraham Lincoln's Gettysburg Address to describe government there, under a state-appointed receiver, these days: "of the receiver, by the receiver and for the receiver."

That receiver, former state Supreme Court Justice Robert G. Flanders Jr., is often criticized for sweeping like a dictator into a city he doesn't know, where he doesn't live and where, with the state blessing, he unilaterally decides matters that go far beyond the fiscal.

The General Assembly passed the "Fiscal Stability Act" in direct response to Central Falls' financial crisis — giving the receiver authority to file for bankruptcy, which city officials did not have. It allows him not only to "exercise the powers of the elected officials" on fiscal issues but says his powers supersede theirs.

With virtually no pushback from the Legislature, the receiver's office has broadly interpreted that law as it works to get the 1.3-square-mile city, just north of Providence, back on sound financial footing.

Flanders sought bankruptcy protection for Central Falls in August, saying it was the only option. He closed the library and community center, laid off the police chief and about 19 others and instituted a five-year "recovery" plan. It balances the city's budget through a combination of tax hikes, cuts to retirees' pensions and benefits and other budget savings.

But the receiver's office has appointed people to non-financial boards; approved business licenses, including, elected city officials say, a "massage parlor" they opposed; instituted new police promotional exams; approved a new ordinance banning overnight street parking; and even issued a congratulatory citation for a new Lions Club.

Initially, the city's business was handled by a "Receiver's Council" consisting of three appointees, including one who had unsuccessfully challenged a sitting council member; the first receiver, former Superior Court Judge Mark Pfeiffer, said it was necessary because the real City Council wouldn't comply with his policies. Last year, that body was replaced by the receiver's "hearing officer," who is Flanders' chief of staff, Gayle Corrigan.

Those meetings are open to the public, but are typically sparsely attended — not unlike regular Council meetings.

Jeff Roter, a resident for 4½ years, said he's never been much involved in Central Falls' affairs: not when the state took over, or when the library closed. But a parking ban imposed by the city's unelected overseer was too much. He had collected nearly 300 signatures ahead of the City Council meeting last week. He wasn't sure who to give them to — the council or the receiver's office — but he thought Flanders had overstepped his bounds.

"We the people won't stand for this," he told the council.

Council President William Benson Jr. said: "We have no power."

In an unusual about face, Flanders' office suspended the ordinance a day later.

In an interview, Flanders noted that the state Supreme Court upheld the constitutionality of the receivership law under a challenge by four of the city's five councilors; the judge interpreted the statute to allow him broad authority beyond just finances. He said the city needed to be rescued — from itself — and that everything he's done is related in some way to its fiscal stability anyway.

"The law suspends the usual democratic process because the economic crisis that caused the city to be running out of cash — and having to go file for bankruptcy — needed drastic action," Flanders said.

"I'm sensitive to the fact that I am not an elected official, that I don't live in the city and that people are leery of a situation where one person ... has as much power as one person does to run the city and to try and right the economic ship of Central Falls," he added. "That's the law that the General Assembly passed and I have to say, it's working, from my view, remarkably well."

Central Falls started the current fiscal year with a $6 million deficit, and multi-million-dollar deficits were projected for coming years. Pfeiffer blamed budget problems on "unsustainable" pension and benefits costs and the lack of expected revenue from the Wyatt detention center; he also cited a "culture of government" in Central Falls that let deficits fester.

City officials have said a loss of state aid and declining tax revenues contributed greatly to the fiscal woes; they filed in court for a receiver themselves, saying the city was insolvent.

Outside the bankruptcy proceedings, Flanders has extracted major concessions from police and fire retirees and the city's unions. Gov. Lincoln Chafee, whose administration appointed Flanders, said this week the "fiscal hemorrhaging" has stopped.

Flanders wonders why Central Falls' elected officials aren't grateful for the work his office has done.

"There ought to be a few mirrors held up by some of the people doing the criticism," he said.

Flanders' initial contract, beginning in February, was for not more than $250,000 in compensation for a period of up to 12 months. But he was paid $30,000 a month through June, after which a new contract was signed. He has been paid $300,000 to Dec. 1, according to the governor's office.

The Central Falls mayor made nearly $72,000 annually before the salary was cut under the receivership to $26,000.

Municipal bankruptcies are relatively rare. In Harrisburg, Pa., a federal judge threw out a petition for bankruptcy filed last fall by the City Council. The state took over the capital's finances, but the mayor still runs the city and a court-appointed receiver is authoring a financial plan that will have to be approved by a judge. In Alabama, Jefferson County — home to Birmingham — in November filed the largest municipal bankruptcy in U.S. history. A receiver runs the troubled sewer system's finances there.

In Central Falls, residents aren't necessarily enamored with the elected leadership; state police are investigating Moreau, the mayor, who has been accused of having an expensive furnace installed in his home for free by an ally who had a no-bid contract to board up houses in the city.

John Osko, a resident for 37 years, said his feelings about the receiver are mixed.

"They're raising taxes without asking anybody," he said. "If it's for the good of the city, let's raise it. If not, let's put an end to it. He chopped everybody's head in the city; he eliminated a lot of people. What extra services are we getting? We're getting less, and we're paying more."

Crowley, the state senator from Central Falls, said she wants lawmakers to clarify the receiver's role in non-fiscal matters.

"We may be in bankruptcy, but as far as I remember, I didn't lose my citizenship," she said. "Let's be very cautious about the rights that you're taking away from the governed."

Copyright 2012 The Associated Press.

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