Small Rhode Island City Has Big Budget Woes

Central Falls, R.I., is a small city in big financial trouble. Seeing no way out, Central Falls put itself into receivership, the municipal equivalent of bankruptcy. Now the received wants to raise property taxes by 10 percent, and residents say they're not willing to pay.

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The city of Central Falls, Rhode Island, bills itself as a city with a bright future. Its financial problems belie that claim. The city's deficit totals 42 percent of its budget. And since May, Central Falls has been in receivership, the equivalent of a bankruptcy. The receiver's decisions have not exactly been thrilling the locals.

We get more from Flo Jonic of member station WRNI in Providence.

FLO JONIC: Central Falls, Rhode Island's financial problems are the result of years of mismanagement and overspending.

The city has pensions it cannot afford. It has lost all state aid because of the recession, and police and fire are running up overtime that isn't budgeted. Three months ago, when the deficit reached almost half the total budget, the mayor and city council took the dramatic step of turning control of the city over to a receiver.

Now, that receiver, who doesn't live in Central Falls, has proposed a 10 percent property tax increase, which will cost the average homeowner about $250 a year. Residents like Alan Parfitt(ph) are furious.

Mr. ALAN PARFITT (Businessman): I have to say, with all due respect, I believe you're making a grave mistake in your budget.

JONIC: Hundreds recently packed a wood-paneled city council's chamber to complain about taxation without representation.

Central Falls resident Shaunne Thomas(ph) says the people she elected should be making the decisions.

Ms. SHAUNNE THOMAS: I will follow this receiver everywhere he goes to let him know that he does not live in my city, he's not the representative of me, and I have to have a voice according to my government for anybody that wants to tax me. And he does not speak for me.

JONIC: Even the mayor seems to be regretting the extraordinary step he took. Charles Moreau says he'll go to court to block the property tax hike, which he says his constituents cannot afford.

Mayor CHARLES MOREAU (Central Falls, Rhode Island): It's not going to happen as long as I'm the mayor. We're going to fight it. We're going to fight on every level. It's unfair.

JONIC: But receiver Mark Pfeiffer says something had to be done to balance the city's books, and he feels confident the state will approve the double-digit property tax hike he's recommending.

Mr. MARK PFEIFFER (Receiver, Central Falls, Rhode Island): I absolutely understand the frustration, and all I can say is that I hope people can keep their patience and their calm to the extent that they can while we work through these problems.

JONIC: The situation in Central Falls is so dire, they're even turning off some of the streetlights to save money. Businessman Alan Parfitt warns that companies which haven't already fled the city will if taxes keep going up.

Mr. PARFITT: We're sick of you constantly coming to us, raising taxes and looking at other ways to save money. You make over $200 now. For crying out loud, it costs us $50 every time you go to the bathroom.

JONIC: The mayor isn't talking, let alone offering alternative budget balancing schemes, and some of the ideas residents have are far out. Central Falls resident Robert Ledo(ph).

Mr. ROBERT LEDO: I think to legalize drugs and prostitution is the way to go.

JONIC: Diane Giraldo(ph) looks to the federal government for help.

Ms. DIANE GIRALDO: How about if all the congressmen, everybody, just take a cut in pay because, you know what, they make more than enough money.

JONIC: How unusual are municipal bankruptcies? Very, says Christopher Hoene of the National League of Cities.

Mr. CHRISTOPHER HOENE (Director, Center for Research and Innovation, National League of Cities): There's been speculation of municipal bankruptcies or receivership conditions in a few places around the country, but most of those haven't entered into actual bankruptcy or receivership at this point.

JONIC: Covering just one square mile, Central Falls is the smallest city in the smallest state in the country, but its financial problems are causing it to lead the way down a path that other municipalities may be forced to travel in these recessionary times.

For NPR News, I'm Flo Jonic.

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