Attorney Alves helped to draft RI Receivership Statute

Rhode Island's City Receivership Law May See Ruling In 30 Days

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     By Romy Varghese     Of DOW JONES NEWSWIRES   

A decision on the constitutionality of a Rhode Island law that placed an impoverished city under receivership may come within the next 30 days, a lawyer said Tuesday.

The mayor and council of Central Falls, six miles north of state capital Providence, are challenging a June law that placed the city under a state-appointed receiver to Rhode Island's highest court, the Supreme Court. A lower court had rejected their argument that the law violates the constitution.

Rhode Island officials asked the five-judge Supreme Court, which heard arguments Tuesday, to move expeditiously because they must arrange financing for the city, said Theodore Orson, who is representing the state in the litigation.

"The city needs to borrow money again," Orson said. "We don't want lenders to be concerned about the constitutionality of the statute."

Michael A. Kelly, attorney for the mayor and council members, didn't immediately return a call for comment.

Central Falls filed for judicial receivership, a first for the state, in May, seeking a way out of deep fiscal woes. Rhode Island officials, worried about the potential impact on other municipalities, passed a law in June barring judicial receiverships.

Instead, it required that state officials--not judges--appoint receivers. The law, which established a three-step process for distressed local governments, eased concerns that other troubled cities may try ad hoc and potentially bondholder-unfriendly tactics to cope with their fiscal problems.

Central Falls had initially agreed to be put under the state receiver, but then Mayor Charles Moreau and the City Council filed suit challenging the legislation, saying it was too broad and violated the state constitution.

One of the first acts of the receiver, Mark Pfeiffer, was to reduce the role of Moreau to an advisory position. Then in November, Pfeiffer fired the five-member council and replaced it with a three-member advisory council.

Pfeiffer warned in a December report that Central Falls faces a near-term financial collapse unless significant acts such as pension reform and regionalization of services occurred.

Central Falls' deficits between 2012 through 2016 will total as much as $25 million, exceeding its total 2011 budget of $16.8 million, Pfeiffer said. In addition, the city won't be able to close its $2.1 million deficit from fiscal 2010 without state assistance, such as through direct aid or a state guaranty of a city deficit reduction bond, he said.

On Monday, newly inaugurated Rhode Island Gov. Lincoln D. Chafee replaced Pfeiffer as receiver with Robert G. Flanders, Jr., a former state Supreme Court judge.

-By Romy Varghese, Dow Jones Newswires; 215-656-8263; romy.varghese@dowjones.com----------------------------------------------------------------------------------
If you have questions about this posting or are interested in Divorce, Immigration, or Estate Law in RI or MA contact Massachusetts and Rhode Island Divorce Lawyer Rui P. Alves at 401-942-3100 or CONTACT him via email.