Video: R.I. city 5th in US to file for bankruptcy

  1. Closed captioning of: R.I. city 5th in US to file for bankruptcy

    >>> the motto for central falls , rhode island is a city with a bright future . but that future looks dim at the moment. now that the town has taken the extremely rare step of filing for bankruptcy protection . like many cities and state government central falls got clobbered by the recession and has struggled to raise enough taxes to meet growing union pension and health benefit demands. i'm joined by the general treasurer for rhode island . gina, good to see you today.

    >> good morning.

    >> so i understand that the state took over central falls 's finances last year. explain how the bankruptcy works and what happens next for this town.

    >> well, the governor and the receiver have been in charge of the bankruptcy process. and my office has not been involved in that. but the city filed for bankruptcy yesterday. you know, obviously this is devastating. it is difficult for the town. but we are hopeful that they will be able to begin anew and look forward to a more prosperous day and begin the hard work of rebuilding the city. i think the message for all of us in this is that these fiscal problems are challenging, they're difficult, and they don't go away. and they don't fix themselves. and unfortunately this town, this city had to file for bankruptcy. i think the message to other state and city leaders is it's time to stand up and take action to fix these fiscal problems so they don't get out of hand like they have been here.

    >> central falls owes $80 million in pension and benefits. it's looking at $5 million in deficits over the next five years. what's the concrete consequence for retirees who put in decades of service for the city? are they going to get their pension checks?

    >> at this point that is uncertain. but as i said, bankruptcy is a great deal of heartache. and it's the most extreme option. in central falls now the unfunded pension liability is approximately five times the size of the city's total tax revenue on an annual basis. so clearly decades of avoiding tough choices around fixing the pension have resulted in this bankruptcy and as a result retirees are going to be asked to take, in some cases, as much as 50% reduction in their retiree pension benefits.

    >> rhode island state senator elizabeth crowley called the bankruptcy filing premature. was there any other option?

    >> i don't know. again, the governor made this decision. and this has been in refership for a year. clearly it wasn't a decision that was made lightly. and at this point the government and the receiver made a decision that this was the only option.

    >> thank you for your time today, gina. appreciate it.

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