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Rhode Island city files for bankruptcy

By Nina Golgowski, CNN
  • Boise County in Idaho filed for Chapter 9 protection in March
  • Central Falls wanted its police and firefighters to give up half their pension
  • Because of declining population, the city has small tax revenues
  • The city's school board fired all high school teachers last year

(CNN) -- Drowning in debt and unable to seek concessions from city employees, the struggling Rhode Island city of Central Falls filed for bankruptcy Monday.

The city, north of Providence, has a population of 19,000 living in roughly a square mile. It isn't alone in seeking court protection. In March, Idaho's Boise County filed for Chapter 9 protection after it was found in violation of a federal law and ordered to pay $6.2 million to a housing developer.

Central Falls took the step after it was unsuccessful in asking police and firefighter retirees to give up 50% of their pension.

"In the end, we were left with no practical option," said former State Supreme Court Judge Robert Flanders who has overseen the city's finances. "We cut city services to the bone, we raised taxes to the maximum allowable, we negotiated with Council 94 and fire and police unions without success," he explained.

"We needed cooperation and monetary agreements from all sides to make this work," Flanders said. "That didn't happen, and so that's why we're all here today."

The city has historically had difficulty reducing its expenses because of a decline in population and the resulting smaller tax revenues, said Michael Trainor, a spokesman for Flanders.

Without the filing, it projected a deficit of $5.6 million by next June -- based on $22 million in expenses and $16.4 million in projected revenue.

Central Falls' website calls itself "A city with a bright future." Rhode Island Governor Lincoln D. Chafee maintained the rosy glow, saying the filing would "put the city back on a path to solid financial footing and future prosperity."

Monday's filing isn't the first result of a failed agreement for the city.

The city's school board voted to fire all teachers at its high school in February 2010, after a failed agreement between the district and the city's teacher's union.

In negotiations prior to the firings, teachers were asked to spend more time with their students to improve failing student test scores, where half of them failed every subject, officials said.

A spokesman for the union last year said the teachers had accepted most of the changes the district presented, but that they wanted compensation for the extra hours of work.

Both sides couldn't reach a pay rate agreement, according to the school's superintendent, resulting in the firings of 77 teachers, including the school's principal and three assistant principals.