What is Municipal Receivership III

I am becoming increasingly uneasy with the scope of the powers being attributed to a “municipal receiver” in Rhode Island. John Hill‘s story in today’s Projo on the situation in Central Falls describes a broad range of executive and taxation authority being suddenly transferred to one man, perhaps working in tandem with the court system (I guess that would be two men)…

The court-appointed receiver has the power to approve or reject purchases and payments and, if the court approves, change contracts with unions and vendors and hire and fire municipal employees.
[Jonathan N. Savage], who said he’d be paid between $100 and $375 an hour for his work as receiver, said it was too soon to predict what he might ask the court to do, from imposing new contract terms or increasing taxes, until he’d had a chance to examine the city’s books and consult with all the parties who might be affected.
Granted, the foundational legal issues regarding non-delegation of government authority are not as clear cut in the case of municipal governments as they are in the case of state governments. Since states are the fundamental units in the American system of government, and states create city and town governments and establish the scope of their powers, states can presumably reserve the power to make changes to municipal government at a future time.
But just because they can reserve their powers doesn’t mean that they do. Article XIII of the Rhode Island Constitution spells out some very clear limitations on the state’s power to change the governance of established cities and towns, Section 4 being the most relevant to the situation in Central Falls…
The general assembly shall have the power to act in relation to the property, affairs and government of any city or town by general laws which shall apply alike to all cities and towns, but which shall not affect the form of government of any city or town. The general assembly shall also have the power to act in relation to the property, affairs and government of a particular city or town provided that such legislative action shall become effective only upon approval by a majority of the qualified electors of the said city or town voting at a general or special election, except that in the case of acts involving the imposition of a tax or the expenditure of money by a town the same shall provide for the submission thereof to those electors in said town qualified to vote upon a proposition to impose a tax or for the expenditure of money.
This makes pretty clear, for example, that the state couldn’t decide to remove the mayor of a city in mid-term and replace him or her with a state-appointed “governor-general” — at least not without the approval of the voters via a referendum. Nor is there any provision allowing a governor-general to be appointed, again in the absence of a referendum, just because a City Council asks for one. Nor would appointing a governor-general become legitimate by re-titling the position to be the “receiver-general” or something similar.
It’s important to understand what the maximum allowed scope for receivership at the outset — and whether it needs to be challenged — because the citizens of Rhode Island cannot assume the Central Falls will be the only place where residents may be told that someone who has not been elected is being put in charge of the local government, to make the decisions that elected officials have been trying to avoid. If we don’t question what is happening in Central Falls right now, Central Falls may become an overly expansive precedent for the future.

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doughboys
doughboys
11 years ago

The Court Appointed receiver can tell Central Falls what to do but doesn’t have the power to throw out contracts and debts from creditors. Only Federal Chapter 9 Bankruptcy has that power. What will really change here? Nothing. The receiver will force them to raise taxes as much as possible – something that could be done without a receiver and they will have to have layoffs because they can’t touch the contracts. The funny thing is that raising taxes in CF will (I’ll wager) mostly end up being paid by Uncle Sam through Section 8 so who will pay for this nightmare one way or the other? Taxpayers who actually pay taxes. The hard working people that live in CF & pay taxes (the real minority there), well I feel sorry for them. They are stuck between a rock and a hard place. Layoffs are the threat that make these muni unions jump. Carcieri had the opportunity to call the union bluff but wimped out. Larisa and company dealt with an expired contract and won but this situation is different. The state should simply authorize Chapter 9 Bankruptcy but that would mean union losses and thats unacceptable to all the union supporter in the GA which is just about all of them. ADJUSTMENT OF DEBTS OF A MUNICIPALITY › TITLE 11 – US CODE – SUBCHAPTER I – GENERAL PROVISIONS 11 USC 903 – Reservation of State power to control municipalities This chapter does not limit or impair the power of a State to control, by legislation or otherwise, a municipality of or in such State in the exercise of the political or governmental powers of such municipality, including expenditures for such exercise, but (1) a State law prescribing a method of composition of indebtedness of such municipality may not… Read more »

Ragin' Rhode Islander
Ragin' Rhode Islander
11 years ago

For better or worse, the Receiver Savage is the husband of the Superior Court Judge Savage … who was appointed by Governor Sundlun even though she wasn’t on the list of nominees, but was counsel with his staff.
In other words, we’re talking very wired into the status quo Democrat power structure.
I don’t know enough about him to know if he’ll exercise independent judgment or “go along to get along” with the powers that be, but his relationship structure doesn’t bode well for the average citizen of Rhode Island.

Ragin' Rhode Islander
Ragin' Rhode Islander
11 years ago

For better or worse, the Receiver Savage is the husband of the Superior Court Judge Savage … who was appointed by Governor Sundlun even though she wasn’t on the list of nominees, but was counsel with his staff.
In other words, we’re talking very wired into the status quo Democrat power structure.
I don’t know enough about him to know if he’ll exercise independent judgment or “go along to get along” with the powers that be, but his relationship structure doesn’t bode well for the average citizen of Rhode Island.

Donald B. Hawthorne
Donald B. Hawthorne
11 years ago

I know Jon and Judy Savage personally, not politically, because our kids went to the same school for years. Personally speaking, they are fine, fine people.
I also know of Jon’s reputation in the restructuring community as my work has interacted with that community for years. While we have never worked together, I have heard good things about Jon’s work. Due to the very nature of their work, restructuring people end up in difficult situations that require decisions that frequently make few people happy. All of which only becomes more complicated when dealing with public sector entities.
I don’t know anything about Jon’s politics and have no interest in speculating. My point here is to vouch for Judy and Jon personally, even if I might eventually disagree with what actions Jon takes.

Ragin' Rhode Islander
Ragin' Rhode Islander
11 years ago

Don,
FWIW, I respect your opinion so take comfort in your characterization of Mr. Savage.
As I’m sure you’ll understand, I have that RI cynicism so am inclined to assume guilt first of anyone that is wired in with the RI Democrat Party / power structure. I don’t think that “presumed guilty until proven innocent” is unreasonable with that crowd.

Donald B. Hawthorne
Donald B. Hawthorne
11 years ago

Ragin’
As to the role of politics in RI, some context about receivership practices is also relevant –
I have been a court-appointed receiver once in a different state – albeit of a private business, not a public sector entity.
Our power as receiver there was defined broadly by state receivership statute law and that provided general direction for the highly specific terms in the order issued by the judge appointing us. We then regularly reviewed the judge’s order to make sure all of our actions were in compliance with his order.
So I would encourage everyone to focus primarily on the judge’s order and then review state law in that context because that is likely the best framework for understanding what Jon can do or not do.
In our receivership role, we filed periodic progress reports with the court. These reports were public information as were our appearances before the judge to discuss those reports. These reports were structured to report any and all actions taken in accordance with the judge’s order and provided a transparent trail for anyone following the case.
Therefore, I would watch out for those reports and encourage their public posting. There also will likely be court transcripts available after hearings and those should provide insight into both what Jon is doing and what outcomes other key stakeholders are encouraging or fighting against.

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