The People of Central Falls Should Fire Their Receiver

… only they can’t, because the people who govern Rhode Island have decided that bond ratings justify a sort of economic martial law. They simply don’t believe that democracy works. So, bond rating agencies’ threat to devalue Rhode Island’s ability to borrow more money (which it shouldn’t be doing, anyway) has given a single man, retired judge Mark Pfeiffer, the right to do this without recourse for those subject to his dictats:

City taxpayers can expect a 10-percent property tax increase and higher taxes on the cars they own as the receiver appointed to reorganize the city’s troubled finances tries to close a $2.1-million deficit in last year’s city budget and a $6.3-million hole in the current one, the state receiver running the city’s finances announced Wednesday.

Anyone inclined to object that Central Falls is already at its 4.5% tax cap needn’t worry, because:

The 10-percent supplemental bill is legal, Pfeiffer said, because the taxation cap legislation allows a municipality to exceed it if the governing council votes to ask the state for permission and if the state allows it.
Pfeiffer said the receivership state law gives him the power to act as the council, and he would do that when he asks the state Division of Municipal Finance to approve the increase.

Of course, the tax cap law — naively presuming that a “governing body” isn’t a single man — requires a 4/5 vote of that body. Such is the distortion of language that one gets when the rules are suspended.
That suspension of rules, by the way, seems conspicuously to benefit a particular group. Note this tidbit from a sidebar to the current story:

[Judicially appointed receiver Jonathan] Savage was appointed May 19 after the city went to court for the state-law version of federal bankruptcy. Savage was replaced July 16 after a new state law put municipal receiverships under the Department of Revenue. [Spokesman Bill] Fischer said that was a mistake because under the old system Savage could have imposed new contracts on the city’s unions. The new law forbids that.
[Gubernatorial Spokeswoman Amy] Kempe disputed that, saying the law wasn’t clear and had Savage tried to change contracts, it would have led to a months-long court battle.

So, before, Savage could have addressed unreasonable expenditures on and promises to labor — much like East Providence’s School Committee did — and taken the likelihood of a lawsuit into consideration. The actions of the state government, however, have taken that off the table, so it’s an historic tax increase without representation one of the poorest communities in Rhode Island at the behest of a very well paid dictator.

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Monique
Editor
11 years ago

“under the old system Savage could have imposed new contracts on the city’s unions. The new law forbids that.”
So, under this law, taxes can be raised endlessly but contracts and expenditures have to be left intact?? What happens when this is implemented, as Justin said, in a poor city (not that most are rich) and the property owners cannot pay their taxes? Doesn’t the cash flow projection under this absurd law get a little disrupted by the non-payment of taxes followed by all of the tax sales that have to be held??
If the receiver can raise taxes, s/he must also have the ability to cut expenditures. This certainly must include the renegotiation of contracts.
This law needs to be repealed immediately on the basis of this lack of parity. As it stands, this law is the dream of bad politicians and (not that I usually criticize them) public labor unions.

Patrick
Patrick
11 years ago

Sorry, no sympathy for the taxpayers of Central Falls. For years, they have paid ZERO to their school system. ZERO! You and I pay just as much to their school system as we do.
Look at their current property tax rate: $10.78. That’s less than most of us pay as the state average is $14.96. They live off the rest of the taxpayers in the state yet they don’t even pay an average property tax rate. What makes that number even more appalling is the fact that many of the houses in CF are tenements, buildings that aren’t usually very valuable. So very little is coming in. Look at other communities that have similar property types:
Providence: $24.21 property tax. Even if you factor in the homestead exemption, that’s still $12.11. More than CF.
Pawtucket: $17.71, a lot more than CF
Woonsocket: $22.36, more than double that of CF.
So if someone wants to raise their taxes by a dollar or so, to still WAY below the state average, I have no sympathy. They should have been paying this for years. If someone says they can’t then afford the taxes, then where can they afford? Where are they going to go if they can’t afford a property tax of $11.86? They can find a better combination of cheap property and low property taxes? If they can, let me know, I’d like to buy some too.

Monique
Editor
11 years ago

Patrick, I don’t necessarily disagree with regard to the C.F. tax base. The much bigger implication here is that this is the process that may be coming to a municipality near you:
taxation without representation and without the ability to touch expenditures.

Patrick
Patrick
11 years ago

Yes, I understand the point that you’re making, but I think it’s quite a leap to think that Cumberland, Lincoln, Coventry, North Kingstown is going to receivership anytime soon. If a city goes into receivership, it means it has been so badly managed that this is what it deserves. Clearly the voters don’t want good representation, they don’t know what’s good for them. Heck, Woonsocket is probably lucky that Menard quit as she was driving that city downt he same path. We’ll see if Leo can be left alone for long enough to turn it around, or if he’ll get the gears going the right way, get voted out for the pain that is necessary and then someone else swoops in and takes credit.
I think to compare the CF situation with other towns that are run quite efficiently is a bit of a stretch.

David P
David P
11 years ago

I have to confess being of two minds about this. As a small-r republican, I think representative democracy needs to be jealously guarded. On the other hand, the citizens of Central Falls find themselves in this situation because of a series of governments, which they elected. This fiscal crisis didn’t pop up overnight. Even the Declaration of Independence states that any form of government is just a means to an end. If Central Falls cannot make representative democracy work then perhaps a dictatorship is in order.

riborn
riborn
11 years ago

You are missing the first costly misstep that was taken down this path Central Falls now finds itself on – the filing of the receivership. At some point the question has to be asked why receivership in the state court and not bankruptcy in the federal court. The estimated fees of Savage and Larisa may shed light on that decision. Do you have any inkling of the fees they would have reaped had they terminated union contracts and battled it out in state court? Do you think either of them cared if they won or lost that battle? It’s about the money – nine lawyers and five staffers, and a firm spokesperson, all being paid by those CF taxpayers you are so concerned with now. In receivership Savage and Larisa would get paid whether they won or lost that battle with the unions, whether they benefited CF or not. And while it presented an interesting intellectual exercise to keep nine lawyers busy for a good long time and many billable hours – who decided it was a good move on behalf of CF? Did the elected officials have any idea of the costs that were going to be incurred in that exercise? In RI, receivership is primarily a money making business for a small group of receivers/lawyers. Yes, the GA absolutely protected their main constituents, the unions, in drafting and passing the Pfeiffer appointment bill, what is the news in that? It was begging to be done when CF was advised to seek and then filed for state court receivership. And Mr. Savage, who can’t seem to speak to the media now and must hide behind a spokesperson, was front and center on the TV and ProJo front page telling everyone he was going to terminate union contracts. Did the… Read more »

Ken
Ken
11 years ago

Patrick you said;
“Where are they going to go if they can’t afford a property tax of $11.86? They can find a better combination of cheap property and low property taxes? If they can, let me know, I’d like to buy some too.”
May I point to the Island of Maui 2nd largest island within the State of Hawaii voted “Best Island in the World” 15 years and “Best Pacific Island” 17 years by the Reader’s Poll of Condé Nast Traveler Magazine.
Maui 2010 real property tax is $5.55 per $1,000 at 100% assessed value. The homestead exemption for all property homeowners is $300,000.00. Maui County minimum real property tax is $150.00 per year meaning if homestead and age exemptions drop your tax below the minimum you must pay the minimum tax. Average condominium price is $390,000.00 and average single family house price is $590,000.00. Also there is no property tax on cars, trucks, motorcycles or boats in Hawaii and the sales tax on Maui is 4%.
Houses do not have central heating systems or fireplaces (below 3,000 ft level) in Hawaii unless they are upcountry (above 3,000 ft level) where there can be 4 weather seasons (winter, spring, summer and fall).
Don’t forget average means 50% are higher and 50% are lower than the average price.
As far as the people in CF paying “Zero” in supporting the State of RI taking over the CF school system, they had to be paying State of RI income tax! Now if the State of RI did not allocate enough funds to support the CF school system that is RI Department of Education’s fault and we already know RI Department of Education kept changing the standards at the high school contributing to the low test scores.

Ken
Ken
11 years ago

ADDEMDUM:
Patrick sorry; I miss quoted the Maui 2010 Real property tax rate which in fact it is $2.50 per $1,000 at 100% assessed value.
The $5.55 per $1,000.00 is for the Big Island of Hawaii (largest Hawaiian island 100 miles across) that has an island-wide free unlimited public bus transportation system.

Patrick
Patrick
11 years ago

I don’t understand a word of this:
“As far as the people in CF paying “Zero” in supporting the State of RI taking over the CF school system, they had to be paying State of RI income tax! Now if the State of RI did not allocate enough funds to support the CF school system that is RI Department of Education’s fault and we already know RI Department of Education kept changing the standards at the high school contributing to the low test scores.”
You’re showing that you don’t really understand how the system works in RI. Every city in the state gets a certain percentage of their school system paid for via aid from the state. For example, Cumberland gets 24%, Barrington gets 0%. Ready now? Central Falls gets 100%. Yes, the people of the town pay zero toward their school system in the way that every other town pays for theirs. Sure, they pay income tax and sales tax, but zero local funds go to their school system. Why is that? Is it because they don’t have enough money? Yes! Is it because their taxes are too low? Yes! Do I have sympathy for a town that has run themselves into the ground and will have to pay an extra dollar per thousand more for their property tax? Hell no. I’ve been paying for their schools for all these years, they can start kicking in some of their own.
And Justin, I get your points. I don’t disagree with them, I think we’re just talking about two different (parallel?) points.

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