By Tom Mooney
The Providence Journal
PROVIDENCE, R.I. — Six months after the state took control of the financially strapped Central Coventry Fire District, the independent fire department is headed for municipal bankruptcy.
State Administration Director Steven T. Hartford, appointed in May to orchestrate a rescue of a department that a judge denounced two years ago as “an elaborate Ponzi scheme,” said Thursday he had been unable to reach necessary cost concessions with the local firefighters’ union.
So Hartford, as the district’s state-appointed receiver, has hired Robert Flanders to prepare the necessary bankruptcy paperwork, to be filed in the next two weeks.
Flanders, a former state Supreme Court justice, served as state receiver in the 2011 bankruptcy of Central Falls. Through that bankruptcy the city restructured labor contracts and cut the pensions of some public safety workers by 55 percent.
While bankruptcy will allow Flanders to unilaterally restructure the labor contract with the fire district union, there would be no retirement savings since the district’s 34 firefighters have pensions through a state retirement system.
The fire district’s debt exceeds $3 million. It owes money to Blue Cross & Blue Shield, the state municipal retirement fund, National Grid, the local water authority, as well as a number of smaller creditors, said Hartford.
David Gorman, president of the district’s firefighters union, and Hartford agreed that current staffing levels at both firehouses and responding fire trucks, now set by contract, were the primary sticking points in negotiations.
“We feel the district could be run on a smaller level,” said Hartford.
Said Gorman: “We can’t compromise on firefighter safety.”
Hartford said there were also some proposed health insurance savings that the union wouldn’t agree to.
The Central Coventry Fire District is the largest of four fire districts in the town of about 35,000 residents. Hartford said it will continue providing fire protection through the Chapter 9 bankruptcy, which will give the district a five-year plan to pay back its creditors.
Central Coventry’s trouble went public in October 2012, when, after the district’s governing board missed multiple payrolls, Superior Court Associate Justice Brian P. Stern appointed the first receiver, Richard J. Land, who oversaw the 38 Studios bankruptcy, to sort things out.
Land said the district’s financial collapse was triggered by a bookkeeping mistake that built a $790,000-annual-shortfall into two successive budgets.
He said when the district’s fiscal 2011 and fiscal 2012 budgets were submitted to voters, they overestimated the value of commercial real estate in the district by $217 million. If it had existed, the property would have brought in about $790,000 in revenue. But that property didn’t exist, and the $790,000 didn’t come in. By fiscal 2012 it was a $1.58-million deficit.
At the same time, the board made the financial problem worse by leasing a new fire truck, hiring more firefighters and signing a new contract with its union.
Last February, Judge Stern ordered the fire district liquidated, denouncing the district as “an elaborate Ponzi scheme.” Rather than reveal the deficit, he said that the district’s board “resorted to what has been quintessentially the 21st-century American thing to do. It took out a loan for a credit line with Centerville Bank to pay operating expenses and cut corners on its obligations to its employees.”
The district was spared liquidation after the General Assembly amended a state law allowing Hartford to act as an appointed official over the district.
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(c)2014 The Providence Journal (Providence, R.I.)
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