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HARVARD UNIVERSITYKENNEDY SCHOOL OF GOVERNMENT
Avoiding Government Meltdown:Are There Effective Legal Solutions to
Unaffordable Pension Liabilities?
Tale of Two Cities:Needed Pension Reform in
Cranston, Rhode Island and Oak Lawn, Illinois
APPENDIX I
James E. SpiottoChapman Strategic Advisors L.L.C.
September 26, 2019
© 2019 by James E. Spiotto. All rights reserved. James E. Spiotto is a retired partner of Chapman and Cutler LLP as well as Managing Director of Chapman Strategic Advisors LLC, President of JASSEE Advisors, LLC and a member of the Board of Directors of Retirement Security Initiative L.L.C. This document is for informational purposes, general in nature and based on authorities that are subject to change. It is not intended as a recommendation or advice, legal or otherwise, with regard to any action or inaction to be taken. The views expressed herein are solely those of the author and do not reflect the position, opinion or views of Chapman and Cutler LLP or Chapman Strategic Advisors LLC.
document.docx0009350/JES
APPENDIX I
TALE OF TWO CITIES:NEEDED PENSION REFORM IN
CRANSTON, RHODE ISLAND AND OAK LAWN, ILLINOIS
INTRODUCTION
The recent history of financial crises of state and local governments has demonstrated the
unfortunate trend of states and local governments suffering from unaffordable pension liabilities.
In such cases, the government is either permitted by state law and state supreme court rulings to
(a) adjust pension obligations to that which is affordable and thereby improve financially or
(b) begin the unwanted pattern of continuing to increase taxes, reduce expenditures on essential
governmental services and discover individual and corporate taxpayers who can do so leave
resulting in less revenues and the evolving financial meltdown. A past example is Vallejo,
California with its unwillingness to adjust its CALpers pension obligation being forced, after
confirming a Chapter 9 plan of debt adjustment, to reduce police and fire by half the
prebankruptcy number and two years later still face budget deficits and threats of bankruptcy.
Likewise, similar sagas are to be found in Detroit, Michigan and Bridgeport, Connecticut and
their slow but steady financial declines before bankruptcy and state intervention.
These actual examples are the best way to demonstrate why state legislatures and
supreme courts should permit the state and local government legislatures to be able to exercise
their police powers to adjust when necessary, as a last resort, unaffordable pension benefits when
taxes no long practicably can be raised and expenses can no longer prudently be reduced. This
permitted adjustment is for the higher purpose of the health, safety and welfare of the citizens of
the government to provide essential services and needed infrastructure improvements at an
acceptable level. In essence, to avoid government meltdown.
The drama of real situations best explains the dynamic of these alternatives and therefore
the Tale of Two Cities: namely, Cranston, Rhode Island, where state law and supreme court
rulings permitted reasonable and necessary pension benefit reductions and Oak Lawn, Illinois,
where state constitutional provisions, given state supreme court interpretation, prohibit any
reasonable and necessary pension obligation adjustment on an involuntary basis, and unlike
virtually all other states preclude the use of police powers to prevent government meltdown. The
following is some background information on both cities to facilitate the Statements of Mayor
Fung of Cranston, Rhode Island and City Manager Larry Deetjen of Oak Lawn, Illinois as to
their respective pension problems and whether they can successfully be solved.
I. THE CITY OF CRANSTON, RHODE ISLAND, AND THE VILLAGE OF OAK LAWN, ILLINOIS, HAVE SOMEWHAT SIMILAR DEMOGRAPHICS EVEN THOUGH THEY ARE 962 MILES APART (SEE APPENDIX A)
A. Urban Cities. Both Cranston and Oak Lawn are urban cities – Cranston 99% and
Oak Lawn 100%. Cranston’s population of 81,201 (2017) is larger than Oak
Lawn’s 56,087, but the breakdown of male, female and median age is virtually the
same.
B. Household Income, Housing Costs Other Similar Factors. Cranston’s estimated
Median Household Income (2016) of $67,275 is close to Oak Lawn’s $61,951,
Cranston’s Estimated Per Capita Income (2016) is $32,011 compared to Oak
Lawn’s $29,688. Cranston’s Median Price for All Housing Units (2016) is
$224,200 compared to $196,838 for Oak Lawn. Cranston’s Cost of Living Index
(March 2019) of 91.4 (U.S. Average 100) is lower than Oak Lawn’s 102.5. The
percentage of Residents in Poverty is relatively low – Cranston 6%, Oak Lawn
- 2 -
10.6%. The Average Household Size was the same for Cranston and Oak Lawn –
2.5, as well as the percentage of Family Households of 64.4% and 64.3%,
respectively.
The breakdown of the population by race for Cranston and Oak Lawn is generally
similar: Whites alone – 73.4% versus 70.1%, respectively, Hispanics – 16.9%
versus 18.7, respectively, and Blacks alone – 3.4% versus 6.8%, respectively.
C. Land Size, Density, Taxes and Industry. Cranston has a larger footprint –
28.6 square m iles compared to Oak Lawn’s 8.6 square miles . Accordingly, Oak
Lawn has greater density of population – 6,525 people per square mile compared
to Cranston’s 2,842 people per square mile . Cranston’s Real Property Tax paid
by Housing Unit with and without a mortgage (2016) is $4,389 (1.9%) and $3,875
(1.82%), respectively, compared to Oak Lawn’s $5,345 (2.6%) and 4,672 (2.5%),
respectively. Major Industry in Cranston and Oak Lawn is very similar: Health
Care, Educational Services, Construction, Finance and Insurance and Accounting
for Cranston is 10.0%, 8.3%, 4.8%, 7.1%, and 6.4%, respectively, compared to
Oak Lawn’s 10.3%, 8.4%, 8.2%, 8.1%, and 4.1%, respectively. The
Unemployment Rate (2016) was virtually the same for Cranston 5.1% and Oak
Lawn 5.3%.
D. Education of Population. Cranston and Oak Lawn have the same educational
level for the percentage of Population of 25 years and older (2016) and
Unemployment Rate.
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DATA POINT OAK LAWN, IL CRANSTON, RI
Education of Population 25 Years or Older (2016) :
High School or Higher 90.7% 90.2%
Bachelor’s Degree or Higher 27.2% 32.4%
Graduate or Professional Degree 9.4% 13.6%
Unemployed 5.3% 5.1%
Mean Travel Time to Work 34.8 Minutes 22.6 Minutes
E. Government Employment and Payroll (March 2016 Citydata.com). Oak Lawn
and Cranston have about the same Police Officers per 1,000 population – 1.92
compare to 1.8, respectively, but Oak Lawn’s Average Yearly Full-Time Salary is
significantly higher $123,857 compared to Cranston’s $65,353. Cranston has
more Firefighters per 1,000 population than Oak Lawn – 2.3 compared to 1.2, but
again the Average Yearly Full-Time Wage is higher for Oak Lawn $124,933
compared to $65,353 for Cranston, respectively.
DATA POINT OAK LAWN, IL CRANSTON, RI
Government Employment and Payroll (March 2016)
Police Protection:
Officer Full-Time 108 (1.92 Officersper 1,000 Population)
146 (1.8 Officersper 1,000 Population)
Monthly Full-Time Payroll $1,114,712 $762,813
Average Full-Time Yearly Wage $123,857 $62,697
- 4 -
DATA POINT OAK LAWN, IL CRANSTON, RI
Firefighters:
Full Time Employees 73 (1.2 Firefighters per 1,000 Population)
189 (2.3 Firefightersper 1,000 Population)
Monthly Full-Time Payroll $760,008 $1,029,302
Average Full-Time Yearly Wage $124,933 $65,353
Total for Government:
Full-Time Employees 339 2,045
Monthly Full-Time Payroll $2,818,7328 $11,744,257
Average Full-Time Yearly Wage $99,778 $68,915
F. Long-Term Debt. Long-Term Debt as of the beginning of 2016 is $108,347,000
for Oak Lawn and $93,878,000 for Cranston with the Per Resident Number higher
for Oak Lawn of $1,931.77 compared to $1,156.10 for Cranston.
II. THE PENSION LIABILITY AND FUNDING RATIO FOR CRANSTON AND OAK LAWN HAS SOME SIMILARITIES AND DIFFERENCES PER CAFR CRANSTON (6/30/18) AND OAK LAWN (12/31/18)
A. Pension Unfunded Liabilities and Funded Ratio. Cranston has an old Police and
Fire Plan for employees prior to July 1, 1995 that has only 27 of the 341 Police
and Fire personnel currently active and has 422 retired. The Old Police and Fire
Pension Plan is functionally frozen and has a Funding Ratio of 21.92% and Net
Pension Liability of $236,296,164 as of FY2017 EOY. The two new Cranston
Sate Agent Plans for Police and Fire Net Pension Liability as of FY2017 EOY
$10,862,240 for Police and $193,145 for Fire for a Funding Ratio of 78.03% and
102.22%, respectively. The combined Funding Ratio for Old and New Cranston
Police and Fire Pension Fund is 39.2%. Oak Lawn has Net Pension Liabilities for
- 5 -
Police $85,403, 504 and $78,520,318 for Firefighters for EOY2017 and Funded
Ratio of 45.8% and 47.2%. The Net Pension Liability for all Police and Fire
Pension Funds per Resident for Cranston is $3,043 and for Oak Lawn $2,927. All
Pension Funding Liability is at a 7% Discount Rate except the Old Cranston
Police and Fire at 7.9%.
CAFR ANALYSIS
OAK LAWN, IL(12/31/18)
CRANSTON, RI(6/30/18)
LONG-TERM LIABILITIES : ($000)FYEOY 2018 2017 2018 2017General Obligation Bonds $63,700 $63,700 $73,700 $76,600Net Pension Liability $171,600 $133.60 $404,800 $403,600OPED Liability $26,800 $26,500 $50,800 $53,400Pension Liability as
% of General Fund Revenues 329% 180%
GENERAL FUND : ($000)
GENERAL FUND
TOTAL GOVERNMENTAL
FUNDS GENERAL FUND
TOTAL GOVERNMENT
FUNDS
Revenues $52,183 $70,480 $225,000 $306,460Expenditures $55,643 $73,658 $131.3 $302,328Excess (Deficit) Revenues over
(Under) Expense $(3,461) $(3,178) $93,700 $(93,869)
PENSION
OAK LAWN, IL(12/31/18)
CRANSTON, RI(6/30/18)
PENSION LIABILITIES AND BENEFICIARIES IMRF POLICE FIRE TOTAL
OLD POLICE AND FIRE
CURRENT POLICE
CURRENT FIRE TOTAL
Net Pension Liability $14,118 $85,404 $78,520 $178,042 $236,296 $10,862 $(840) $246,318
Retiree 354 105 117 422 19 14Inactive 166 2 4 9 1Active 177 108 61 27 141 173
Net Pension Liability Per Resident $252 $1,525 $1,402 $3,179 $2,190 133 (10.3) $3,043
B. Net Pension Liability as Percentage of General Fund Revenues and Deficits.
Cranston’s Net Pension Liabilities as a percentage of General Fund Revenues for
- 6 -
2018 is 180% while Oak Lawn is 329%. Cranston’s Net Pension Liability
increased about $1,200,000 from 2017 to 2018, while Oak Lawn Net Pension
Liabilities increased about $38 million or 28% between FY2018 and 2017 .
Cranston had a Total Government Funds Deficit of $13.869 million (June 30,
2018) and Oak Lawn had a deficit of $3.178 million (December 31, 2018). This
is a deficit of $170.80 Per Resident for Cranston compared to $56.75 for Oak
Lawn.
C. Detailed Pension Fund Analysis (2015-2018) for Cranston and Oak Lawn. (See
Appendix B, source Merritt Research Services LLC)
1. Historical (2018-2015). Required Contribution under GASB 67/68 which
replaced the ARC or ADEC. Namely, the actuarial Required Contribution
is calculated under GASB 67/68 for the pension fund being 90% funded
by 2040 for Cranston and Oak Lawn. Between 2015-2018, Cranston
made 100% or more of the Required Contribution while Oak Lawn only
made 61 - 75% of the Required Contribution . For all pension funds,
Cranston’s historical contribution for 2017, 2016 and 2015 was 100%,
100% and 102-88%, respectively, compared to 75.56%, 73.34%, 72.35%
and 67.58% for 2018, 2017, 2016 and 2015, respectively, for Oak Lawn.
For Cranston’s New Police Pension Fund, the Required Contribution was
100% made for 2017, 2016, 2015 and for Oak Lawn it was 67.88%,
66.01%, 66.01% and 61.50% for 2018, 2017, 2016, 2016, respectively.
For Cranston’s New Firefighters Pension Fund, the Required Contribution
- 7 -
was 100% for 2017, 2016 and 2015 compared to 74.91%, 71.6%, 69.42%
and 61.39% for Oak Lawn for 2018, 2017, 2016 and 2015, respectively.
III. LEGAL FRAMEWORK FOR CRANSTON AND OAK LAWN
A. Ability to File for Chapter 9 Municipal Bankruptcy . In order to file for Municipal
Bankruptcy (Chapter 9 Municipal Debt Adjustment) , the municipality must be
specifically authorized by state law to be able to file a Chapter 9 proceeding.
There are 12 states that generally authorize its municipalities to file, 12 states that
have a conditional authorization subject to the approval of state governor or other
elected official, legislative committee or authority or other review process by the
state before the municipality can file, 2 states generally prohibit Chapter 9 filings,
3 have very limited use by a designated type of municipality, irrigation district,
special district, etc. and 21 states do not specifically authorize their municipalities
to file Chapter 9. Illinois does not authorize its municipalities like the Village of
Oak Lawn to file Chapter 9. Rhode Island allows a state-appointed budget
commission to appoint a receiver to restore financial stability for a city, and the
receiver can file a Chapter 9 proceeding for a city like Central Falls did in 2011.
B. Financial Distress, Oversight and Prevention. Rhode Island has a three-phase
process under the State Department of Revenue Director who, after certain
triggering events, may request the appointment of a Fiscal Overseer to
recommend sound fiscal policies. If the Fiscal Overseer concludes the city is
unable to balance its budget, it may request the appointment of a Budget
Commission. The Budget Commission may request the appointment of a receiver
- 8 -
if it concludes its powers are not sufficient enough to restore fiscal stability. The
ability to have a receiver appointed that can file Chapter 9 places pressure on
elected officials and public workers and unions to promptly resolve issues. While
Illinois has a Financially Distressed City Law, it has not been used given its
basically unworkable process and lack of real power to address distressed issues
other than authorizing the borrowing of additional funds. Illinois has had
proposed in HB 2575 in the 100th Legislative Session a Local Government
Protection Authority that would encourage negotiated resolution including of
pension issues and, if not resolved, there is a quasi-judicial body that can order a
debt restructuring enforced in a pre-package Chapter 9. This bill never came out
of Committee.
C. Elimination of Public Debt Controversy in Rhode Island. Rhode Island has
granted public debt a first in priority statutory lien on all ad valorem revenues
(property taxes) and all general funds, so that its public debt is secured and will be
paid thereby limiting the credit wars to trade creditors and public workers without
threatening the ability to borrow or credit contagion on other governmental bodies
by a distressed government. While Illinois has proposed legislation for a statutory
lien for public debt, the bill never came out of Committee.
D. Pension Reform Legislation. Illinois pension reform legislation, as noted above,
was declared unconstitutional by the Illinois Supreme Court in 2015 as a violation
of Article XIII, Section 5, the Pension Protection Clause of the Illinois
Constitution that membership in a retirement system “shall be an enforceable
- 9 -
contractual relationship, the benefits of which shall not be diminished or
impaired.” The Illinois Supreme Court ruled this meant no ability to involuntarily
through legislation alter by reduction of pension benefits from date of
employment for any reason and since the police powers were not explicitly
reserved in the language of Pension Protection Clause, no impairment for a higher
public purpose is permitted. In contrast, Rhode Island passed a law in 2011
permitting modification of a pension plan that was in “critical status” as
determined by its actuary and the plan was less than 60% funded. As noted
above, the Rhode Island Supreme Court held Cranston’s needed pension reforms
were constitutional and a permitted impairment for a higher public purpose under
the well-established police powers of the city and state.
IV. BACKGROUND ON CITY OF CRANSTON POLICE AND FIRE PENSION REFORMS
A. Creation of Pension Fund and Historic Underfunding Problems and Move to State
Retirement System. In 1937, Cranston established a pension fund for its police
and fire. By the mid-1980’s, the pension fund had become a significant financial
concern. In 1996, the City passed an ordinance with the agreement of the union
that personnel for police and fire hired after July 1, 1995 would be enrolled in the
state pension system, and those with less than five years of service could elect to
stay in the old fund or move the the state fund. The 1996 Ordinance provided for
a minimum of 3% compounded COLA. This did not reduce underfunding that by
July 1, 1995 exceeded $169 million. Then, the Great Recession occurred in 2008
and 2009, and Mayor Fung took office. The City experienced a high
unemployment rate and over $1 billion decrease in property value. State aid
- 10 -
decreased substantially, and there were two devastating floods in the Spring of
2010. By June 30, 2011, the underfunding for police and fire pension obligations
had risen to $256 million or $87 million more than 12 years earlier. By 2012, the
pension system was only 16.9% funded meeting the definition of “Critical
Status”.
B. The Pension Reform Proposal. The Mayor, Allan Fung, in 2012 wrote to the
pensioners informing them of the critical status of the pension fund. Raising
taxes, cutting more personnel and eliminating city services were all explored. In
September 2012, the Mayor met with pensioners and proposed a ten-year COLA
suspension plan. Ultimately, ordinances were past suspending COLA benefits for
ten years starting July 1, 2013.
C. Litigation, Settlement and Litigation in Cranston. In 2013, the Cranston Police
Department Retirees Association Inc. and Local 1365 Retirees Association filed a
lawsuit against the City that the ordinance violated the United States and Rhode
Island Constitution. This lawsuit was settled with agreement for a COLA
suspension in alternating years for ten years and 1.5% COLA payment for the
eleventh and twelfth years with the individual retiree right to opt-out and retain
the right to sue for damages. Thereafter, members of the Cranston Police Retirees
Action Committee opted out and sued for damages on breach of contract and
constitutional rights. The expert for the Plaintiff Action Committee asserted the
average loss per retirees, given the change in benefits, was $210,000 per retiree.
The City cited the Great Recession, loss of over $18 million in state aid between
- 11 -
2007 and 2011, the $1 billion loss of property value, the devastating floods of
2010, over 50% increase in unfunded pension obligation between 1999 and 2011
and 16.9% funded ratio were all present to demonstrate the City’s significant
financial crisis. On June 3, 2019, the Rhode Island Supreme Court ruled the
ordinances for pension reform were reasonable and necessary given the financial
emergency and the impairment of contract rights of the retirees was permitted and
was constitutional as an exercise of police powers for a higher public purpose.
V. BACKGROUND ON VILLAGE OF OAK LAWN PENSION ISSUES
A. The Village of Oak Lawn’s Inability to Obtain Needed Pension Reform Due to
the Illinois Supreme Court Ruling. The increase in unfunded pension obligations
for Oak Lawn in one year FY2017-2019 EOY of over 28% with total net pension
obligations being 329% of the Village’s FY2018 General Fund Revenues. Labor
Agreement that mandated set number of personnel per equipment, even if
evolving times, reasonable justified reduced personnel and this “overstaffing”
resulted in unnecessary overtime creating budget deficits. Given rulings by the
Illinois Supreme Court as to state pension reform, arbitration, state labor relation
board, and state court ruling as to Oak Lawn, there was provided no relief for
reasonable and necessary adjustment to work rules and related pension benefits.
B. Oak Lawn’s Credit Rating Downgrades Due to Growing Pension Burden and the
Pension Intercept Law for Police and Fire Pension Funds. Since 2008, Oak Lawn
(then Moody’s Aa2) has suffered six credit rating downgrades by Moody’s, the
last downgrade being October 10, 2018 when Oak Lawn was downgraded to just
- 12 -
one notch above “junk” status. (Moody’s Baa3 with a negative outlook.)
Moody’s attributed the credit slide to “heighten operating risk” powered by “high
and growing pension burden” and Illinois Pension Intercept Law for police and
fire pension funds (Pubic Act 096-1495), that took effect on January 1, 2018, that
allows police and fire pension funds to compel the state controller to withhold
state tax revenue that traditionally would go to the Village and pay it to the
pension fund that has not been fully funded under a statutory funding formula to
bring the actuarially determined funding ratio to 90% by 2040. The City of
Harvey, Illinois, had needed funds withheld from it causing it to layoff half of its
police and fire force. The Village’s fire pension fund in 2018 filed a claim with
the state comptroller for a $3.3 million shortage that is equal to almost 16% of
Oak Lawn’s FY2018 General Fund Revenue. Oak Lawn does not want the fate of
Harvey, Illinois.
- 13 -
APPENDIX A
TALE OF TWO CITIESBASIC DATA COMPARISONSOURCE: CITYDATA.COM
DATA POINT OAK LAWN, IL CRANSTON, RI
Population (2017) 56,087 (100% Urban) 81,201 (99% Urban)
Males 48.3% 49.9%
Females 51.7% 50.1%
Median Age 41.3 years 41.9 years
Estimated Median Household Income (2016) $61,951 67,275
Estimated Per Capita Income (2016) $29,688 $32,011
Mean Price All Housing Units (2016) $196,838 $224,200
March 2019 Cost of Living Index (U.S. Average 100) 102.5 91.4
Percentage of Residents Living in Poverty (2016) 10.6% 6.0%
Race:
White Alone 70.1% 39,620 73.4% 59,495
Hispanic 18.7% 10,579 16.9% 13,676
Black Alone 6.8% 3,859 3.4% 2,735
Asian Alone 2.2% 1,269 4.6% 3,692
Two or More 1.4% 797 1.4% 1,144
Other 0.1% 78 0.3% 203
American Indian 0.08% 45 0.04% 32
Incorporated 1909 1754
Land Area (Square Miles) 8.60 28.6
Population Density (People Per Square Mile) 6,525 2,842
Median Real State Property Tax Paid Housing Units with Mortgages (2016) $5,345 (2.6%) $4,389 (1.9%)
DATA POINT OAK LAWN, IL CRANSTON, RI
Median Real Estate Property Tax Paid Housing Units Without Mortgages (2016) $4,672 (2.5%) $3,875 (1.8%)
Most Common Industry:
Health Care 10.3% 10.8%
Educational Services 8.4% 8.3%
Construction 8.2% 4.8%
Finance and Insurance 8.1% 7.1%
Accommodations and Food Services 4.1% 6.4%
Professional Scientific, Technical 5.9% 0%
Public Administrative, Support and Water Services 3.3% 5.9%
Miscellaneous Manufacturing 0% 5.0%
Major Medical Facility Advocate Christ Hospital749 Beds Teaching
1,300 Affiliate Physicians
Community Hospital of Rhode Island
80 Beds
Average Household Size 2.5 2.5
% Family Household 64.4% 64.3%
Education of Population 25 Years or Older (2016) :
High School or Higher 90.7% 90.2%
Bachelor’s Degree or Higher 27.2% 32.4%
Graduate or Professional Degree 9.4% 13.6%
Unemployed 5.3% 5.1%
Mean Travel Time to Work 34.8 Minutes 22.6 Minutes
App. A-2
DATA POINT OAK LAWN, IL CRANSTON, RI
Government Employment and Payroll (March 2016)
Police Protection:
Officer Full-Time 108 (1.92 Officersper 1,000 Population)
146 (1.8 Officersper 1,000 Population)
Monthly Full-Time Payroll $1,114,712 $762,813
Average Full-Time Yearly Wage $123,857 $62,697
Firefighters:
Full Time Employees 73 (1.2 Firefighters per1,000 Population)
189 (2.3 Firefightersper 1,000 Population)
Monthly Full-Time Payroll $760,008 $1,029,302
Average Full-Time Yearly Wage $124,933 $65,353
Total for Government:
Full-Time Employees 339 2,045
Monthly Full-Time Payroll $2,818,7328 $11,744,257
Average Full-Time Yearly Wage $99,778 $68,915
Beginning Outstanding $108,347,000 $93,878,000
Per Resident $1,931.77 $1,156.10
App. A-3
APPENDIX B
PENSION FUND DATA ANALYSIS (2015-2018)SOURCE: MERRITT RESEARCH SERVICES LLC
IN ($000) OR (%), AS APPLICABLE
DATA POINT OAK LAWN, IL (EOY) CRANSTON, RI (EOY)
2018 2017 2016 2015 2018 2017 2016 2015
All Pension PlansNet Pension Liability (Unfunded) $178,042 $133,242 $151,850 $145,746 $391,543 $388,472 $362,637 $341,827
Funded Ratio 57.32% 66.40% 60.73% 61.08% 57.17% 56.37% 58.10% 59.71%Required Contribution $12,406 $11,442 $10,177 $9,453 NA $37,582 $36,924 $35,457
% Actually Contributed 75.56% 73.34% 72.35% 67.58% NA 100.00% 100.00% 102.88%
Police Pension Plan RIMERS – Police New PlanTotal Pension Liability $149,610 $144,407 $139,476 $178,454 $49,432 $39,613 $35,996 $29,987
Net Pension Liability $85,404 $70,062 $73,319 $70,162 $10,862 $5,904 $3,419 -$944
Funded Ratio 45.80% 53.17% 49.23% 49.68% 78.03% 85.10% 90.50% 103.15%Required Contribution $5,739 $5,186 $4,463 $3,997 NA $1,040 $1,109 $858
% Actually Contributed 67.85% 66.51% 66.01% 61.50% 100.00% 100.00% 100.00%
Discount Rate 7.00% 7.00% 7.00% 7.00% 7.00% 7.50% 7.50% 7.50%
Firefighters Pension Plan RIMERS – Fire New PlanTotal Pension Liability $148,821 $142,394 $137,776 $132,512 $62,747 $54,737 $51,468 $44,990
Net Pension Liability $78,520 $63,991 $67,884 $64,320 -$1,393 -$840 -$2,582 -$6,158
Funded Ratio 47.24% 58.06% 50.73% 51.46% 102.22% 101.53% 105.02% 113.68%Required Contribution $5,173 $4,800 $4,245 $4,008 NA $972 $992 $1,227
% Actually Contributed 74.91% 71.00% NA 100.00% 100.00% 100.00%
Discount Rate 7.00% 7.00% 7.00% 7.00% 7.00% 7.50% 7.50% 7.50%
Municipal Employer IMRF RIMERS – GeneralTotal Pension Liability (EOY) $110,222 $104,580 $104,461 $102,471 $152,978 $141,598 $139,760 $136,010
Funded Ratio 87.25% 100.78% 89.81% 89.03% 88.64% 89.83% 95.26% 99.46%Discount Rate 7.25% 7.50% 7.50% 7.50% 7.50% 7.50% 7.50% 7.50%
OLD CRANSTON POLICE AND FIRE EMPLOYEE PENSION PLANFOR EMPLOYEES HIRED BEFORE JULY 1, 1995
($000) OR (%), AS APPLICABLE
DATA POINT 2018 2017 2016 2015Total Pension
Liability $302,630 $309,848 $313,727 $327,937Net Pension
Liability $236,296 $247,131 $245,859 $258,295Funded Ratio 21.92% 20.24% 21.63% 20.51%Required
Contribution NA $21,404 $21,316 $22,376% Actually
Contributed 100.00% 100.00% 104.79%Discount Rate 7.90% 7.90% 7.74% 7.29%
CAFR ANALYSIS($000)
OAK LAWN, IL(12/31/18)
CRANSTON, RI(6/30/18)
GENERAL FUND REVENUES : ACTUAL BUDGET 6/30/18 6/3019Total $57,210 $57,412Taxes $38,635 $40,290Expenditures $56,529 $57,416Change in Fund Balance $681,000 $(3,598)
LONG-TERM LIABILITIES :FYEOY 2018 2017 2018 2017General Obligation Bonds $63,700 $63,700 $73,700 $76,600Net Pension Liability $171,600 $133.60 $404,800 $403,600OPED Liability $26,800 $26,500 $50,800 $53,400Pension Liability as
% of General Fund Revenues 329% 180%
GENERAL FUND :
GENERAL FUND
TOTAL GOVERNMENTAL
FUNDS GENERAL FUND
TOTAL GOVERNMENT
FUNDS
Revenues $52,183 $70,480 $225,000 $306,460Expenditures $55,643 $73,658 $131.3 $302,328Excess (Deficit) Revenues over
(Under) Expense $(3,461) $(3,178) $93,700 $(93,869)
App. B-2
PENSION
IMRF POLICE FIRE TOTALOLD POLICE
AND FIRECURRENT POLICE
CURRENT FIRE TOTAL
Net Pension Liability $14,118 $85,404 $78,520 $178,042 $236,296 $10,862 $(840) $246,318
Retiree 354 105 117 422 19 14Inactive 166 2 4 9 1Active 177 108 61 27 141 173
Net Pension Liability Per Resident $252 $1,525 $1,402 $3,179 $2,190 133 (10.3) $3,043
App. B-3
APPENDIX C
Illinois
Municipal Bankruptcy Authority
Specific state authority to file a municipal bankruptcy petition only exists with respect to the Illinois Power Agency. With the exception of the Illinois Power Agency, no other municipal entity in Illinois is authorized to file a municipal bankruptcy petition without further state authorization.
Courts in Illinois have entertained municipal bankruptcy petitions, including In re Village of Brooklyn, Case No. 03-34272 (Bankr. S.D. Ill. Nov. 23, 2004) (confirmation of plan); In re Village of Alorton, Case No. 05-30055 (Bankr. S.D. Ill. Dec. 11, 2006) (confirmation of plan); but see In re Slocum Lake Drainage Dist. of Lake County, 336 B.R. 387 (Bankr. N.D. Ill. 2006) (finding no specific authority and dismissing); In re Washington Park, Case No. 09-31744 (dismissed Dec. 21, 2010 due to lack of authorization). The cases in which plans were confirmed likely were not dismissed because the municipal filings were not challenged.i
Home Rule and Taxing Power of Municipalities
Municipalities’ Ability to Self-Govern
Illinois operates under Dillon’s Rule by default. However, counties in Illinois with a chief executive officer elected by the electors of the county or any municipality with a population of more than 25,000 are automatically deemed home-rule units. Any other municipality can become home rule by referendum. Similarly, those units that are automatically home-rule units may elect not to be a home-rule unit through referendum.
The state legislature may not deny or limit the power of home-rule units to levy or impose taxes upon areas within their boundaries. Additionally, municipalities that are not home-rule units are still granted the authority to levy taxes upon areas within their boundaries in order to provide special services to that area.ii
Taxing Limitations
In certain taxing districts, property taxes may not be increased by more than the lesser of 5 percent or the increase in the national Consumer Price Index for the year preceding the levy year, but this rate may be increased by a majority of voters voting in a taxing district.iii
Illinois
Debt Default Prevention Debt Limitation
Various debt issuance provisions in the Illinois Code contain limitations on how much debt a particular municipal entity may issue. For instance, municipalities with fewer than 500,000 people may issue debt up to 8.625 percent of the total equalized assessed valuation of taxable property in the municipality. A school district for either kindergarten through eighth grade or ninth grade through twelfth grade may only issue bonds up to 6.9 percent of the taxable property in the district. Should a school district contain kindergarten through twelfth grade, the district may issue bonds up to 13.8 percent of the taxable property in the district.
Other debt limitations include (a) 2.875 percent of taxable property in counties with populations less than 500,000 and townships, schools or municipal corporations with populations less than 300,000, or park districts, but this 2.875 percent limit does not apply to schools for acquiring or improving a site; constructing, extending, improving and equipping school buildings; or establishing a working cash fund; and (b) 5.75 percent of the value of taxable property for fire protection districts.iv
Financially Distressed City Law
Under this provision, a financially distressed city may receive assistance from the Illinois Finance Authority, which may provide financial aid to the city so that it can provide basic municipal services, while permitting the distressed city to meet its obligations with creditors and bondholders.v
Refunding Bonds
In certain situations, a municipal entity may issue refunding bonds to refund and refinance outstanding debt.vi
Mechanisms for Resolution after Default
Financial Planning and Supervision
Under the Local Government Financial Planning and Supervision Act, a local government with a population less than 25,000 and suffering a “fiscal emergency” in certain instances may upon two-thirds vote of the members of its governing body petition the governor for the establishment of a financial planning and supervision commission in order to remove the “fiscal emergency.” A unit of local government may contract out of the provisions of the Local Government Financial Planning and Supervision Act.vii
Receivership
In certain revenue bond default situations, a receiver may be appointed to take possession of and operate the project for which the bonds were issued.viii
App. C-2
Illinois
Remedies on Default Appropriate Relief
In certain situations, a bondholder may obtain relief from an “appropriate civil action in the appropriate circuit court.”ix
ForeclosureIn certain default situations, bondholders may foreclosure on a mortgage and seize and sell the underlying asset.x
Injunctive ReliefIn certain situations, bondholders may obtain injunctive relief to enjoin an action with respect to a bond issuance.xi
Mandamus
In certain situations, bondholders or their trustee may bring a court action to compel the local governing body to perform a ministerial action that it has refused to undertake, such as collecting taxes or fees where the underlying bond authorization requires such a collection.xii
Other Bondholder Protections
Special Revenue Bonds
As provided by Section 922(d) of the Bankruptcy Code, payments to bondholders holding special revenue bonds would not be stayed on the filing of a municipal bankruptcy petition, and payments to holders could continue. Whether an issuance would qualify as a special revenue bond depends on the provisions of the authorizing statute with respect to the bonds at issue.xiii
Statutory Liens
Were a municipal entity to file a petition under Chapter 9 of the Bankruptcy Code, bondholders holding bonds to which statutory liens have attached would continue to receive payment on those bonds. For a statutory lien to apply, the authorizing law of the bond issue must contain such a lien. Categories SL-1 and SL-2.xiv
App. C-3
Rhode Island
Municipal Bankruptcy Authority
Rhode Island law includes provisions that allow a budget commission to appoint a receiver to restore fiscal stability in a city, town or fire district. Among other powers, the receiver may file a petition in the name of the city, town or fire district under Chapter 9 of the Bankruptcy Code. Outside of this situation, a municipal entity in Rhode Island may not file a municipal bankruptcy petition. Between 1980 and July 31, 2016, two municipal entities in Rhode Island have filed such a petition.xv
Home Rule and Taxing Power of Municipalities
Municipalities’ Ability to Self-Govern
Rhode Island is a Dillon’s Rule state.xvi Although the state constitution includes an article granting the people of every city and town the right to home rule, the state legislature maintains power over those entities. The state constitution provides that cities and towns may not levy, assess and collect taxes or borrow money without authorization by the state legislature. The Rhode Island General Laws authorize certain local taxes.xvii
Tax Limitations
Rhode Island law provides the maximum levy that a city or town may make in a year but allows the city or town to levy taxes above the maximum rate in certain situations.xviii Rhode Island law, however, provides that the power and obligation of cities and towns in the state to pay general obligation debt are unlimited and that cities and towns must levy sufficient ad valorem taxes to pay general obligation debt.xix
Debt Default Preventionxx Bond Issuance Requirements
To issue bonds, a city or town must (1) have a long-standing “A” credit rating; (2) represent that the proposed bonds will finance a capital asset and that the average useful life of the asset will be greater than or equal to the average maturity of the proposed borrowing; (3) be in compliance with statutory financial reporting requirements and not subject to enforcement proceedings or remedies; and (4) approve the issuance by local referendum or financial town meeting. Cities and towns must receive ministerial approval from the auditor general, who will approve only if these standards are met.xxi
Debt Limitation
Cities and towns may not incur debt exceeding 3 percent of the full assessed value of taxable property within the city. This measure is net of (i) borrowing in anticipation of tax proceedings and (ii) the amount in any sinking fund. The state director of revenue, however, may allow a city to borrow above this limit.xxii
App. C-4
Rhode Island
Debt Default Preventioncontinued
Fiscal Overseer
The director of the state department of revenue may appoint a fiscal overseer for any town or city where the elected chief executive officer and city council so request or the city or town has suffered at least two of five events, including a projected deficit in the current and upcoming fiscal years, failing to file its required audits in the past two years, being downgraded by a nationally recognized rating organization, otherwise being unable to obtain access to reasonable credit or not having promptly responded to requests from the state to assess its financial condition. The fiscal overseer shall recommend to the city sound fiscal policies, supervise all finance services and activities, advise assessors and financial personnel of the city, provide assistance in all matters related to municipal financial affairs, assist in preparing the city’s budget and spending plans, review all proposed contracts and obligations, monitor expenditures, approve annual municipal budgets, and report monthly to the state on the city or town’s progress. Within 120 days of being appointed, the fiscal overseer shall develop a three-year plan to achieve fiscal stability in the city or town.xxiii
Budget Commission
If the fiscal overseer concludes that the city, town or fire district is unable to balance its budget, faces a fiscal crisis that poses an imminent danger to the safety of the city, town or fire district or will not achieve fiscal stability without a budget commission’s assistance, or that the tax levy of the fiscal year should not be approved, it may request that a budget commission be appointed. The budget commission has significant powers, including to approve all appropriations, borrowing authorizations, transfers and other municipal spending authorizations; to increase or decrease municipal fees; to restructure the city, town or fire district’s government and departments; and to issue general obligation bonds of the city, town or fire district. If the budget commission concludes that its powers are not sufficient to restore fiscal stability, a municipal receiver could be appointed.xxiv
Refunding Bonds
In certain situations, a municipal entity may issue refunding bonds to refund and refinance outstanding debt.xxv
App. C-5
Rhode Island
Mechanisms for Resolution after Default
Bond Payment Guarantee
If a city or town is unable to make a payment of principal or interest on a bond, and the state certifies, the state treasurer shall pay the bond paying agent the amount of the due or overdue debt to the extent of the sum that would otherwise be then payable to the city or town and sums estimated to become payable during the remainder of the fiscal year. The amount paid will be in trust and charged against the amount that would otherwise be payable by the treasury to the city.xxvi
Municipal Receiver
If the budget commission concludes that it has insufficient power to restore fiscal responsibility to the city, town or fire district, the director of revenue shall appoint a receiver with the powers of the financial overseer and budget commission and additional powers to exercise governmental functions. The receiver’s power is superior to that of the elected official of the town or city.
Further, if the director of revenue determines that a fiscal emergency exists, he shall appoint a receiver without having first appointed a fiscal overseer or a budget commission.xxvii
Receivership
In certain default situations, Rhode Island law allows for the appointment of a receiver with respect to revenue bonds.xxviii
Remedies on Default Accounting
In certain default situations, bondholders may bring a proceeding to require the authority in question to account as if it were a trustee of an express trust.xxix
Foreclosure
In certain situations, bondholders may take possession of a project in the event of default.xxx
Mandamus
In certain situations, bondholders or their trustee may bring a court action to compel the local governing body to perform a ministerial action that it has refused to undertake, such as collecting taxes or fees where the underlying bond authorization requires such a collection.xxxi
App. C-6
Rhode Island
Other Bondholder Protections
Special Revenue Bonds
As provided by Section 922(d) of the Bankruptcy Code, payments to bondholders holding special revenue bonds would not be stayed on the filing of a municipal bankruptcy petition, and payments to holders could continue. Whether an issuance would qualify as a special revenue bond depends on the provisions of the authorizing statute with respect to the bonds at issue.xxxii
Statutory Liens
Were a municipal entity to file a petition under Chapter 9 of the Bankruptcy Code, bondholders holding bonds to which statutory liens have attached would continue to receive payment on those bonds. For a statutory lien to apply, the authorizing law of the bond issue must contain such a lien. Category SL-1.xxxiii
Rhode Island law also includes strong provisions requiring that payment of bond debt will have first priority of ad valorem and property tax revenues of a municipality over all other debt.
App. C-7
APPENDIX D
VILLAGE OF OAK LAWN POLICE AND FIRE PENSION FUND DATA
App. D-9
App. D-10
App. D-11
App. D-12
i 20 ILL. COMP. STAT. 3855/1-20(4)(b)(15) (specific authorization for Illinois Power Agency).
Under the Local Government Financial Planning and Supervision Act, the financial planning and supervision commission has the power to recommend that a “local governmental unit,” as defined in 50 ILL. COMP. STAT. 320/3(d), file a petition under Chapter 9 and to submit this recommendation to the state. 50 ILL. COMP. STAT. 320/9(b)(4). The Illinois Code, however, does not include any provisions specifically authorizing a public entity, with the exception of the Illinois Power Agency, to file a petition.
ii ILL. CONST. art. VII, § 6 (setting power of home-rule units) and ILL. CONST. art. VII, § 7 (discussing powers delegated to counties and municipalities other than home-rule units); see also Tri-Power Resources, Inc. v. City of Carlyle, 967 N.E. 2d 811, 813 (Ill. Ct. App. 2012).
iii 35 ILL. COMP. STAT. ANN. 200/18-185 et seq. (Property Tax Extension Limitation Law).
iv 65 ILL. COMP. STAT. 5/8-5-1 (municipalities less than 500,000). Certain exceptions to this provision exist, such as debt incurred for constructing a wastewater facility to comply with the Clean Water Act. This provision, further, does not apply to home-rule municipalities. 105 ILL. COMP. STAT. 5/19-1 (school district for either kindergarten through eighth grade or ninth grade through twelfth grade); 105 ILL. COMP. STAT. 5/19-1 (School district containing kindergarten and grades one through twelve); 50 ILL. COMP. STAT. 405/1 (local governments including counties with populations less than 500,000 and townships, schools or municipal corporations with populations less than 300,000); 50 ILL. COMP. STAT. 405/1.2 (providing exception for working cash fund); 70 ILL. COMP. STAT. 705/12 (fire protection districts); and 70 ILL. COMP. STAT. 1205/6-2 (park districts).
These statutes have been provided as examples of statutory debt limitations under the Illinois Code. The state code may be more expansive, and an attorney should be consulted to examine any specific situation.
v 65 ILL. COMP. STAT. 5/8-12-1 et seq. “Financially distressed City” means any municipality which is a home-rule unit and which (i) is certified by the Department of Revenue as being in the highest 5 percent of all home-rule municipalities in terms of the aggregate of the rate percent of all taxes levied pursuant to statute or ordinance upon all taxable property of the municipality and as being in the lowest 5 percent of all home-rule municipalities in terms of per capita tax yield, and (ii) is designated by joint resolution of the General Assembly as a financially distressed city. 65 ILL. COMP. STAT. 5/8-12-3.
A designation as “financially distressed city” shall last for 10 years until the city submits a balanced budget and proves its responsibility.
vi Examples of refunding bond provisions in Illinois include 65 ILL. COMP. STAT. 5/8-4-14 (allowing for refunding revenue bonds issued by municipalities with a population less than 500,000) and 65 ILL. COMP. STAT. 5/11-130-12 (allowing for water supply and sewerage system refunding bonds). The state code may be more expansive and the statutory authority for each bond issuance should be reviewed with respect to each proposed refunding bond issuance.
vii 50 ILL. COMP. STAT. 320/1 et seq. “Local governments” include counties, cities, villages, incorporated towns, townships, special districts and units of local government that exercise limited governmental powers, but do not include school districts. “Fiscal emergency” includes the existence of any one or more of the following conditions: (1) the existence of a continuing default in the payment of principal and interest on any debt obligation for more than 180 days; (2) the failure to make payment of over 20 percent of all payroll to employees of the unit of local government in the amounts and at the times required by law, where the failure has continued for more than 30 days after such time for payment, unless two-thirds of such employees agree in writing to such extension; (3) the insolvency of the unit of local government, being a financial condition that the unit is (A) generally not paying its debt as it becomes due unless it is the subject of a bona fide dispute or (B) unable to pay its debts as they become due. 50 ILL. COMP. STAT. 320/3.
In 1980 the Chicago Board of Education was placed under supervision of the state, and in 1989 East St Louis was placed under state supervision.
viii See, e.g., 50 ILL. COMP. STAT. 445/6 (Industrial Building Revenue Bond Act); 50 ILL. COMP. STAT. 455/6 (Medical Services Facilities Revenue Act); 50 ILL. COMP. STAT. 465/20 (Local Government Housing Finance Act); 65 ILL. COMP. STAT. 5/11-103-15 (airports for municipalities of less than 500,000); 65 ILL. COMP. STAT. 5/11-119.1-6 (Joint Municipal Electric Power Agencies’ bond documents may contain provisions allowing for appointment of receiver); 65 ILL. COMP. STAT. 5/11-119.2-6 (Joint Municipal Natural Gas Agencies’ bond documents may contain provisions allowing for appointment of receiver); and 65 ILL. COMP. STAT. 5/11-130-7 and 5/11-130-12 (water supply and sewerage system bonds). The state code may be more expansive and the statutory authority for each bond issuance should be reviewed before assessing whether a receiver may be appointed.
ix See, e.g., 50 ILL. COMP. STAT. 445/6 (Industrial Building Revenue Bond Act) and 50 ILL. COMP. STAT. 465/20 (Local Government Housing Finance Act). The state code may be more expansive and the statutory authority for each bond issuance should be reviewed before assessing whether such a remedy is applicable.
x See, e.g., 50 ILL. COMP. STAT. 445/6 (Industrial Building Revenue Bond Act); 50 ILL. COMP. STAT. 455/6 (Medical Service Facility Revenue Bond Act); and 50 ILL. COMP. STAT. 465/20 (Local Government Housing Finance Act). The state code may be more expansive and the statutory authority for each bond issuance should be reviewed before assessing whether bondholders may pursue a foreclosure action.
xi See, e.g., 50 ILL. COMP. STAT. 445/6 (Industrial Building Revenue Bond Act). The state code may be more expansive and the statutory authority for each individual bond issuance should be reviewed before assessing the availability of injunctive relief under the particular statute.
xii See, e.g., 70 ILL. COMP. STAT. 200/2-51 (Civic Center Code); 65 ILL. COMP. STAT. 5/11-48.3-11 (municipal zoo authorities); 50 ILL. COMP. STAT. 445/6 (Industrial Building Revenue Bond Act); 50 ILL. COMP. STAT. 455/6 (Medical Service Facility Revenue Bond Act); 50 ILL. COMP. STAT. 465/20 (Local Government Housing Finance Act); and 65 ILL. COMP. STAT. 5/11-103-15 (airports for municipalities of less than 500,000). It is possible that an aggrieved bondholder could pursue a writ of mandamus even absent authorizing statutory law.
xiii See, e.g., 65 ILL. COMP. STAT. 5/8-4.1-11 (revenue bonds issued by municipalities paid by revenues from operation of utility system or revenue-producing enterprise) and 65 ILL. COMP. STAT. 5/11-130-7 (water supply and sewage system bonds). These are examples of special revenue bonds. The state code may be more expansive, and an attorney should be consulted to examine any specific situation involving a default.
xiv Category SL-1: See, e.g., a statutory lien (105 ILCS 5/34A-511) provided for the debt issued by the Chicago School Finance Authority created in 1970 (105 ILCS 5/34A-102) which was discharged on June 1, 2009. See also, e.g., 105 ILL. COMP. STAT. 5/1E-110 (creating statutory lien for Downstate School Finance Authority) and 65 ILL. COMP. STAT. 5/11-103-15 (airports for municipalities of less than 500,000 establishing statutory mortgage lien). These are examples of statutory liens. The state code may be more expansive, and an attorney should be consulted to examine any specific situation involving a default.
Category SL-2: See also 30 ILL. COMP. STAT. 350/13 of the Local Government Debt Reform Act dealing with certain pledges of specified revenues providing such pledge is valid, binding, immediately subject to the lien without further action, binding on other parties and capable of being escrowed. While the language appears to create a statutory lien on such pledged revenues, further clarification or opinion of counsel would be helpful to determine or reaffirm the legislative intent that a statutory lien was created. Further, there is provision for double-barrel bonds contained in 30 ILL. COMP. STAT. 350/15 where, in addition to a pledge of revenue, there is an ad valorem tax levied to pay the bonds if the revenue pledged is insufficient and the levy is abated if the payment is made from the pledged revenues. In addition, the state can issue general obligation bonds which have a set-aside mandated by statute where tax revenues are deposited into a general obligation bond retirement and interest fund where 1/12 of the next 12-month principal amortization and 1/6 of the next six months of interest are deposited. Again, while the language of these statutes is helpful to bondholders as statutory mandates for payment, further clarification would be appropriate before any analysis of a statutory lien could determine whether the intent was to create anything similar to a statutory lien. State Representative Sandack in 2015 sponsored a bankruptcy bill (H.B. 4214, 99th Gen. Assemb., Reg. Sess. (Ill. 2015)) which would provide the clarification and reaffirmation that the pledges of revenues to secure payment of bonds, notes and other obligations of state and local government are covered by a statutory lien. When and whether that legislation will pass the Illinois house and senate are yet to be
determined.
xv R.I. GEN. LAWS § 45-9-7. The Rhode Island Depositors Economic Protection Corporation is specifically not authorized to become a debtor under Chapter 9. R.I. GEN. LAWS § 42-116-5(a)(6). Further, the Tobacco Settlement Financing Corporation is specifically not authorized to file a Chapter 9 petition until one year and one day after the date the corporation no longer has bonds outstanding. See endnote xix for a discussion of the strong measures that Rhode Island has provided to protect bondholders in the event of a Chapter 9 filing by one of its municipalities, such as the 2011 filing by the city of Central Falls. Because of these protections, the city’s general obligation bondholders were not impaired by the Central Falls bankruptcy.
xvi See, e.g., Early Estates v. Housing Bd. of Review, 174 A.2d 117, 119 (R.I. 1961) (finding city ordinance requiring property owner to provide hot water facilities exceeded the jurisdiction of the city because state’s enabling statute had no express grant of such power).
xvii R.I. CONST., art. XIII (Home Rule for Cities and Towns); R.I. GEN. LAWS § 44-5-1 (authorizing certain cities and towns to levy property taxes).
xviii R.I. GEN. LAWS § 44-5-2.
xix R.I. GEN. LAWS § 45-12-1.
xx The Rhode Island fiscal overseer, budget commission and municipal receiver debt default resolution mechanisms are similar to those provisions that have been adopted by the Commonwealth of Massachusetts on an ad hoc basis. Rhode Island, however, has chosen to codify such provisions rather than adopt them on an as-needed basis.
xxi R.I. GEN. LAWS § 45-12-2.1.
xxii R.I. GEN. LAWS § 45-12-2. Section 45-12-11 allows the state director of revenue, on petition by the local governing body, to authorize it to incur indebtedness above this ceiling.
xxiii R.I. GEN. LAWS § 45-9-3.
xxiv R.I. GEN. LAWS §§ 45-9-5 to 45-9-6. The Rhode Island Director of Revenue has established a budget commission for the cities of Woonsocket and East Providence. See City of East Providence Budget Commission, http://eastprovidenceri.net/content/619/6362.aspx (last visited Sept. 23, 2013) and City of Woonsocket Budget Commission, http://www.ci.woonsocket.ri.us/budget.htm (last visited Sept. 23, 2013).
xxv R.I. GEN. LAWS § 45-12-5.2 (allowing any political subdivision to issue refunding bonds); see also R.I. GEN. LAWS § 45-50-22 (allowing municipal public buildings authority to issue refunding bonds).
xxvi R.I. GEN. LAWS § 45-12-32.
xxvii R.I. GEN. LAWS §§ 45-9-7 to 45-9-8. In July, 2010 a receiver was appointed to oversee the city of Central Falls. On the first day on the job, the receiver fired the city’s mayor. See Rhode Island City Overseer Starts by Firing Mayor, http://www.reuters.com/article/idUSTRE66I58520100719 (last visited Sept. 23, 2013). On November 8, 2010, the state-appointed receiver fired the five members of the Central Falls council and replaced the council with a three-member advisory council. In the statement explaining the firing of the council, the receiver noted he fired the council because “several members of the City Council have chosen to continually obstruct our efforts to return fiscal stability to the city.” Romy Varghese, Receiver Replaces Elected Council of Rhode Island City, Dow Jones News, http://www.advfn.com/news_Receiver-Replaces-Elected-Council-Of-Rhode-Island_45198246.html (last visited Mar. 20, 2015). Additionally, a receiver has been appointed over the Central Coventry Fire District.
R.I. GEN. LAWS § 45-9-13 provides that a city or town may not be the subject of a judicial receivership proceeding.
xxviii See, e.g., R.I. GEN. LAWS § 45-48.1-12 (allowing receiver on default of West Greenwich Water District bonds); R.I. GEN. LAWS § 45-33-13 (redevelopment bonds); and R.I. GEN. LAWS § 46-15.1-15 (water supply facilities
bonds). The state code may be more expansive than the examples cited here and the statutory authority for each individual bond issuance should be reviewed before assessing whether a receiver may be appointed.
xxix See, e.g., R.I. GEN. LAWS § 45-33-13 (redevelopment bonds). The state code may be more expansive than the example cited here and the statutory authority for each individual bond issuance should be reviewed before assessing whether an action for accounting may be brought.
xxx See, e.g., R.I. GEN. LAWS § 45-33-13 (redevelopment bonds). The state code may be more expansive than the example cited here and the statutory authority for each individual bond issuance should be reviewed before assessing whether bondholders may take possession of a project.
xxxi See, e.g., R.I. GEN. LAWS § 45-50-18 (revenue bonds for municipal public building authorities under which bondholders can enforce rights through any civil action, mandamus or other proceeding) and R.I. GEN. LAWS § 46-15.1-15 (water supply facilities bonds). It is possible that an aggrieved bondholder could pursue a writ of mandamus even absent authorizing statutory law.
xxxii See, e.g., R.I. GEN. LAWS § 45-50-18 (revenue bonds for municipal public building authorities). This is an example of a special revenue bond. The state code may be more expansive, and an attorney should be consulted to examine any specific situation involving a default.
xxxiii Category SL-1: R.I. GEN. LAWS §§ 45-12-1 and 45-12-22.4. (The statute specifically states it is a statutory lien, a first lien and valid and binding against all other parties and was drafted with the intention that it would be a statutory lien with all the protection as to payment in bankruptcy that statutory liens have. See supra at 50.) This provision has been successfully applied in the bankruptcy proceeding of Central Falls, Rhode Island and general obligation bondholders received payment above other creditors. Indeed, the Central Falls plan of adjustment left unimpaired the city’s general obligation bond issuances, meaning that general obligation bondholders will continue to receive full payment on their respective general obligation bonds. See Fourth Amended Plan for the Adjustment of Debts of the City of Central Falls, Rhode Island, In re City of Central Falls, Rhode Island, Case No. 11-13105 (Bankr. D. R.I. July 27, 2012).