The city of Providence is seriously considering its options in the wake of a $20 million budget deficit. The mayor and city managers are looking at bankruptcy as a last resort to restore the city's fiscal health.
PROVIDENCE, RI, May 08, 2012 /24-7PressRelease/ -- The city of Providence is seriously considering its options in the wake of a $20 million budget deficit. Like many municipalities across the country, Providence is having trouble in these difficult financial times. The mayor and city managers are looking at bankruptcy as a last resort to restore the city's fiscal health.
Providence has explored several measures to close the gap in the budget, yet up to this point it has not fully resolved the problem. The city has requested voluntary concessions from city retiree pension plan holders in an effort to help stave off bankruptcy. In addition, the city has made a request to Brown University, as well other large nonprofit companies, to make similar voluntary payments rather than paying taxes to help. It is unclear if these and other measures will be enough to help the city before it runs out of money.
There is a distinct parallel between the potential insolvency of Providence and that of individuals going through the same financial struggles. Just as the city may face long-term consequences for having to file bankruptcy, individuals and businesses must deal with the realities of not being able to pay their bills. While it may be necessary for an individual or business to file for bankruptcy protection, it is done with the understanding that one may have a difficult time receiving credit afterwards, may lose some possessions or may face other financial complications. If Providence files bankruptcy, it will have a similar experience, but on a much larger scale.
If Providence does file Chapter 9 bankruptcy, it will have a serious impact on the city and its residents. Essential services including the police and firefighters will continue if the city files bankruptcy, but other services may be determined less essential and no longer be afforded to residents. There is also concern about a bankruptcy decreasing property values, leading to difficulty for the city in obtaining future financing and the overall national perception of the city. Much like an individual filing bankruptcy, the city would do so with the intention of creating a plan to resolve the most dire financial responsibilities and reorganize to resolve outstanding debt.
The mayor and other city officials are still holding out hope that a resolution to avoid such an undesirable option is available, but some close to the mayor's office are not very optimistic. The mayor recently fired a political advisor for suggesting that bankruptcy was unavoidable. Currently there is a discussion of every available option, but right now it may be too early to tell what will happen to the city and its residents.
Patriot Law Group
127 Dorrance Street
Providence RI 02903
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