Bloomberg News

Providence Cuts Off Adviser Citing Bankruptcy Comments

April 03, 2012

Providence Mayor Angel Taveras cut ties to an adviser who said the Rhode Island capital probably would be forced to seek bankruptcy protection.

Taveras dropped Robert G. Flanders Jr., the receiver for Central Falls and a former state Supreme Court justice, citing the remarks, made in a March 27 interview with Bloomberg News.

“Judge Flanders’s recent comments concerning Providence’s fiscal crisis are unacceptable,” Taveras, 41, said in a statement. “Because of the harm his comments have done, effective today the city of Providence has severed its relationship with Judge Flanders.”

The budget deficit in Providence, Rhode Island’s largest city, probably will force it into bankruptcy, the receiver said in the interview last month. “I don’t see how they can get out of it without going there,” Flanders said while at a conference in Philadelphia. He put Central Falls under court protection in August. His law firm, Hinckley Allen & Snyder LLP (816655L:US), had advised the state capital on pension issues.

“The mayor disagreed with the comments I made about the situation, in terms of the difficulty in obtaining voluntary concessions in time to avoid the necessity for a Chapter 9 filing,” Flanders said by telephone today. “It’s his prerogative to work with counsel he wants to work with.”

Bankruptcy Experience

Providence also had hired his firm to make use of its experience with municipal bankruptcy, Flanders said. He has said that the Chapter 9 filing by Central Falls, the state’s smallest city with about 18,000 residents, provided “a tremendous tool” to balance the municipal budget.

Taveras has put pressure on Brown University in Providence as well as other nonprofit organizations to make voluntary payments in lieu of taxes to help close a deficit of at least $20 million. Governor Lincoln Chafee, an independent, is pressing the state Legislature, led by Democrats, for action on measures to curb municipal pension costs. Retiree expenses helped push Central Falls into insolvency.

Hinckley Allen & Snyder, based in Providence, began advising the city in October, Flanders said. He spoke to the City Council earlier this year about the Chapter 9 process, concluding the work he was asked to do, he said.

Bankruptcy may become more common in the near future, Flanders said at the conference in Philadelphia, sponsored by the Bond Buyer. He suggested that as many as 20 cities a year may head to court.

“We are taking every measure to resolve Providence’s fiscal crisis,” Taveras said in the statement, dated yesterday and received today. “We can avoid bankruptcy and will only consider such action as an absolute last resort.”

To contact the reporter on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net.

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net.


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