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Providence faces uncertain outlook on legal challenge to pension overhaul

April 30, 2012

The Providence City Council is expected this evening to pass a freeze on pension cost of living adjustments. Supporters, like Majority Leader Seth Yurdin, are banking on a legal defense that the compelling public purpose of Providence’s financial crisis justifies the change.

But not everyone thinks the city is on a strong legal footing, as the Bond Buyer reports today:

Brian Fraser, a partner with Richards Kibbe & Orbe LLP in New York, said the city has an uphill climb legally. “Obviously that’s a breach of the collective bargaining agreements, so I think they’ll have a hard time supporting that in court,” Fraser said.

Providence already lost in court in February, when Superior Court Judge Sarah Taft-Carter blocked the city from switching public-safety retiree health plans to Medicare. Taveras said the move would have saved Providence $6 million to $8 million annually. The state’s Supreme Court plans to hear an appeal in May.

Central Falls receiver Robert Flanders lost his legal gig advising Providence after speaking in support of the municipal bankruptcy process. For his part, Fraser is thinking along similar lines as Flanders.

“Bankruptcy would not be the worst thing for them,” Fraser added. “It worked for Central Falls.”

3 Comments leave one →
  1. tednesi permalink
    April 30, 2012 5:05 pm

    My favorite part of the Bond Buyer article is the headline: “Providence Confronts a Pension Problem That’s Not So Divine”

  2. Mister Guy permalink
    April 30, 2012 9:55 pm

    “‘Bankruptcy would not be the worst thing for them,’ Fraser added. ‘It worked for Central Falls.'”

    Sure…right…because everyone is stumbling over themselves to buy those Caa1 (below investment grade & just 5 notches above default) municipal bonds. For those of you keeping score at home, that’s around 9 notches below Providence’s current bond rating.

    News flash: Providence is going to lose the court cases that are in progress now & will come to pass based on their current, planned course of action. Who will be left holding the bag for the needless legal bills, the higher cost of borrowing, and the wasted time & effort in the end? The taxpayers of the City of Providence.

Trackbacks

  1. On heels of pension overhaul, Taveras consolidates deals with Lifespan + Brown « On Politics

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