Central Falls, Rhode Island — the smallest city in the smallest state — filed for bankruptcy today after years of decline. It is the fifth U.S. municipality this year to seek protection from the courts under the bankruptcy law. The Governor of Rhode Island stood with city officials as the bankruptcy process commenced. Reuters quoted him as saying in a statement:
“The current situation is dire and it necessitates decisive steps to put the city back on a path to solid financial footing and future prosperity,” Rhode Island Governor Lincoln Chafee said in a statement.
Central Falls’s population peaked in 1930 and has declined ever since; it currently has only 19,000 inhabitants. The town is extremely poor with median household income of $22,628 and per-capita income of $10,825, according to the 2000 Census. Central Falls, like many hidden American towns, is at the end of municipal row.
The city was placed in state receivership last year as its pension problems spiraled out of control. The twin municipal demons of debt and pension obligations have burdened this community with unsustainable costs as the population and revenue bases shrank. Bloomberg reports:
The pension’s obligations were $48 million greater than the fair value of its assets as of June 30, 2010, according to data compiled by Bloomberg.