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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.

[email protected]

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.

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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

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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.


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

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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


Total for Government:

Full-Time Employees 339 2,045

Monthly Full-Time Payroll $2,818,7328 $11,744,257


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

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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



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

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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

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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

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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

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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

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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

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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

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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.

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APPENDIX A

TALE OF TWO CITIESBASIC DATA COMPARISONSOURCE: CITYDATA.COM


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%)


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


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


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


Total for Government:

Full-Time Employees 339 2,045

Monthly Full-Time Payroll $2,818,7328 $11,744,257


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)



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).

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