Courtesy of Wall Street Journal
Retired firefighters and police officers in Central Falls, R.I., agreed to cut their pensions and support a plan that would likely give bondholders everything they are owed by the struggling city.
The unusual arrangement is being watched closely by municipal-bond investors and government officials across the U.S. because it could be cloned in an effort to keep borrowing costs from spiraling higher in municipalities near financially shaky cities and counties.
The deal also could spare Central Falls from a costly legal battle with retirees, while giving bond investors more clarity about the security of their investments.
Central Falls, with a population of 19,300 and a severely underfunded pension plan, filed for bankruptcy protection in August. The city has about $20.5 million in bond debt and $47 million in pension liabilities, according to state officials.
As of Monday December 20, 2011, 82 of about 130 Central Falls workers had agreed to support the pension cuts, which will total 25% over the next five years for many recipients, said Matthew McGowan, a lawyer for about 100 police and fire retirees. A minimum of 75 retirees had to support the proposed agreement… Read Full Article at the Wall Street Journal