"While it is true that Providence must confront its serious retiree liabilities, calls for bankruptcy ignore the important fact that bankruptcy protection is not available to the City. Providence has maintained stable and prudent fiscal positions and is not, nor will be in the near-term, insolvent. Today, the City can pay its current bills, its fiscal outlook is improving, it has closed historical deficits, weathered the COVID-19 pandemic, and – with recommendations in this report – has a pathway to confront its most pressing fiscal challenge, the ERS. Even if the City were to reach any of these criteria – which, today, it does not – the State would have to authorize Providence to file for bankruptcy which, at best, would be an uncertain result."  (Note: ERS – Employee Retirement Fund)

 

11 U.S.C. § 109(c) – To declare bankruptcy, the City must be insolvent as defined in

11 U.S.C. § 101(32)(C) – The term “insolvent” means—

(C)with reference to a municipality, financial condition such that the municipality is—

(i)generally not paying its debts as they become due unless such debts are the subject of a bona fide dispute; or

(ii)unable to pay its debts as they become due.

 

Moreover, anticipating the 2011 bankruptcy of Central Falls, in 2010 the RI Legislature added provisions to RI laws to protect Central Falls’ ability to continue borrowing and the state’s reputation in credit markets. – http://webserver.rilegislature.gov//Statutes/TITLE45/45-12/45-12-32.htm

(b) Notwithstanding any provision of general or special law or any rules or regulations with respect to the timing of payment of state aid payments, not later than three (3) days after receipt of the certification from the director of revenue or one business day prior to the date on which the principal or interest, or both, becomes due, whichever is later, the general treasurer shall pay to the paying agent the amount of the due or overdue payment certified to him/her to the extent of the sums otherwise then payable and the sums estimated to become payable during the remainder of the fiscal year, from the treasury, to the city, town or district.

(c) The amounts so paid to the paying agent shall be in trust and shall be exempt from being levied upon, taken, sequestered or applied for any purpose other than paying principal or interest, or both, on bonds, notes or certificates of indebtedness of the city, town or district.

And, Bankruptcy saves tiny Rhode Island city, but leaves scars | Reuters

“Central Falls’ bankruptcy left its elected officials powerless. Even in January when state officials think they can hand the reins back to city council members and the mayor, the bankruptcy case will continue in court and the state will retain oversight, allowing it to step back in if local elected officials veer from the five-year budget plan.”