For Chelsea, Mass., and its newly appointed receiver, Harry Spence, the second phase of a three-pronged recovery program has begun.

Last September, Gov. William F. Weld appointed Chelsea's first receiver, James F. Carlin, to return the financially troubled city to solid ground. Now Mr. Spence has stepped up to the plate for phase two -- studying how to reshape the city's government and generate long-term economic growth.

The 28,000-person city located just north of Boston has already seem some changes since Gov. Weld effectively removed the mayor and Chelsea's nine aldermen from its day-to-day operations.

Through Mr. Carlin's programs, the city closed a $10 million hole in a budget under $40 million. Two of Chelsea's four fire stations have been closed, its payroll has been slashed through layoffs and consolidations of departments, and several city union contracts have been settled.

But Mr. Spence, who assisted Mr. Carlin in his receivership, is not resting on past achievements.

"Now we're charged with producing some real economic development," Mr. Spence said in describing phase two of the recovery drive. "We have proposals that would bring a plastics company employing 225 people to Chelsea and also an enviro-technic industrial park."

Mr. Spence believes the second, and perhaps most critical phase, is off to a good start.

"We have a meeting [today] with the aldermen, bringing them into a closer relationship with the receiver," Mr. Spence said. Looking at how different parts of local government fit together is a major focus of the receiver in considering restructuring city government.

He said the city has entered into a pact with the University of Massachusetts to investigate changing the city's charter.

Mr. Spence said that through an upcoming series of public forums and citizens conferences, hiss office plans to educate the people of Chelsea about the different ways the government might be restructed.

"We will completely rewrite the charter if it is necessary," Mr. Spence said.

According to Mr. Spence and Mr. Carlin, a main factor in Chelsea's problems was the old system of government, under which the mayor shared substantial powers with the nine part-time aldermen.

"There was just not enough control over the workings and the expenses of the town," Mr. Spence said. "One prospect we are looking at is the placement of a full-time town manager."

Mr. Spence said his job has been made easier by the public's changed perception of the city and his office.

"When Jim [Carlin] started, people were literally spitting on him in the street," he said. "Now the mood has shifted to cautious optimism."

In June, Mr. Carlin announced that a long-term budget plan had been implemented and that the city was paying its bills within 30 days. This signaled an end to the first phase of the receivership and allowed Mr. Carlin to resign from the $1.00 per year position.

One new program that has begun within the past year is the Chelsea Image Committee.

"The program was started by citizens to let the rest of the town, as well as the rest of the country, get a better understanding of where Chelsea has been and where we hope to go," Mr. Spence said. "One of the largest factors to regenerating a city involves the clarification of image versus reality."

"Nine or 10 months ago this was a negative town," he said. "Both Jim [Carlin] and I really wondered If Chelsea was a viable city. Now I am certain this could be a healthy and vibrant community."

One way the city has been able to improve its finances so quickly is through a one-shot deal that replenished the city's suffering coffers.

The Massachusetts Port Authority had been paying the city $310,000 per year in lieu of tax payments. The receiver was able to convince the authority to cover the city's taxes through 2012 by presenting a $5 million check.

Mr. Spence recognizes that as the city begins to show signs of life, the rating agencies will begin to take more notice.

However, representatives of all three major rating agencies said they do not currently rate the city because it has no outstanding debt.

Mr. Spence, however, said this may change.

"We are interested in getting back into the public finance business," he noted. "It's a little too premature to say when, but we are looking into it."

Mr. Spence said that one strong factor in the city's recovery has been renewed dedication on the part of the aldermen.

Following the appointment of the receiver, the city's aldermen, led by former Mayor James Mitchell Jr., filed a lawsuit arguing that the stated had no right to deprive the citizens of representative government. Although the lawsuit was dismissed, Mr. Spence said the bad feelings between the two groups have finally begun to heal.

Both Mr. Spence and Mr. Carlin said the eventual goal of the receiver is to make the position less powerful.

Under the third phase of the receivership process, which will begin at the behest of the governor, the city should elect a new government. The receiver will be a more hands-off financial "overseer."

"In the third phase, the receiver will simply watch how the new government does and make sure the sins of the past are not repeated," Mr. Spence said.

Mr. Carlin said his job is done. "I'm going back to the milk and honey of private life," he said. "We were able to bring the city from the red to the black, and I'm pretty proud of that."

Mr. Carlin, who said he is confident in Mr. Spence's abilities, explained that "Harry doesn't need to see me around asking him what he's doing."

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