Only last September, Chelsea became the largest Massachusetts city to go into receivership, but the receiver running the city has already begun to plan a credit market comeback.

"We're putting together an infrastructure improvement plan," said James F. Carlin, the insurance industry executive appointed last fall to bring the city from the brink of insolvency.

"We will have had two balanced budgets in a row by the end of fiscal 1993, and my sense is that we will be returning to the capital markets as soon as we can convince people that our bonds are good bonds to buy, or the insurers that our bonds are good bonds to insure," Mr. Carlin said.

Chelsea last tapped the capital markets in 1975, with a $1.7 million general obligation issue that carried an A rating, according to Moody's Investors Service.

The rating agency said Chelsea's rating fell to Baa in 1978, then was suspended in 1980 after passage of the Proposition 2 1/2 property tax limit. After assessing the effects of the anti-tax referendum, Moody's gave Chelsea's bonds a Ba 1 rating. The rating was withdrawn in 1989 after the bonds matured.

Edward Cyr, Mr. Carlin's chief of staff, said the city is working on a five-year capital plan. The city has long deferred maintenance of sewers, schools, and other important elements of its infrastructure, which has contributed to the need for about $40 million of capital for renovations.

Mr. Carlin was scheduled to present a balanced budget for Chelsea to city aldermen yesterday.

As recently as last fall, Chelsea was facing a deficit estimated at one-fourth its budget. Under the state law that created the receivership, the aldermen have no say over the budget; Mr. Carlin provides it to them "for informational purposes only."

Mr. Carlin said he balanced Chelsea's budget for fiscal 1993, which starts July 1, by using a combination of fee increases, privatization of services, and layoffs of city employees.

Chelsea ran a $2.3 million deficit in its fiscal 1991 budget, according to Mr. Cyr. When Mr. Carlin assumed control, Chelsea had a $10 million hole in its $40 million budget. It now expects to end fiscal 1992 in balance.

"It's a hard-fought victory and it's not done yet," Mr. Cyr said. "All we've done now is brought it back to a level playing field, but this is a very tough, lean city budget. It is not a budget full of frills or even things that people would not consider frills."

For the state, Chelsea's recovery has proceeded more speedily than expected, said Eric Kriss, assistant secretary and chief financial officer in the Executive Office of Administration and Finance.

"What we've shown is that when a municipality is in such dire condition, a whole new form of government needs to be imposed," said Mr. Kriss.

He added that state officials were beginning to consider possible alternatives for the city's government. Prior to Mr. Carlin assuming control, the city was run by a weak mayor and board of aldermen.

"The objective during the first year was to create financial stability and a balanced budget," Mr. Kriss said. "That has been pretty much accomplished. The next phase is to design and begin to implement a new form of government at the local level."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.