Gov. William F. Weld's bitter prescription for the economic woes of Chelsea, Mass., would abolish the office of the mayor and install in his place a receiver endowed with powers to run the city and even file for bankruptcy protection, with the approval of the state's director of administration and finance.
"This is not a desirable thing, particularly in a democracy," said an aide to a state senator. The Massachusetts legislature was expected to hold a hearing Saturday on the bill outlining the governor's proposals, the aide said.
Among those expected to testify were Gov. Weld, Administration and Finance Secretary Peter Nessen, and city officials. The Senate staffer said the General Court would not convene before Wednesday because of Jewish holidays.
If lawmakers approve Gov. Weld's bill, which was filed on Thursday, the governor would appoint a receiver for a one-year term. The receiver would then be reappointed by the secretary of administration and finance on an annual basis as long as the receivership period lasts, potentially through 1996 under Gov. Weld's bill.
Whoever lands the job would have unbridled authority over the city's fiscal affairs. The city's nine aldermen would be reduced to adviser status, and the receiver would have the ability to cut their salaries, as well as those of other city elected officials.
The receiver's existence would mean three of the aldermen planning to run for mayor this fall would not be able to do so.
But what the receiver would be able to achieve in terms of curing the city's fiscal ills -- which include a $9.2 million deficit compared to annual spending of roughly $40 million -- is an open question, legal observers say.
While the receiver would have power over all the city's proposed contracts, he would not be able to change existing agreements as a municipality in Chapter 9 could.
And, under Gov. Weld's proposal, the receiver would still have to seek voter approval to override Proposition 2 1/2, the 1980 ballot referendum that prevents cities and towns from raising their property tax levies by more than 2.5% a year without a vote of approval from citizens.
In one version of the bill, the receiver would have had the power to exempt tax increases to pay debt service from the Proposition 2 1/2 limits. But Gov. Weld opposed that provision, said Jordan St. John, a spokesman for the governor.
"He doesn't want to have any tax increases, even if they're through a bonding mechanism, that take place without the citizenry having a chance to vote on it," Mr. St. John said.
The receiver would, however, have the ability to initiate the referendum process to override the Proposition 2 1/2 limit. And he would have the power over the city's bond-issuing plans, and be able to pledge aid payments fromt he state as backing for the securities.
The city receiver would also have the power to sell or lease Chelsea's assets, with the approval of the secretary of administration and finance.
But, as James E. Spiotto, a partner in the Chicago law firm of Chapman & Cutler sees it, receivership is generally a way of cutting through red tape. It is not intended to allow the dramatic powers to back out of contracts that Chapter 9 and the rest of the Bankruptcy Code provide for.
"There is no ability for a municipality to compromise its debt outside of Chapter 9 unless [creditors] voluntarily agree," Mr. Spiotto said. Receivership, he explained, "is really an administrative technique."
Receivership may be preferrable because it doesn't carry the same stigma of Chapter 9, and, Mr. Spiotto said, it presents a "unified front" for the municipality when dealing with its creditors.
Thirty-three states have statutes that generally allow municipalities to be placed into receivership, according to Mr. Spiotto. Counting states that have passed laws for specific receiverships, the number reaches 48.
