By Charles Sercombe
As bad as things are financially for many communities, Hamtramck is doing surprisingly well.
That was the report given by the city’s auditor, Carl Johnson, Jr. of Plante Moran, at Tuesday’s City Council meeting. It was mostly a good news/bad news presentation. The audit was for the financial year of 2009.
So, first an overview of the good news:
There is over $1 million in the police department’s drug forfeiture fund; however, that money has strict limitations on how it can be spent.
It’s good to save, but in these times it’s a luxury: fortunately for the city, it still has a $2 million “rainy day” fund, which is usually reserved for emergency expenses. That fund is tied up in investments.
Amazingly at a time when property tax collections are down by about 3 percent for most communities, Hamtramck saw an increase of 1.4 percent. That trend is expected to slide down in the coming year as more and more properties fall into foreclosure.
Hamtramck is about to close the door on a longstanding housing discrimination lawsuit this coming year when a special tax district will expire. The district, which captures property and income taxes in the Hamtramck Shopping Center on Jos. Campau and Holbrook, has $2 million in it and last year took in $300,000.
The city won’t be able to tap into the existing $2 million but starting next month it will take in the property and income taxes.
And now for the bad news:
Remember when we said property tax collection for the city went up a little over 1 percent last year? Well, what we didn’t mention is there’s a problem with collecting a payment the city receives in lieu of property taxes from GM’s Poletown plant, which straddles Hamtramck and Detroit.
The city had been receiving $4.3 million a year in that deal.
At least that was the agreement Hamtramck officials struck with Detroit years ago when the plant first opened.
Now, Detroit officials are disputing the deal, saying it expired a couple of years ago.
Hamtramck officials insist the agreement runs forever. The really bad news is that Detroit holds the money and until the dispute is settled, the city will have to make do without. That’s what the auditor said.
City Manager Bill Cooper said, however, after the meeting, that Hamtramck will still receive $2.4 million from that collection. He said he already factored in the balance of the loss, $1.9 million a year, into the projected city deficit for the next three years.
Countywide, property tax collection is projected to fall 5-10 percent. The upshot?
“Revenues are falling off the face of the earth,” said auditor Johnson.
This year is the once-every-10-year Census count. During the last 10 years the city’s population count has gone up and down, and lately it’s gone down. If the city doesn’t receive an accurate count, and if the count is down from the 2000 Census, the city could lose $800,000 a year – and that amount for each year over the next 10 years — in street repair funds.
Hamtramck paid dearly for not keeping up with Detroit’s water and sewerage rate increases. Past city administrations decided to not increase water rates and that led to a depletion in the Water Department’s budget and cash flow – to the point where the department had to borrow against the city’s general fund.
Last year the city transferred $500,000 into the department. Because of that, Hamtramck needs to raise its water rates, which it may have no choice since Detroit is already threatening to increase what it charges its customers by at least another 9 percent.
Increasing water rates is no cure-all. With more and more houses and buildings becoming empty, there is less and less water service, which means less revenue for the city.
Legacy costs – a fancy way of saying pensions and employee health insurance — have come to haunt many communities and corporations. Hamtramck is not alone. Johnson said the city’s pension fund is underfunded by $30 million and another $30 million in health coverage.
“Good luck with that,” Johnson said to City Councilmembers.