A grim view of finances

By Charles Sercombe
The options for Hamtramck to pull out of an ongoing financial meltdown are few.
That was the word from a budget hearing held a few weeks ago, in a special meeting with city council.
The financial audit firm Plante Moran was hired by the city to conduct an independent study of the city’s financial picture.
The presentation to the council was brutal, to say the least. And the options to save money are few and, mostly, ineffective.
First, their projection of the city’s finances is grim. For the next several years, through 2027, there will be significant decreases in revenue income from key sources. Some of it due to the lingering effects of the COVID shutdown for the past year.
Here’s a run-down, according to Plante Moran:
Income tax collections are down by about $400,000 from last year, and will continue to be down, from a high of $3 million in 2019 to about $2.5 million over the next six years.
Hamtramck’s district court was hit hard by a lack of fines and fees. In 2019, the court collected over $1.4 million, down to just a little over $1 million projected for 2021. It is expected to stay flat for several more years.
The General Motors plant, known as the Poletown Plant, once generated $900,000 in 2017, but has now dropped to $400,000 for 2020. It gets worse: the city expects to receive next to nothing for 2021, as the plant continues to retool for new production.
By 2027, their contributions could inch back up to a little over $600,000.
The Wayne County Jail picture is even worse.
The city expects to collect over $1 million for 2021 but after 2023, that figure drops to zero, because the county is building a brand-new jail in Detroit, and will transfer all prisoners out from here.
So, what revenue options does the city have?
The big one is getting voters’ approval to raise property taxes by 10 mills to fund the cost of police and fire pensions. That would cover the city’s cost of about $2 million a year.
Voters already rejected that proposal last November, but they will be asked once again this coming August.
Chances of it being approved? Nil to none.
Income tax collection could increase. It was suggested the city could crack down more on those that live or work here, but don’t pay. The city already cross-checks with state records to see who registers living here and working here.
The cops could start writing more tickets. They had been told to pull back, because of the dangers of COVID, and coming in contact with people.
Our fire service could be offset by establishing an authority with other communities, which would pool tax sources. However, this is a complicated political procedure.
Some have suggested cutting back on the city’s work force. In order to save $3.2 million, that would require eliminating 27 to 40 positions in the police and fire departments.
There is one huge problem with that: Unless the city got the police and fire unions to agree to eliminating minimum staffing requirements, there would be mandatory overtime.
The net effect would be to cancel any savings, because it is highly unlikely the unions would agree to that move.
Another option that Plante Moran called the “Kitchen Sink” approach is a variety of across-the-board cuts, such as: eliminating office supplies ($7,000); no more training for the police and fire departments ($21,000); a 10 percent increase in police tickets ($106,000); a 10-percent increase in building permits ($25,000); plus other cuts.
The total savings in this category is less than $500,000 – far from the $2-3 million a year needed in savings.
At the present rate, the city will be $15 million in the hole, budget-wise, by 2027 if nothing changes.
There has been one other suggestion: bankruptcy, which would give the city the ability to redo contracts with city employees, and even its pension obligations.
It’s a complicated legal procedure that would require state Treasury Department officials to go along with it.
City Manager Kathy Angerer said she is opposed to going this uncertain route.
“Bankruptcy isn’t an option, because there is an answer for the city to pay our debts. Our problem isn’t a spending problem. We are at bare bones when it comes to spending.
“Our problem is a revenue problem. Having the state declare financial distress to seek bankruptcy isn’t the solution. The solution is for the city to increase revenue to keep up with the increasing costs of doing business.
“The best answer and most immediate answer is to cover the cost of the pension obligation. If the community can clearly understand the issue and support the police and fire pension millage increase, which will allow the council to set the annual amount levied to fund the pension expense, then we have a path to balancing the budget and solving our revenue problem.”
Posted March 26, 2021