Bankruptcy is now an option for city

Emergency Manager Cathy Square will likely have to stay on the job longer than she expected to tinker with the city’s budget.

By Charles Sercombe
Hamtramck’s finances are not as rosy as thought.
Just a few weeks ago Emergency Manager Cathy Square said she had a sound budget for this year and next year that even boasted a surplus.
But then last week, the city’s pension operator, MERS (Municipal Employees’ Retirement System), had some bad news. Because the city fell behind several months in making payments before Square came here last year, MERS demanded higher yearly payments.
Square said that would result in the city falling behind in payments once again by next year.
MERS now wants upwards of an additional $5 million over the next five years, Square said.
“MERS gave us some numbers that will bankrupt the city,” Square said. “It’s a disaster.”
Square said she is talking with MERS to get a better deal.
In the meantime, Square is still seeking a $2 million emergency loan from the state, which would be used to make up the missed payments to MERS.
The worst case scenario, Square said, is that she will have to apply for bankruptcy.
No matter what, Square said it looks like she will be staying past her scheduled exit point at the end of this month by at least a few more weeks.
If the city were to go into bankruptcy, pensioners will likely take the brunt of cuts to the budget, Square said.
She said she would seek to end the city’s coverage of health insurance for retirees under the age of 65. Those over 65 are already eligible to collect Medicare.
The city spends $1.2 million a year for health insurance for pensioners under 65.
The city fell into a financial emergency by not making payments to MERS the year prior to Square being appointed as emergency manager.
Missing those payments, Square said, “was a huge mistake.”
At the time, city officials thought they had no other choice. The other option was to miss city employee payroll, including paying police officers and firefighters.
Although the situation appears bleak, it could be worse. At least the city has $46 million invested in MERS, whereas the City of Highland Park found itself with no money in the pension fund.