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City inches closer to state intervention

City Hall may have a new boss soon.

 

 

 

By Charles Sercombe

          It’s official: A state review team will look into Hamtramck’s financial situation.

          Hmmmm … sound familiar?

          Indeed. Last fall city officials requested a state review of finances when the city’s financial condition continued to worsen. That “preliminary” review, however, was just the first step toward a review team being appointed to once again look into the city’s finances.

          This time around, there is a deadline for action to take place. The five-member review team has 60 days to report back to the governor and make a recommendation on what action to take.

          If needed, the team can take an additional 30 days to wrap up the review, but it’s likely that won’t be necessary.

          “We have already met with the state treasurer himself, and he is very aware of the situation,” said Acting City Manager Kyle Tertzag. “I do not anticipate the review team will need all 60 days.”

          Some of the preliminary findings that prompted the appointment of a review team include the city passing a budget that basically spent more than what it took in, and the fact that the city fell behind on pension payments by $2 million in order to pay bills and meet city employee payroll.

          It’s highly likely that an emergency manager will be appointed.

          Hamtramck is no stranger to having a state-appointed financial manager take over. Back in 2001, the state stepped in and appointed Louis Schimmel as emergency financial manager.

          He left the city in 2007 when it was deemed the city was back on track, and indeed within two years after that the city boasted of a balanced budget and the establishment of a rainy day fund that eventually amounted to $2 million.

          But the 2008 economic crash and housing collapse conspired to undermine the city’s financial turnaround. Adding in the loss of American Axle jobs and rising health care costs for city employees, the city soon found itself in deficit spending through no fault of its own.

          Since that time there have been significant changes in the emergency manager law. Back when Schimmel was here, his hands were tied in making changes to employee union contracts.

          That’s not the case now, although the state’s new emergency manager law has yet to be tested in court.

          But if the law remains intact, an emergency manager will be able to tear up union contracts and renegotiate them.

          If an emergency manager is appointed, Hamtramck will not be alone. Emergency managers are now in charge of six cities, most notably Detroit, and three public school districts.

          Schimmel has remained busy in the emergency manager business, having been in Pontiac for the past few years. He is scheduled to leave his post in June, which has prompted rumors in town that he will be coming back here.

          And that prompts us to quote a song from the great Ray Charles:

          Hit the road, Jack and don’t you come back

No more, no more, no more, no more

Hit the road, Jack and don’t you come back no more

What you say”

5 Responses to City inches closer to state intervention

  1. Curious

    April 21, 2013 at 5:22 pm

    I would like to know why MERS (the pension company) did not contact the State Treasurer much sooner to alert him as to lack of mandatory contributions that were being missed that should have been paid to them. Now the amount owed has soared to $2,000,000. I don’t undersatnd what is going on because employee paychecks are deducted for these payments in lieu of Social Security and should be paid to MERS on a timely basis.

  2. Curious

    April 23, 2013 at 2:57 pm

    I would like to know why MERS (the pension company) did not contact the State Treasurer much sooner to alert him as to lack of mandatory contributions that were being missed that should have been paid to them by the City. Now the amount owed has soared to over $2,000,000.

    I don’t undersatnd what is going on because employee paychecks are deducted for these payments in lieu of Social Security and should be paid to MERS on a timely basis.

  3. hurontrader

    April 25, 2013 at 1:45 pm

    With artificially inflated real estate prices in the last decade resulting additional revenue in property tax, the city budget was artificially balanced. There is going to shared sacrifice to balance the budget.

  4. Only the facts

    April 25, 2013 at 8:58 pm

    Curious…
    The city was granted a grace period for a year,I think, when they did not have to contribute their share of the pension payment to MERS. During that time,however they did submit the payroll deduction from each employee. At the end of the grace period they were to start submitting their portion plus what they didn’t pay for the last year. Obviously they forgot they might have to “Catch Up”.
    hurontrader…
    I believe that the property taxes have not been reassessed in Hamt. since the late 60’s. I think I read in this paper recently that it would cost the city $40,000.00 to reassess the value of properties in Hamt. Money well spent if you ask me.
    I do agree that this does not apply to property values when the property changes owners. Nor do I know what the turnover rate is for homes in Hamt. over the last 40+ years.

  5. Curious

    April 26, 2013 at 11:15 am

    ONLY THE FACTS:

    I’m not sure why the City would spend $40K reassessing at this point because all properties currently owned are capped and taxable values legally cannot increase yearly except by per the amount of the CPI so there would be no point in reassessing.

    For the properties that either sell or an interest transfers, since they are uncapped and the City can legally increase the taxable value to the current market value, there is no reason this shouldn’t be done and would assume they have been doing this.

    As for MERS, I question as to what authority they have to allow a City to not pay their pension contributions for an entire year, knowing this amounts to a debt of over $2 Million. Who in their right mind would believe a City who has been under financial distress for how many years now will somehow magically pay this amount of debt in a timely manner? Most importantly, my understanding is back in 2010 the pension fund was underfunded at 62% so knowing the fund is only funded at 62% why would you allow this type of debt to continue to incur?

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