By Charles Sercombe
Hamtramck officials are crossing their fingers that a bank will loan the city $2 million within the next several weeks.
If no bank is willing to offer the loan, city employees will most likely face payless paydays by sometime in April.
It would be curious if banks turn down the request because the loan is backed up with property tax money that rolls in this July through August.
Finance Director Nevrus Narzarko said the city annually collects at least $2 million during the summer tax period.
But Nazarko told The Review he wouldn’t be surprised if banks turn down the loan, given the conservative financial climate banks are in these days after years of making bad loans.
The loan deal, called in government circles a Tax Anticipation Note (TAN), didn’t come easy for city councilmembers, who debated the proposal for over 30 minutes at the Tuesday council meeting.
The vote turned out to be 4-2 in favor, with Councilmembers Robert Zwolak and Abdul Algazali voting in opposition.
The loan is just one part of an overall strategy to buy the city time to work its way out of its projected $3.4 million budget deficit come next year.
The loan, called a “bridge” by Acting City Manager Erik Tungate, will still only give the city until October to work out a series of contract concessions with city employees – which includes police officers and firefighters – and find new revenue streams.
Tungate said the loan might coincide with another loan of $3 million from the state. The loans don’t come free, obviously. A bank loan will likely come with a 6 percent interest rate, while a state loan carries a much lower interest rate at 1 percent.
The city’s hands are tied in deciding what loan to take and in which order, Tungate said. He said state officials told him the loan from a bank is the required first step, before a state loan would be considered.
Tungate came under some sharp questioning on why the city should take on more debt without a plan upfront on how to balance the budget. Tungate conceded that without contract concessions from city employees, the city would indeed be facing a $5.4 million debt, with no way out.
“Everybody will have to face some tough times,” Tungate said, “including concessions.”
Despite assurances from Tungate that he can get contract concessions, Councilmember Robert Zwolak wasn’t buying it. He said taking a loan will only set the city up for further financial crisis.
“All we’re talking about is paying one credit card with another credit card,” Zwolak said.
Councilmember Algazali was flat out against taking a loan, calling it a “cosmetic” approach to solving the city’s short-term financial problems.
Despite those concerns, a majority on council voted in favor of seeking a loan. Tungate said it will take about 30 to 45 days before the city gets state approval to go ahead and seek a loan.