Financial meltdown looms for city

By Charles Sercombe

As if it were even possible, Hamtramck’s financial picture looks a lot worse than it did a month ago.

It was previously thought that the city will go broke by January. Now, however, it looks like the city could miss an employee payroll before then, said Acting City Manager Kyle Tertzag.

“It’s worse than we thought,” Tertzag told the city council. “I don’t like being the bearer of bad news.”

Tertzag gave the city council a heads-up at the last council meeting. He told the council that the city has a little over $200,000 on hand and that $500,000 in state revenue is coming in.

Tertzag told The Review that he initially believed the city would have to pay back $500,000 it borrowed from a state road repair fund.

That money was used to meet a previous payroll. Tertzag said the city, technically, isn’t allowed to borrow from the road repair fund. Now, however, Tertzag said state officials said it was OK to use the $500,000 to meet payroll – at least for now.

The cost of payroll is about $400,000 every two weeks.

If the city does miss a payroll, that would likely trigger state intervention. Given the city’s grim financial outlook, it’s likely that the state will appoint an emergency financial manager.

Just what kind of powers the emergency manager will have depends on what voters decide on a controversial law that was passed several months ago. Next Tuesday voters will be asked to uphold the new law, called Act 4.

If voters give it their thumbs up, the emergency manager will have the authority to rip up union contracts. If the law is rejected, the manager will have limited powers, and it’s likely the city would have to seek bankruptcy to tear up contracts.

At press time on Thursday, Tertzag called for a special meeting that evening to discuss the city’s financial situation. He said that unbeknownst to him, the city has twice skipped paying into the pension fund.

The city owes over $600,000 to the fund, Tertzag said. He said the city has until June 30 to make up the payment.

But that seems nearly impossible since the city is spending $3 million more than it expects to bring in.

In the meantime, city officials are waiting to hear back from state officials about their request for an emergency state loan for up to $3 million.

City officials concede that all the loan does is delay the city’s total financial meltdown.