By Charles Sercombe
It looks like Hamtramck will head straight into being broke by March.
Four City Councilmembers formed a majority vote to reject applying for a $2.5 million state loan. The loan would have kept the city financially afloat until 2012, but now without the loan the city will simply run out of money within the next two months.
A lengthy and heated debate took place at Tuesday’s City Council meeting. Despite passionate pleas by Mayor Karen Majewski and Councilmember Catrina Stackpoole to save the city and apply for the loan, the loan was shot down by Councilmembers Cathie Gordon, Kazi Miah, Tom Jankowski and Mohammed Hassan.
On top of heading into payless paydays, Hamtramck faces a $3.5 million deficit. A few weeks ago, City Manager Bill Cooper took the bold and unheard of step to ask permission from the state to file for bankruptcy protection.
State Treasury officials rejected the proposal, saying state law requires the city to first be under the control of an emergency financial manager (EFM) who has to make the request.
The bankruptcy plea caught the attention of the national press, which characterized Hamtramck as a forerunner of what’s to come for many struggling communities.
State officials offered the city four loan options. Cooper initially rejected the offer, saying a loan would not solve the city’s underlying financial problem and, on top of it, a loan would only add to the city’s debt.
He has since come around on the loan offer, saying it will buy the city some time to negotiate new contracts with the city’s union workers. Cooper said he has asked the city’s unions for contract concessions with no luck.
He specifically wants to replace expensive Blue Cross health insurance plans with a less expensive deal. So far, the unions have rejected concessions.
Cooper also wants to throw out minimum staffing requirements in the police and fire departments.
Cooper was diplomatic about Tuesday’s rejection of a state loan, saying those who voted against it were “voting their conscience.”
“I’m a little disappointed,” he said about the vote.
He said he will now have to work up another plan, but conceded the city will be broke within several weeks.
Terry Stanton, a spokesman for the Michigan Department of Treasury, said he could not comment on the council’s decision not to apply for a loan. He said if the city were to go into payless paydays, the state could immediately step in and appoint an emergency financial manager.
Hamtramck had been under the control of an EFM for several years and only about four years ago was local control handed back.
In a recent Reuters news interview, Gov. Rick Snyder said the possibility of bankruptcy is still on the table for Hamtramck, but first he’d rather work with local officials.
Mayor Majewski pleaded with the council to apply for the loan, saying it will keep control of Hamtramck local for another year-and-a-half, which would give the city time to work out the crisis.
Councilmember Stackpoole said the loan is part of a three-prong approach to solving the city’s financial problem, which will require residents to also take a hit with a property tax hike and the unions to agree to contract concessions.
Councilmember Jankowski insisted that the unions must first agree to concessions, and he also complained that Cooper’s deficit recovery plan was not adequate.
Councilmember Gordon said there are still plenty of budget cuts that can be made. She said she would be willing to revisit the loan option after more cuts are made.
“Sometimes you have to shake the tree to see what falls out,” Gordon told The Review a day after the meeting.
(Read more about the loan debate in this issue’s “City Hall Insider” column.)
January 18, 2011 at 12:39 pm
Hi Chip and John. You both know that I really appreciate your services as Hamtramck’s news source. About this article, I want to point out a couple of misleading ideas.
1. The Emergency Loan has certain requirements – including that the city must have already applied for 1) a Tax Anticipation Note, and/or 2) a State Revenue Sharing Note within the last 6 months. Hamtramck has not yet met this requirement.
2. The notes I mentioned above (Tax Anticipation and State Revenue Sharing) are like loans. So, Hamtramck has other loan options to pursue. Cities frequently use these notes/loans to manage cash flow problems like affording payroll.
3. Statements that are opinions (“It looks like Hamtramck will head straight into being broke by March.”) are very misleading. Please keep opinions in the Op-Ed section. Please let the facts tell the story.
January 20, 2011 at 3:34 pm
Sorry to say but big mistake.