By Charles Sercombe
Hamtramck’s financial tailspin has a long and complicated story, according to the findings of a financial analysis performed by O’Keefe & Associates.
The financial report was prepared for the state Treasury Department and was obtained by The Review through a Freedom of Information Act request.
The report, which can be considered a blueprint to Hamtramck’s financial recovery, is scathing in its analysis – especially of unnamed elected officials.
The report says that not only does Hamtramck have a $3.3 million budget deficit, it also lacks the ability to get immediate up-to-date information on its financial situation, delayed making payments to the pension fund, borrowed against a street repair fund and has “minimal ability to downsize staffing primarily due to inflexible union contracts with fire and police” unions.
The report did have some positives as well as negatives. First the positives:
“The elected officials and administrative staff are all very passionate about Hamtramck.
“Hamtramck is a very unique City with a huge mix of cultural diversity, ethnic restaurants and shops. Due to the large and varied immigrant population, Hamtramck has a flavor unlike any other city in Michigan.
“Walkable, relatively safe City with a visible police presence. Hamtramck may be Michigan’s only dense urban neighborhood setting that is similar to the older residential sections found in Chicago.
“Affordable, fairly well maintained housing stock with minimal abandoned buildings.
“Lots of upside potential for growth given its unique identity and central proximity to midtown Detroit and the suburbs.”
And on the downside, the report, in part, found:
“Financial issues and mismanagement by elected officials and previous administrationshave created a toxic atmosphere within the City Council and City Hall. The City passeda FY2012-13 budget knowing there would be a $3 million deficit and assumed the statewould provide an emergency loan to cover the shortfall.
“Low morale, an inability to attract quality candidates for open positions, and the highturnover in the city manager position means the organization is floundering and unableto fix itself. Keeping the current Acting City Manager on a series of short term contracts,instead of making him the permanent City Manager, has inhibited his ability to hire quality staff, effectively manage existing staff, and implement any type of restructuringor operating improvements.
“During our time working at City Hall, we observed that the City Manager’s authority is often undermined by micro-managing of staff operations by certain members of the City Council, even though the Hamtramck City Charter specifically states the Council should deal with the administrative staff solely through the City Manager and shall not give any order or direction to subordinates of the City Manager (Section 7-03).
“Unsustainable spending on Public Safety, combined with union contracts that inhibit cost reductions, results in cuts to other administrative areas and City services. The City is forced to forgo payments on obligations such as pensions in order to maintain positive cash flow.
“Centralized controls over cash management, collections, purchasing, billing, and other functions related to daily cash flow are not in place. Job descriptions and processes need to be reworked to improve management of cash.
“The city manager is not getting the timely information needed in order to manage the City through this crisis situation. For example, it took over five days to get an updated accounts payable aging since information does not efficiently flow from the department levels that receive vendor invoices to the accounting area for input to the accounting system (i.e., there was a pile of vendor invoices on people’s desks that accounting was not aware of).
“Lack of forward planning for major public works projects. For example, there is no long term capital spending plan for the Street Funds or Water and Sewer, even though the Street Funds have a balance of over $2.5 million specifically intended for road improvement.”
The report does see what it calls “opportunities” despite the financial obstacles. Here’s what the report had to say:
“Restructuring of fire and police contracts to reduce cost while maintaining sufficient services, especially maintaining adequate police presence, will be a major step toward allowing the City to generate positive cash flow and begin paying down the current $1.3 million cumulative General Fund deficit incurred in previous years.
“Solidify the City Manager position and give that person the full public support of the City Council. This move will give the City Manager the respect and authority needed within the City to manage staff and implement organizational changes.
“Large, entrepreneurial immigrant population, plus the lack of national chains, makes Hamtramck perfect for establishing small business and building a desirable central core that can be a destination for the metro area.”
But the report also warns of “threats” to the city’s recovery:
“Hamtramck survives because the City is relatively safe even though surrounded by Detroit. Spending reductions for the Police Department beyond those used to eliminate inefficiency or inflated costs could reduce police presence in the City. Higher crime will mean an exodus from the City.
“The City Council needs to adopt a more positive attitude toward governing. Continued infighting and public acrimony will inhibit the City’s ability to attract quality people to work there and stymie efforts to turn around and grow.
“The City’s budget depends on two large, potentially temporary revenue streams that if lost would drive the City into a dire financial crisis. The $800,000 drawn for SAFER on the grant supporting the Fire Department staffing plus the $1 million PILOT payment from Wayne County for use of the jail represent over 10% of the City’s General Fund revenue.”
Despite the findings, Emergency Manager Cathy Square fired Acting City Manager Kyle Tertzag and has refused to replace five police officers who left the department.
In fairness, Square told The Review that with her in charge of the city, it was redundant to keep the acting city manager in place and that the police department can be downsized if management is given the right to determine the proper staffing levels per shift.
The Review will have more on the financial analysis in the coming weeks.