The Tertzag year: City’s past financial turmoil finally catches up

Former Acting City Manager is poised to return to that position if a state-appointed financial advisory board agrees to his contract. During his short time here in 2012 and 2013, the city’s finances were rocky. File photo

Former Acting City Manager is poised to return to that position if a state-appointed financial advisory board agrees to his contract. During his short time here in 2012 and 2013, the city’s finances were rocky. File photo

 
By Charles Sercombe
This coming Tuesday, the city will find out if Kyle Tertzag will return as interim city manager.
He held that position in 2012 and part of 2013. Recently, he was hired by the city council – although not unanimously – to take over when the employment contract for City Manager Katrina Powell expires on June 30.
The state-appointed Receivership Transition Advisory Board will consider Tertzag’s contract at its monthly meeting on Tuesday. The RTAB could reject the contract.
Regardless, much was made at a recent special council meeting about Tertzag’s past as a councilmember for Allen Park and as a city administrator for the downriver community Woodhaven.
There are some in the community who are not pleased with his return, and they cited some of Tertzag’s past actions in public office as evidence that he is not a good fit for Hamtramck.
Not much was made, however, about his short tenure here. Tertzag was the last of several to fill the position of acting city manager, which is what the position was called at the time.
The city was going through a rough time financially-speaking, and prior to Tertzag’s arrival the city council put the wheels in motion for the state to intervene. The council eventually asked for an emergency manager to take over in order to make budget cuts the council couldn’t force on city employees.
One did eventually arrive, and that’s when Tertzag was let go. The reason for his firing was that a city manager was not needed as long as an emergency manager was in charge.
Taking a stroll through The Review archives covering Tertzag’s time here, a number of hot-button issues came up. In no particular order they were:
One of the first things he did was follow-up on a predecessor’s inquiry into billings submitted by top city vendors. An outside agency was hired to review the bills.
The auditing company Stout Risius Ross, Inc. (SRR) reported that several bills were incomplete and $56,835 in payments could not be properly documented.
The upshot: Tertzag asked the council to rebid some contracts and in other instances amend existing contracts. Councilmembers didn’t take his advicefor various murky reasons.
Tertzag said there were likely instances of department heads or city employees failing to follow proper procedures in invoicing.
“This situation did not occur overnight and will not be corrected overnight,” Tertzag said in his report to the city council.
“I will endeavor to make changes as expeditiously as possible so as to improve the accuracy and efficiency of our operations vis-à-vis our city contractors and our oversight of these contractors.”
Unbeknown to many at the time, the FBI was also looking at those invoices. No charges ever resulted, nor did the FBI ever confirm what it was investigating.
A looming budget shortfall reared up. The deal had already been in motion before he arrived, but Tertzag was in the uncomfortable position of laying off 12 firefighters.
Their time off was short-lived, however. Once the city secured an expected federal SAFER grant, worth $2.25 million, the firefighters returned to work. The grant paid for their salaries for two years, thus freeing up about $1 million a year from the city budget.
At the time the city was facing a $3.5 million budget deficit, and this grant was seen as a way to take a huge bite out of that amount.
The grant was not totally welcomed by some. The firefighters were in negotiation with the city for a new employment contract. Some felt the grant worked against the city in getting needed contract concessions.
To this day, the city is relying on the grant being renewed, but it is expected to run out in a couple of years. After that, it’s unknown – and perhaps unlikely – if the grant will continue.
While the firefighters escaped deep cuts, the city council was struggling to come up with a new budget. Tertzag was seeking a 20-percent pay cut from all city employees, but there was little chance employees would agree with that.
The council eventually adopted a budget, but one with expenses at $18 million and income revenue at $15 million.
It was hoped the state would agree to an emergency $3 million loan to cover that shortfall. That was not to come.
As state legislatures wrangled over adopting a new emergency manager law, the city inched further into financial crisis.
Finally, some bad news for city officials. The state rejected the request for a $3 million loan.
Tertzag said state officials told the city it has “Cadillac” labor contracts and that the state was not going to “fund the status quo.”
One reason the city had run into financial difficulties was because departments weren’t collecting money that was owed. Take the Water Department, which was owed about $600,000 from homeowners who failed to pay their bills.
In most cities, that would have resulted in water service shutoffs. Not so in Hamtramck.
Until Tertzag seized on the opportunity. During the summer of 2013, the city waged an aggressive campaign against homeowners who had fallen far behind on water payments.
“It’s money that’s sitting out there that crippled the city’s ability to maintain its infrastructure – which has resulted in basement floodings,” Tertzag said back then.
Among those who had their service shutoff was Councilmember Mohammed Hassan, who had reneged on a previous agreement with the city to begin paying on his overdue bills.
When an emergency manager took over later that year, that program was ramped up. The line to pay overdue bills and avoid water shutoffs ran all the way outside of city hall’s front doors.
Many owing hundreds and even tho0usands paid in cash, not by check. Hmmmm.
As the city’s financial situation continued to crumble, a tradition that went back to the 1980s came to an end.
After a series of ambulance breakdowns, that service was taken away from the Fire Department.
The firefighters’ union was not happy, but the two ambulances were getting too costly to repair. In one instance, the only working ambulance conked out at a house where a 2-year-old boy was in need of urgent medical attention.
Ambulance service was no small matter. Fire Chief Paul Wilk said that out of the approximately 3,000 runs the department experienced each year, 80 percent of them were ambulance runs.
The service was eventually contracted out to an EMT company, and that service still remains in private hands. Despite a private company taking over ambulance duties, the firefighters’ union filed a grievance demanding the city to continue paying them for that service.
The grievance was considered brazen considering the city was in a major financial crisis and looking for ways to cut costs, which included contract concessions.
The financial squeeze continued, and the state came down hard on the city – demanding pay cuts from all employees. But now the focus was shifting back to the Fire Department.
Tertzag said that while state Treasurer Andy Dillon (who later resigned amidst a personal scandal) demanded contract concessions from all city employees, he repeatedly also said the city has to “get out of the fire business.”
It got worse. Dillon and state officials delivered an ultimatum: get contract concessions or the state would eliminate the police and fire departments of Hamtramck and Highland Park and have Detroit provide those services.
The clock was ticking closer to state intervention.
As payless paydays loomed for city employees, the state put together a financial review team, and it was expected that either an emergency manager or a consent agreement would be forced on the city in a few weeks’ time.
That was in March of 2013.
In May, a state financial review team recommended the state to intervene. Its report was harsh, saying city officials failed to address the problem for years and had behaved in a “dysfunctional” manner.
The report said: “The Review Team was informed that City Council meetings are chaotic, protracted, and produce little in the way of tangible results. In such an environment, rational financial management is not likely to be forthcoming.”
The review team also took aim at the police and fire departments, saying police officers earned $10,000 more than Flint officers, who patrol a city much larger than Hamtramck with a population of five times the size.
(No one suggested that maybe Flint officers were underpaid.)
As for firefighters, the team pointed out that they received a 16 percent salary increase in the face of shrinking revenues.
Despite objections from some city officials over the team’s report, the council urged the governor to appoint a emergency manager.
In June, Gov. Snyder complied with that request and appointed Cathy Square as emergency manager.
Hamtramck joined six other cities in the state – including Detroit – that were under the control of an emergency manager.
Square remained in that position for 18 months – the legal limit set by the state’s brand new emergency manager law. Near the end of her term, she hired Katrina Powell as city manager, giving her a contract for two-and-a-half years.
That contract expires next Friday.
And as of this week, Kyle Tertzag is waiting in the wings to make a return.
This time around, though, there is no financial crisis facing the city. Powell is leaving the city with a $4 million budget surplus.
There is still one scenario that could play out: The RTAB could reject Tertzag’s contract, and possibly find a way – or a legal reason — to extend Powell’s.
Until Tuesday, you can bet there is wide speculation over what’s to come.

 

4 Responses to The Tertzag year: City’s past financial turmoil finally catches up

  1. Captain Midnight

    June 24, 2017 at 12:10 am

    “There is still one scenario that could play out: The RTB could reject Tertzag’s contract, and possibly find a away – or a legal reason – to extend Powell’s.”

    Expect a throng of Powell supporters to appear before the RTAB meeting to voice their disapproval of Kyle.

    All this controversy could have been avoided if City Council had approved John Gabor in lieu of Kyle Tertzag as “Acting City Manager”. Gabor is well-respected and had a stellar background at General Motors and served adequately as the city manager of Marine City.

  2. Stan Zelmanski

    June 24, 2017 at 12:04 pm

    Remember Election Day, Tuesday, August 6, 2013 when Hamtramck voters went to the pols to select candidates for the primary election?

    Scores of Hamtramck residents had their water shut off and were frantically contacting the city and the media to complain while they descended on City Hall to get their water service restored.

    Who was the Acting City Manager who approved this fiasco and made a smiling appearance on Channel 7 saying there’s one way to avoid this painful situation – “Pay your water bill!”

    It was Kyle Tertzag.

    Could it happen again?

  3. Saila Allen

    June 27, 2017 at 4:38 pm

    Stan,

    “Who was the Acting City Manager who approved this fiasco and made a smiling appearance on Channel 7 saying there’s one way to avoid this painful situation – “Pay your water bill!”
    It was Kyle Tertzag.
    Could it happen again?”

    So, while it seems your issue is directly related to Mr. Tertzag, it sounds quite a bit like your issue is with compelling residents to pay the bills THEY are responsible for.
    Perhaps you are one of those residents with a substantial overdue water bill. Regardless, if I don’t pay my electric bill & it gets shut off, shall I pass the buck and blame Mr. Tertzag as well? Matter of fact, if I don’t pay my cable bill and it’s shut off, since it can’t possibly be my fault, apparently I can just blame anyone I choose. No. No, we cannot blame anyone else for neglecting our responsibilities, and you sir are doing just that. Shameful.

  4. Roadman

    June 29, 2017 at 9:04 pm

    Anne Moise is being appointed by Katrina Powell as the new “Acting City Manager”.

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