Town Hall meeting lays it on the table, but for some the writing is on the wall

By Ian Perrotta

By now you’ve probably seen it on TV or heard about it from someone else, but that doesn’t mean last Thursday’s (Jan. 6) Town Hall meeting is old news – the reverberations can still be felt a week later.

The meeting, which was held at People’s Community Services on Joseph Campau, was widely attended by residents, city personnel and other curious onlookers, as well as about a half-dozen media outlets. Organized by City Councilmember Kazi Miah and promoted by a group of residents who braved the elements to go door-to-door to spread the word, the number of assembled public easily surpassed the 165-person occupation limit of the PCS gym.

“When I ran for office I didn’t promise the people anything other than that for any decision we (the council) make, I’ll get the people involved,” Miah said. “I felt like that with the way the situation in the city is now, we needed to have a meeting at someplace other than at City Hall and give residents a chance to be heard.”

Mayor Karen Majewski started things off with a brief overview of the city’s history, providing a context from which City Manager Bill Cooper could extrapolate upon further. Stating that Hamtramck’s history has often been “punctuated by periods of struggle and sometimes by very public drama,” she also noted that “the fate of our little city has risen and fallen and risen again in cycles,” offering examples like the Great Depression, when Hamtramck’s unemployment rate was over 50 percent and the city had to issue its own currency to keep things running.

Majewski also said that underfunded police and fire pensions were a “fundamental structural deficiency that was adding to our debt and silently undermining our stability” throughout the city’s history, noting that the issue continues to be a problem for both Hamtramck and the rest of the country. In 1970, this led to a $400,000 budget shortfall and over $31 million in debt — including $28 million in unfunded pension obligations — which caused the Michigan Deputy Treasurer to declare, “I have never seen a city in the state of Michigan in such a mess as Hamtramck.”

After touching on the hardships caused by the closing of the Dodge Main Plant, Majewski brought the story into the 21st century by mentioning the period the city was in receivership under the guidance of state-appointed Emergency Financial Manager Louis Schimmel. Recognizing that “Schimmel’s measures and methods are still the subject of debate,” she also stated that “he certainly instituted changes that would not have been accomplished at that time by any other means.”

Ending her speech, Majewski said that “the most troubling question reporters and state officials have been asking me over the last couple of months is, ‘Why should Hamtramck exist?’,” stating that “the idea that people who help shape public opinion and who are making decisions that could decide our fate feel that we need to justify our existence is something that keeps me up nights.”

Next up at the lecturn was City Manager Bill Cooper, who gave a much longer and more detailed speech. Focusing on the current financial situation, the steps the city is taking to address that issue and the reasoning behind its course of action, Cooper began by firmly acknowledging that the city is in fact in the midst of a financial crisis. While he conceded there are several causes for this problem, he said it is “first and foremost […] Detroit’s failure to honor our revenue sharing agreement regarding the Poletown plant.”

He went on to provide specifics of the revenue sharing agreement between Hamtramck and Detroit, giving details on the interlocal contract which allowed the two cities to form the Tax Increment Finance Authority (TIFA) that sold the bonds to build the plant. Comparing the two cities, he highlighted the fact that while Hamtramck pledged approximately one-third of the land necessary for the project – with Dodge Main occupying most of that land – the City of Detroit pledged 240 acres, displacing nearly 4,200 residents, 140 businesses and six churches.

“Long-time Hamtramck residents know that the loss of all those Poletown people left an indelible mark on the institutions of our own town simply because Poletown Detroit was an interwoven component of Hamtramck,” said Cooper. “Make no mistake about it: the plant was originally conceived by then-Mayor Coleman Young as a catalyst for change in his city. But 30 years after its conception, the plant has had a much greater impact on our much smaller city.”

Cooper also explained the distribution of funds based on the revenue sharing agreement. He said that under that agreement taxes are collected by both cities, the proceeds are pooled together, and, according to the agreed-upon formula, the first $3.4 million is divided evenly between the two. Anything over that amount is divided between Hamtramck by one-third and Detroit by two-thirds.

“The really nice thing about this agreement is that it continues until ‘the plant is no longer viable,’” said Cooper. “With the recent investment in the plant, this plant will continue to be ‘viable’ for a long time.”

According to Cooper, the problems began in the fiscal year of 2009 when the payments from Detroit came to an abrupt halt. In the aftermath of the ensuing discussions, Hamtramck would go on to sue Detroit for nonpayment. Detroit countersued Hamtramck, claiming it had overpaid the city by $7 million. Countering accusations that Hamtramck has not done enough to collect what it is owed, Cooper pointed to a timeline that showed what has happened thus far and when it occurred.

“The Finance Director, Mayor, City Council and I, and even our City Assessor, have all been involved in efforts to get what is owed to us,” he said.

In addition to the problems with Detroit, Cooper also touched upon several issues that he says have converged into a “perfect fiscal storm.” First, he noted that property tax revenue has fallen over the last several years, which in conjunction with the lowest millage rate in 20 years has caused a significant decrease in city revenue.

Cooper said that the second part of the fiscal storm involves rising health care costs. For the current fiscal year the city experienced a 40 percent increase, taking the total cost to about $2.6 million for active and retired employees. Next year it is expected to increase by another 40 percent, which means that in just two years health care will have nearly doubled in cost, mainly due to the actual use of the benefits, or what is known as “experience.” Through a change in the retirement plan for retirees over the age of 65, the city has only been able to offset costs by about $400,000 per year.

A third contributing factor to the budget problem, according to Cooper, is the continuing escalation of pension costs. Crediting “creative thinking” by Finance Director Nevrus Nazarko, Cooper said that while the increase was kept to a modest 2 percent this year, in the coming year the city may face a 30-40 percent increase.

“Unfortunately, I think that Mr. Nazarko may have run out of rabbits in his magic hat,” said Cooper. “With pension costs running around $3 million, this increase could amount to another $1 million in cost.”

When everything is taken into account, Cooper says the city could face a potential $3 million gap in the budget. He said the council took the first steps in eliminating the deficit by cutting expenses by about $1 million in early December, but thanks to the refusal of Detroit to pay Hamtramck there is still a $2 million shortfall. Cooper said that really leaves only a few options – mainly reducing services or raising taxes.
In the short term, the city has a four-point plan. The first point is for the city to continue pursuing its lawsuit against Detroit. Though Cooper is not confident that the matter will be resolved quickly, he does believe Hamtramck will ultimately win.

“While this may not provide us with relief in the near future, we have to work on both short and long term solutions at the same time,” he said.

The second part of the plan is for Hamtramck to continue to manage its costs. Cooper said that though the city will “continue to look for ways to contain costs the old-fashioned way,” that would only solve some of the problem and the city must explore more drastic options – namely bankruptcy.

Saying that this measure would allow for protection from creditors seeking to foreclose on the city’s assets, but that it would not seek to eliminate responsibility of bond debt, Cooper noted a key aspect of bankruptcy is that Bankruptcy Code allows for municipalities to obtain relief from labor contracts they cannot afford. He said the city needs to save approximately $1.2 million to $1.5 million from both the police and fire unions for a combined savings of $2.4 to $3 million.

“While we view such relief to be extraordinary in nature and would hope to avoid it through negotiations with our unions,” said Cooper, “we cannot rule out the possibility of seeking protection from the Bankruptcy Court for contract provisions that we simply cannot fund, no matter how many other cost-savings or revenue-generating ideas we create.”

The third step of the plan was for the city to apply for a loan from the state. When the city approached the state to file for bankruptcy it was at first offered three loans options, then ultimately one more. And although Cooper said that taking a loan was an idea he had personally rejected in the past, he admitted that he thought it may be one of the city’s only options.

“The reality is that even if we are allowed to go into bankruptcy, we will need funds to get us through the next year or so until we can realize the impact of the cost reductions or concessions that we put into place,” he said.

For the final part of the plan, Cooper said the city must continue to seek out opportunities for economic growth. Though this will not be easy given the current landscape – Cooper said that “the prospect of decreased city services and financial upheaval, together with the crime and blight that accompany both, admittedly [does] not provide us with the optimal conditions for private investment” – he maintained that it is still an important step in turning the tide of the economic flood.

“With the investment of NSP II funds (stimulus money from the federal Recovery Act) into our city, we hope that the curve will not be quite as steep as our current conditions seem to indicate,” he said. “Whatever the case, we remain committed to what many, perhaps justifiably, believe are insurmountable obstacles.”

When his presentation was finished, Cooper opened the floor for residents to voice their opinions to both him and the city council and mayor, who were seated to the right of the stage facing the audience. Many had sensed the imminent conclusion to Cooper’s speech and had already begun to line-up at the microphone. Though the time limit was set at two minutes, many speakers refused to yield until they had made their point.

Based on the visible protest signs in the audience – like “BANKRUPTCY WAS NEVER AN OPTION” and “DON’T SCAPEGOAT UNIONS/DON’T SCAPEGOAT DETROIT” – it was apparent before the comments even began that many residents in attendance were not happy with the way things were being ran. Though their comments ranged from polite suggestions to spiteful insinuations, most fell along a few common threads.

One of the most prevailing points made by the commentators was that the city must not reduce its police and fire protection. Residents were adamant that it is paramount to the city’s future that it maintain adequate services, otherwise new people will not want to live in Hamtramck, let alone those that are already in the city. A few asked about the status of a cost-recovery ordinance that could bring in additional revenue.

Another point made by residents was that the city should enforce codes and make people pay fines. A chief complaint was that code enforcement is either lacking completely or arbitrarily enforced. Residents said that this not only made the city unsafe, but it also makes it less attractive to live in as well.

A third – but by no means final – concern was that the city’s money was being spent irresponsibly. Questions were raised about whether or not some things in the city were necessary, like the Downtown Development Authority or sprinklers for city hall (the latter of which was later revealed to have been paid for by the Police Department’s drug fund). Accusations of unnecessary discretionary spending were rampant, as were charges that the city overpays for some of its contracts, particularly its legal services.

At the meeting’s conclusion, attendees were asked to turn in a survey sheet that would gauge their reaction to what they had just heard. In addition to asking residents to rank four options the city can take – bankruptcy, tax anticipation notes, state loans and state revenue sharing notes – residents were also asked to rank their preferences for cost-saving options. There were also questions on how residents themselves would be willing to help the city and what services are most important.

While the results of the surveys are still being looked at, for some it was a promising sign that so many residents showed up. Councilmember Miah said he was extremely happy with the results, and though he took a moment during the meeting to encourage residents to remain involved and to attend regular council sessions, he said that town hall meetings are important to public discourse and should be held on a more regular basis.

“I thought that the public had a lot of good ideas and suggestions,” he said. “I think we need to have more meetings like this – maybe quarterly.”