City offered loan instead of bankruptcy

By Charles Sercombe

It’s a no go for the city’s request to file for bankruptcy.

In late-breaking news, a representative from the state Treasury Department said the state will not allow the city to file for bankruptcy and instead will offer the city a loan to meet payroll and other financial obligations for the next year.

Hamtramck City Manager Bill Cooper recently requested permission to file for bankruptcy because of a looming $3 million budget deficit and the likelihood that the city won’t be able to meet employee payroll come Feb. 1.

Cooper also asked for “guidance” from the state if bankruptcy wasn’t an option. Well, he indeed received guidance instead of a yes to bankruptcy. Cooper was quoted in a Free Press story saying that receiving a loan would only delay the city’s financial problems.

There’s been a media firestorm since Cooper announced last week that the city is seeking bankruptcy.
News reporters from local, state and national media outlets have been calling Cooper all week. This is the first case of a Michigan city asking state officials to help it file for bankruptcy. A Detroit News columnist called Hamtramck a canary in a coalmine, a forewarning of what many other communities are facing.
Communities can’t file for bankruptcy alone. That action has to be done by state treasury officials.

There has also been plenty of buzz in town about the city’s request among city employees – particularly firefighters and police officers. City retirees are concerned that their pensions and health insurance are in jeopardy.

“I’m terrified,” said former Income Tax Department Director Pat Piasecki.”As a retiree I rely on my Blue Cross.”

Cooper has been trying with no luck to get major benefits and staffing reductions from the city’s union employees.

In his letter to the state, Cooper said there is no need for the state to appoint an emergency financial manager, which the state did in 2000.

“We do not need an EFM (Emergency Financial Manager) to look for cost savings within our operations, which was done under the previous EFM, and has continued under my direction,” Cooper said in his letter.

“We know what needs to be done, and are in a position to take action, we simply lack the authority to take the needed action. An analysis by an EFM will take time, and time is something we do not have if we want to avoid running out of funds. We need to work closely with your department in order to move quickly to bankruptcy, the only option available, to our knowledge, where we can set aside our union contracts, specifically our police and fire contracts, allowing for staffing and benefit reductions in both departments, offsetting the $2,000,000-plus deficit we are facing.

“While this step may seem radical in its approach, it is the only approach that will quickly and effectively allow us to address our shortfall.”

Until last January, the city’s finances were considered to be in good shape. But the city’s financial health took a turn for the worse after a combination of several things. The main culprit was the loss of $3 million in tax revenue that Detroit is withholding from the city.

Detroit is claiming it has overpaid Hamtramck for the last several years from a property tax revenue sharing agreement over GM’s Poletown plant.

Hamtramck has since sued Detroit for the money and Detroit has filed a counter-suit. The matter likely won’t be settled for over a year or more.

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