On June 3, Gov. Rick Snyder declared the city of Hamtramck is in a financial emergency. In response, the Hamtramck City Council, using a provision of the state’s new emergency manager law, voted to have an emergency manager appointed to take control of the city.
It is the second time this city of about 22,000 people has fallen under state control. In 2000, then-Gov. John Engler appointed Lou Schimmel to be Hamtramck’s emergency financial manager. The state retained control until 2007, when the city was operating in the black and appeared to be on a stable financial footing.
Six years later, Hamtramck is again having trouble balancing its $16 million budget. The city government’s revenues have declined by more than $3 million per year compared to 2009, according to a recent report from the financial review team appointed by the state to examine Hamtramck’s finances.
Among other things, the review team found that city officials had delayed making required monthly pension contributions to the Municipal Employees Retirement System of Michigan in order to manage cash flow.
“The amount of unremitted pension contributions was approximately $1.6 million for the months of September, November and December 2012, and January, February and March 2013,” the review team reported.
The team also reported that a “structural operating deficit has existed in the city’s general fund during the last three fiscal years ($1.2 million in FY 2010, $341,216 in FY 2011, and $3.3 million in FY 2012).”
Although the report focused on problems within the city — particularly high turnover in the city manager position and what it described as “dysfunction” on the City Council — it’s far from alone in struggling to have enough money to provide services and pay its bills.
Local units of government across the state have been hit by a double-whammy of sorts: Drastic reductions in property taxes as a result of the housing market’s collapse and a severe cut in state revenue-sharing funds.
In terms of revenue sharing, Hamtramck is receiving about $1.8 million annually. That is a little more than half of what it had been getting from the state, says City Councilman Robert Zwolak.
It’s not just Hamtramck feeling the bite.
“Over the past dozen years, the Legislature and governor have cut local revenue sharing by more than $6 billion, breaking promise after promise and ignoring statutes that require the appropriations to local communities,” Daniel Gilmartin, CEO and executive director of the Michigan Municipal League, said in March.
Wayne County Executive Robert Ficano echoed those sentiments when he told a gathering of the Southeast Michigan Council of Governments that the “municipal model is broken” and that “everybody at the local level is struggling.”
But Hamtramck is also dealing with issues of its own. Atop that list is the 2011 decision by American Axle to close its Hamtramck plant, which cost the city about $1.7 million a year in property and income taxes, Councilman Anam Miah says.
Other city officials point to a long line of unfortunate events that have contributed to Hamtramck’s financial woes, from a loss of taxes from General Motors’ Poletown plant, following the automaker’s structured bankruptcy, to a long-running tax dispute with Wayne County to the lingering consequences of a 40-year-old housing discrimination lawsuit the city lost.
In her “State of the City” address last September,Mayor Karen Majewski pointed to a host of problems beyond the city’s control:
“The past year has been one of the most financially challenging on record, for the city of Hamtramck, and that’s saying a lot. Due to the decline in revenues from various sources — property taxes, American Axle, GM, city of Detroit, etc. — Hamtramck has exhausted the positive fund balance that we worked so hard to build by the end of fiscal year 2011, and we’ve ended the fiscal year 2012 with a budget deficit.”
The state, however, focused not on the revenue-sharing dispute or other tax issues facing Hamtramck, but rather on the role city officials themselves have played in the crisis. In its report, the state’s financial review team noted:
“During the course of our discussions with various individuals, two key themes emerged as contributing factors to the inability of city officials to address the city’s decaying financial condition: frequent turnover in the city manager position and significant dysfunction within the City Council. Neither of these deficiencies is, in itself, financial in nature, but each appears to have contributed to the city’s financial emergency.”
The revolving door at the city manager’s office has certainly been an issue.
“Since the city was released from emergency financial management in November 2007, it has had six different individuals serve in the city manager position, in either a permanent or acting capacity. In fact, five of those individuals have served within approximately the last 12 months. Many city officials interviewed by the Review Team indicated that the frequent turnover in this key managerial and administrative position resulted in an ever-changing strategic direction within the city, which, in turn, had a profound impact upon day-to-day city operations.
“It also was noted by several city officials that the frequent turnover in the city manager position posed a considerable challenge to city staff seeking to adapt to changes in management styles and resulted in ineffective communication. For example, city and union officials expressed considerable differences of opinions regarding the amount of labor concession that had been requested and the amount of such concession that had been offered in response.”
Then there’s what the review team described as the “dysfunction” exhibited by the city’s officials.
“While several city councilmembers we interviewed seemed individually knowledgeable regarding the city’s financial condition, the members of that body seemed unable to function collectively in a coherent manner.
“City councilmembers themselves indicated that financial leadership by that body has been demonstrated only in the breach. With that assessment, we concur.”
“The review team was informed that City Council meetings are chaotic, protracted, and produce little in the way of tangible results,” according to the state’s report. “In such an environment, rational financial management is not likely to be forthcoming. Illustrative of this point is the fact that when Review Team members inquired of City Councilmembers regarding a proposed plan to address the city’s financial condition, the response from most city councilmembers was that they intended to request an emergency manager.”
In that sense, at least, the state has found a way to forge agreement among the often-fractious council members.
Whatever the source of city government’s problems, council and the mayor’s office have come together to declare the best way to address the budget crisis is to have someone with unfettered power come in, clean things up and kick some ass.
Tommy Zimmer is a Metro Times editorial intern. Send comments to [email protected].