XML FeedsSpecial meeting about city finances
Hassan was absent.
There were no comments from the public.
Cooper distributed three documents: a budget to actual report for the general fund, his standard monthly report, and a cash balance summary. Property tax collections from the GM Poletown plant decreased from $4.3 million in 2008 to $1 million in 2009. Detroit stopped paying altogether and did not pay a dime in 2010.
Revenue was higher than projected in other places. Traffic fines are up $500,000. Every department was under budget a little, spending 93% of what was budgeted. The problem is that $1.1 million was spent in anticipation of Detroit paying GM revenue that was never collected. "Technically", the city spent more than it brought in.
Follow up:
Fund balances can be deceiving because they include capital assets, such as roads, sewers, and water lines. On June 30, 2009, the city had just over $1 million in fund balances, which is how an even bigger crisis had been averted thus far. As of June 30, 2010, the general fund is $687,000 in the hole. Money has to be transferred from the budget stabilization fund to cover the deficit, plus money to cover the anticipated deficit in 2011. He said there is enough money in the fund, unless Detroit doesn't pay on the GM agreement, in which case, the city will be in receivership by January 2011. The last payment the city received was $1 million in January 2010, but that it was counted as revenue for the fiscal year that ended June 2009. Detroit is 1 1/2 years behind at this point.
Jankowski asked if the city has been getting double payments on the jail. Cooper confirmed that the city has been collecting $2 million for the last few years to make up for the years that Wayne County didn't pay, but we will only receive $1 million going forward. When Crawford was the city manager, he used the double payments to establish the budget stabilization fund. The city would be in receivership now without it.
Ahmed asked if the city was out of cash. Cooper repeated that the general fund is more than $600,000 in the hole, and revenue is down 1/3rd from the previous year. Cooper said he had been raising red flags for months, but had held out hope that Detroit would pay. The general fund could borrow from other funds with permission of the council if other funds have balances. He said that the cash of the city is pooled, and that it can be used to overcome cash flow problems, but that this is not a long term solution, and all funds have to be kept separate from an accounting standpoint. Transfers have to be approved by the council.
Miah asked for more information about the budget stabilization fund. Cooper explained that $1.2-1.4 million has to be transferred to the general fund to cover the deficit last year, plus anticipated shortfalls this year. This will leave $600,000-800,000 in the stabilization fund, assuming that Detroit pays the $2 million in GM taxes, taxes they say they will not pay. The $2 million dollars is still listed in the budget as revenue. There is not enough money left in the stabilization fund to cover the shortfall if Detroit doesn't pay, which is why Cooper has been telling the council that we will be broke by January 2011.
Jankowski said that the extra payments from the jail are over. The stabilization fund increased by in 2007 and 2008, but is now dropping.
Gordon asked why spending was not curtailed earlier. Cooper said that the city got $4 million from Detroit 2 years in a row and was ahead of the game in revenue, so the city was in the position to "absorb" delays. He said he had no idea that they wouldn't pay until fiscal year 2010 when they said audits were the hold up. That is when he came to the council with the cuts. The city increased revenue with the traffic program, and he put off making cuts until after the end of the 2010 fiscal year. After a visit to the Detroit City Council, he added a closed session to discuss other options. Cooper said that it's okay for funds to close books with a deficit, but they will get a letter from the state saying that the deficit will have to be corrected within three years. City employees will be facing payless paydays in the coming year.
Ahmed asked what solutions are available. Cooper thought getting Detroit to pay would be easiest. More cuts will have to be made, such as cutting police officers and firefighters back to absolute minimum staffing, which would potentially save $450,000. They could try to cut enough to make it until union contracts expire next year. AFCME has made a proposal for concessions, and the firefighters have made minor concessions, but the police unions have completely refused. Schimmel issued bonds to cover operating expenses. The city is still paying $600,000 per year from the general fund on those bonds. The city could refinance those bonds and add to them, but the bond market is tight and Hamtramck has a poor bond rating due to our reputation from being in receivership. Interest rates would be high. If Detroit did over pay, he could work out a payment plan to keep the minimum $1.7 million per year that Hamtramck is entitled to coming in.
Emergency financial managers are brought in to make short term fixes. Five to six years later when the EFM is gone, the city still has to deal with long-term repercussions: foolish contract decisions, MERS payments and bond payments.
Jankowski said a lot of mistakes were made in the past. Schimmel took actions, but nothing was done in the years after he left to compensate for rising medical and retirement costs. He said we have to cut costs to stay viable. Gordon was also against floating more bonds. Cooper said that the city should never borrow to pay for operating expenses, but the city could potentially lower the payments or pay off the bonds faster. There has not been enough long-term planning.
Jankowski asked if an EFM would be able to issue bonds again. Cooper said they might not be able to, and EFMs are limited in what they can do. He said it would be best if the council could identify an EFM they wanted that they can work with. Police and fire can't be cut easily. Jankowski said that cities in receivership typically have administrations and councils at odds, and if they work together, the state might pass legislation to help. Cooper suggested that the state may find ways to force communities to merge and share. Jankowski said there is a difference between merging and contracting.
20 comments
Bankruptcy seems to be a better option.
Hasan was not there - he was probably not missed and meeting probably went well as this guy does not seem to speak or understand English much.
- Neighbor
The city manager appears to be making the same mistake that Gary Zych made a decade ago in thinking that he will be appointed to the position of EFM by the state, actively working to invite the state in.
The treasurer and finance director were separated for a reason. It might be worthwhile to read the duties outlined for each under the charter. You know how every time a stupid purchase or illegal check is written, the city manager says it was caused by "poor internal controls"? The finance director and the treasurer are the internal controls. Circumvention of the charter and the non-separation of these duties has cost us tens of thousands of dollars in the last 2 years alone.
Hassan's role appears to be to show up at random meetings with outlandish positions that have no basis in reality.
He is just stupidly repeating like a frantic chicken ..the city will be in receivership by Jan. 2011
Hey Cooper, Just resign and let someone else, who knows what he is doing, run the show.
http://www.hamtramckreview.com/2010/07/talk-of-receivership-heats-up/
Like I said before, Cooper is making the same mistake as his predecessor if he thinks that the state will appoint him to be the EFM, inviting the state to come in and take us over.
This is one of the reasons they got rid of the previous City Manager.
http://www.freep.com/article/20100718/NEWS02/7180448/1322/Hamtramck-moves-forward-as-it-waits-for-Detroit-audit
(Horribly crafted headline)
"We have a budget stabilization fund, and we're going to use that until we run out of money," said Hamtramck City Manager Bill Cooper.
Telling.
The budget stabilization fund HAD $2 million dollars. Last year, there was a $687,000 deficit that has to be covered. The projected deficit for this year is also around $700,000, and that is if Detroit pays the GM taxes! We are projected to be at or near bankruptcy in 2012 even if GM pays.
At the meeting last Tuesday, council voted to stop paying Detroit for water.
Now lets hope DWS does not turn off water.
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