City sees bond setback

Sunday Times Newspapers

ALLEN PARK – City councilors face a setback to a planned bond issuance designed to help the city avoid running out of general fund money as early as next month.

Carl Johnson, of the city’s financial management firm Plante & Moran, said Tuesday that the $2.2 million in fiscal stabilization bonds the city planned to sell require that the city first issue $4 million in tax anticipation notes, borrowing money against next year’s income taxes.

Johnson said the city and the state treasury, with which city officials met in December to discuss the plan, both thought they could waive the stipulation to issue TANs, but the treasury told the city in a phone call Feb. 17 that they could only do so if they already had an emergency financial manager in place. Councilors had hoped to avoid the step as it would only help current cash flow and not impact the current year’s $2 million deficit.

“It’s a silly rule but one they could not waive,” Johnson said.

“To be frank, it was disappointing to learn in that fashion,” City Administrator John Zech said. “We were given a path to follow, we were dutifully doing that, they reversed course.”

The council will now issue the TANs, which take up to 30 days to close, and apply for the bonds, which take up to six months. The TAN money can be used for cash flow and to pay back the bonds, Johnson said.