Treasurer recommends 2nd step toward EFM

Sunday Times Newspaper

ALLEN PARK – A financial review team has been named to come to the city, the second step toward an emergency financial manager.

Lt. Gov Brian Calley appointed the six-member team Tuesday after recommendations by State Treasurer Andy Dillon.

According to published reports, the team includes Deputy State Treasurer Roger Fraser, Office of Internal Audit Services Director Doug Ringler, Michigan Department of Millitary and Veterans Affairs Project Consultant Joel Wortley, Michigan Department of Treasury Local Government Services Director Frederick Headen, Michigan State University Extension Specialist Eric Scorsone and former Ferndale City Administrator Mark Wollenweber.

In a letter to Gov. Rick Snyder dated June 21, Dillon outlined findings from a May 29 preliminary review of the city’s finances and says the preliminary review team found “probable financial stress” in the city, including a decreased bond rating, persistent fund deficits, deficit spending and decline in taxable values.

Interim City Administrator David Boomer responded to the letter at a city council meeting Tuesday.

“Even though we have not been officially notified by the state, we are going through this line by line addressing any item that is being asked by us and giving any correspondence that is needed,” he said.

The letter also cited the city’s methods to keep from running out of money in the last few months of the fiscal year that ended June 30, including a “pay-as-you-go” method of funding current retiree benefits instead of the entire annual $8.2 million obligation and failing to pay pension payments on a monthly basis, instead making up the entire $2 million when it is due in June.

The letter also mentioned the city’s failure to pay many vendors in a timely manner.

“At the end of May, there were five small boxes of invoices not yet entered into the City’s accounting system that were being set aside for payment,” the letter said. “The invoices totaled over $1 million with some dating back to January of 2012.”

In his letter, Dillon also mentions the city’s plan to outsource its police and fire departments, a plan originally meant to take effect July 1. No momentum has been made on the plan so far and Dillon predicts the move would happen “by October 1 at the earliest,” forcing the budgets — more than $10 million for both — to come out of the city’s general fund.

It also mentioned the city’s failure to file an updated deficit elimination plan after a May millage failed and to update its general appropriations act after it deviated from it, a violation of Michigan Public Act 2.

In the fiscal year that ended June 30 2011, police operations came in at $90,504 over budget and transfers out went over by more than $1.7 million, but according to the letter, the budget was never updated to reflect that.

Councilman Dennis Hayes echoed a concern in the letter, saying that it “seems clear” that the council failed to get a required biennial actuarial report for its pension obligation and post-employment benefits. The last report was from 2008, and the letter said a new report will likely increase the city’s required annual pension contributions.

Boomer said the city is in the process of getting an updated report.

“Absent that, you cannot know how deep in debt you really are,” Hayes said. “Our problems are not this year, next year and the year after, our problems are 10 and 20 years from now, and unless we wake up to that fact, we’re just tinkering around the edges.”

A financial review team has 60 days to report its findings to Snyder.