AP requests hearing for EFM

By ANDREA POTEET
Sunday Times Newspapers

ALLEN PARK — The city has one more chance Wednesday to avoid an emergency financial manager after the City Council Tuesday narrowly approved a measure to request a hearing regarding Gov. Rick Snyder’s Sept. 7 decision to assign the city an EFM.

In his Sept. 7 letter to the city council in which he upheld an independent review team’s assertion that an EFM was needed, Snyder scheduled the hearing, should they request it, for 2 p.m. Wednesday in Lansing.

A motion for the hearing passed 4-3 with some councilors saying the review team failed to take into consideration some cost-saving measures in the works at the time, such as recent American Federation of State, County and Municipal Employees negotiations and a recently-awarded Staffing for Adequate Fire and Emergency Response grant that the city plans to vote to accept or deny at a special meeting Tuesday.

Councilman Bob Keenan said Snyder upheld the team’s decision to disprove criticism that only cities with largely black populations received EFMs under recently suspended Public Act 4.

“I firmly believe the city of Allen Park is used as a pawn,” he said in a study session Tuesday. “I believe its a feather in the governor’s cap so he can say, ‘We’re going to a city that’s 90 percent white. It’s not a racist law.’”

According to a State Treasury press release, Snyder made the determination after the six-member review team’s report listed “incoherent decision making” and other actions by a “manifestly dysfunctional” city council among its reasons for suggesting an EFM.

“We are committed to helping Michigan’s struggling communities,” Snyder said in the release, “and while declaring a financial emergency in Allen Park is not a decision we like to make, it is a necessary one to restore the city’s financial stability and put it on a path to success.”

In his letter to the city, Snyder cited conditions, found by the review team, that contributed to his decision, including a fund balance that dropped from $3.7 million in 2010 to $505,023 in 2011, amended budgets that did not reflect actual spending, and annual payments of more than $2 million to subsidize its failed movie studio property for which it paid more than $10 million more than the property was valued in 2009.

Financially struggling cities previously were subject to controversial Public Act 4 of 2011, which awarded EFMs broad powers including voiding contracts and dismissing elected officials, but after an Aug. 6 formal opinion by Attorney General Bill Schuette regarding the act, which will be voted on in November’s general election, Public Act 72 is in place until the election’s outcome. That act limits those powers — especially involving contracts — substantially.

An August letter by the review team suggested that an EFM, who would be paid up to $160,000 a year from the city’s general fund, should consider filing for Chapter 9 bankruptcy, a move Plante and Moran’s Carl Johnson said was unlikely and has never been done since it severely damages the state’s credit rating.

Johnson, who works with other EFM-affected cities like Ecorse and Highland Park, said even with deficits up to $5 million above their annual revenues, those cities did not file for bankruptcy. Allen Park’s deficit is $6 million, $9 million less than its annual revenues.

Some, like Councilman Larry Templin, voted against the hearing saying the city had not done enough to combat an EFM. Templin pointed to a $2 million emergency financial loan the city planned to but failed to apply for that appeared in the review team’s report. The city voted last month to apply for it, but Templin said that action had still not been taken.

“We’re always pushing things to the last minute,” he said. “Well, the last minute’s here.”

No new information may be presented at the hearing, a fact Councilman Dennis Hayes pointed to, calling it a “fool’s mission.” Hayes said he voted for the action to help prevent a tie vote.

“All of our efforts, no matter how we wishfully think, are not going to make an impact to get us out of this hole,” he said.

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