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Allen Park Turns to Residents For Bad Investment Bailout

City loses tens of millions in quest for film business

Allen Park City Manager John Zech says if a tax increase isn't approved by voters today, the city will likely have to get an emergency manager.

Zech says a 4-mill, 2-year tax increase to pay for $28 million it borrowed to buy land for a failed movie studio is much needed. The city also borrowed $2 million against next year’s tax revenue and is asking for another $2 million from the state of Michigan in an emergency loan, Zech said.

If the state doesn’t loan the city money, Zech said the city would try to sell “fiscal stabilization bonds” so it can pay off operating expenses.

But one resident said he’s not happy with the city’s solutions to its economic woes.

“The new administration thinks they can borrow their way out of debt,” said Tim O’Brien. “What they have done is just outrageous.”

O’Brien and supporters will be out today collecting signatures for a petition to amend the city’s charter so Allen Park would have to get voter approval for loans.

Zech said the city is taking money from its general fund to pay for the studio debt but still needs the millage increase to pass.

“If it doesn’t, I’m sure the governor will send somebody in,” he said.

Anthony Minghine, chief operating officer of the Michigan Municipal League, said it’s rare for a city to ask for a loan to cover operating expenses, which is what Allen Park would be doing if it sold fiscal stabilization bonds.

“You wouldn’t expect to see people borrowing for operating costs. You would expect to see those costs met with the resources you have available,” Minghine said. “It’s a tool you use if find yourself in severe economic circumstances. Cities as a rule don’t do that.”

Zech said although the studio was a “principal reason” for the financial crisis, he said the city has overspent in other areas over the years.

The city also has a community center that includes a hockey rink that has run about $300,000 to $400,000 a year in the red, Zech said.

Michael LaFaive, a fiscal policy analyst with the Mackinac Center for Public Policy, said such entertainment centers ultimately redirect money from core services.

“Running entertainment centers are not core to a government’s mission,” LaFaive said. “Allen Park and other cities should apply a 'Yellow Pages’ test to its services. If it is, or can be provided privately, it should be. People may enjoy these services very much; that is a reason to keep them private.”

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See also:

Local Government Stories

The Problem With Allen Park

A City At the End of Its Rope

The Detroit International Jazz Festival brings together music and charitable giving. Read more about this "spontaneous order" by clicking here: http://www.mackinac.org/7885


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