A news service for the people of Michigan from the Mackinac Center for Public Policy

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Tough Choices Ahead For Allen Park Emergency Manager

General fund to run out of cash in one month

ALLEN PARK — As Emergency Manager Joyce Parker draws up plans to stop the financial troubles here, a new audit shows the effort will be herculean.

The audit, conducted independently by a newly hired accounting firm, states that Allen Park's financial conditions "raise substantial doubt about the City's ability to continue as a going concern."

In addition, City Treasurer Carl Johnson sent a memo to city staffers Jan. 24 that the general fund will run out of cash by the beginning of March and that payments to vendors are to be delayed by as many as 60 days.

Most city residents anticipated a painful period when City Council asked the state to bring in a review team for emergency management. After weeks of investigation, Gov. Rick Snyder appointed Parker, who has served in this role in other cities in Southeast Michigan. Most recently she cleaned up finances in the City of Ecorse and worked on the books at Highland Park Public Schools.

The audit, conducted by Detroit-based Alan C. Young & Associates, paints a bleak picture of Allen Park's finances. The Wayne County city is in the red $857,000 despite a $2 million boost from a Tax Anticipation Note from the state. 

The problem can be boiled down to one thing: too much being spent and not enough being collected. Revenues are down 19 percent, and while the city cut spending 20 percent, the biggest drains on the budget are the $10 million it owes on property it bought for a movie studio that never materialized, rising public safety costs (up 6 percent) and increasing pension and retiree health insurance obligations. 

"It all needs to be on the table," said resident Tim O'Brien. "The city needs to take a serious look at public safety union contracts. We don't need all those workers at that expense to cover seven square miles.”

O'Brien was referring to an ongoing battle with the city’s fire department over minimum staffing requirements. 

Resident Bob Armstead said city taxpayers have reached the limit for any more tax increases. In November, residents passed a proposal requiring taxpayer approval for any city borrowing. Armstead said he thinks there is so much distrust over the movie studio that taxpayers will never agree to giving more money until they see criminal indictments regarding the matter. 

"The question I have for Ms. Parker is, 'would the city be best off filing for bankruptcy?' " he said. "Everything needs to be on the table and now that the state's emergency manager law has changed, maybe this is the best way to handling our problems."

Armstead said he thinks the city can get more money from studio property tenants, eliminating retiree health benefits and turning the city’s pension plan from a defined benefit plan to a defined contribution 401(k)-style plan.

Parker has been meeting with residents every Wednesday to get their input.

Before she can make any move, she needs to come up with a deficit reduction plan, which is expected any day.

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See also:

Union Contracts, Bad Investment Force State to Suggest Emergency Manager for Allen Park

A City At the End of Its Rope

The Problem With Allen Park

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