Tuesday, City Manger Bill Cooper sent two memos. One was given to city employees, warning them that the city is about to run out of cash, and therefor, they won’t be paid.
The second gave Jim Allen notice that the city intended to terminate the contract of Allen Brothers as our attorney in 30 days. Cooper intended to hire Sean Kowalski as our in-house city attorney at a rate of $65,000 per year, $14,000 less than Jim Allen’s retainer. Labor negotiations would be conducted by Pentiuk, Couvreur & Kobiljak P.C. at $90 per hour, far less than the $150 to $200 per hour that Allen Brothers charges.
At the budget meeting, council discussed applying for a Tax Anticipation Note through the state and talking with local banks. Department heads came up with only $250,000 in cuts when the city will be $2 million in the red at the end of June.
At the special meeting, Karen Majewski, Tom Jankowski, Abdul Algazali and Mohamed Hassan fired Bill Cooper. Jankowski tried to add a resolution to the special meeting agenda to appoint an acting city manager over protests, as items are not supposed to be added to agendas at special meetings. Gordon, Zwolak and Miah walked out before Jankowski could make his resolution.
Memo from Cooper to employees
A lot has been printed and/or said lately about the City’s financial situation. Comments have been made about what has or has not been done over the past couple of years to head off a financial crisis.
Accusations have been made,to the point that I feel that I have to give you the facts of what has happened, and what is going to happen.
What exactly has happened over the past couple of years? • American Axle closed costing us $600,000 in income tax revenues. They then went on to idle all of their buildings, thereby reducing the property taxes, costing us another $200,000. Now that they have “officially” closed they are appealing their property taxes which could result in additional loss of revenues between $200,000 and $400,000.
• Poletown revenues dropped substantially. We budgeted $1,700,000, the amount that we have historically received for many years. We will be receiving $700,000 this year, a drop of $1,000,000. (VIle are discussing this with Detroit.) All of the talk about the plant moving to three shifts and hiring lots of people has yet not happened.
• Property values continue to drop. We reduced our budgeted revenues for this fiscal year by $225,000. It looks like we may be on target with this one. However, assessed values are projected to drop another 14% next year. When all is said and done this will equate to an additional $350,000 reduction.
• Over the past two years the cost of our health insurance has jumped by about 30%, or about $700,000 per year. This is on top of an equivalent jump over the previous two years.
We have approximately 270 retirees as compared to 95 active employees. Retirees, between the cost of pensions and benefits, cost us nearly $6,000,000 per year. While I agree that some bad decisions were made over the years that had a direct effect on our pension costs, we cannot change what happened in the past, we can only work to find ways to reduce our overall costs.
We have been successful along those lines by reducing our overall pension costs by about $1,000,000 per year. The State of Michigan changed the Statutory Revenue Sharing, replacing it with a new program. However, the basis for starting this new program was that all communities would lose about 1/3 of their revenue sharing. In our case that cost us about $600,000 per year. We are planning for this now, but we could not plan for it last year when it was first implemented.
On top of this it appears that overall revenue sharing state wide is down and it looks like we will lose an additional $200,000 this year alone. Speaking of the State, several new laws were passed that affected pension and health care benefits. The simple fact is that we are working to try to implement these changes.
However, the changes are only mandated for new employees. This will be helpful long-term, but will have little or no effect short-term unless we can negotiate immediate changes to our pensions and health care.
Overall our expense budget is on target. This is a great thing, but unfortunately not enough to weather the storm that lies ahead, especially in light of the declining revenues.
One of many things that has been said is that we have not received concessions from any of the unions. This is absolutely not true. The FOP has offered concessions. The ROA is expected to follow suit in many of the same ways. The Fire Fighters have said that they will consider making concessions,
and I hope to be able hold them to it. AFSCME has also tightened their belts, even though they are the lowest paid of all of our employees. Concessions have been made, and I for one appreciate the effort that has gone into negotiations towards those concessions. These negotiations have not been easy for any of us.
The City continues to look at ways to increase revenues and reduce costs. You will hear about these things as they move closer to becoming a reality. All I can say at this point is that there is a lot of thought being put into how to bring this about.
Why am I telling you all of this? I have done this to give you some background, to tell you that we are in financial trouble, and to warm you up to the bad news. The bottom line is that we are running into a serious cash flow problem. We are not actually broke at this point, but we are getting close. Due to our situation I am giving you a heads-up that we may not make payroll on March 28, definitely not April 11.
In addition, we may be facing one payless payday per month through the end of June. For those of you who were here a few years ago, you went through payless paydays. This is what we are facing. I did not want to surprise you in late March or early April, I wanted to warn you that this was coming. Based on current projections we are hoping to begin making back payments starting in July and running through the end of the year. I cannot give you specific dates when those back payments will occur as they will depend on our cash flow over the next few months.
I know that this is a difficult time; it is difficult for all of us. I know that I can count on you to continue to provide high quality service to our residents and business owners. I know that I can count on you to do your best. We must continue to pull together to keep the City moving forward no matter how difficult it may be. We will get through this, together.
Thank you for all of your hard work in keeping Hamtramck a great city, and for all of the effort you will put into returning Hamtramck to what it used to be as we continue to move forward.