By JAMES MITCHELL
Sunday Times Newspapers
LINCOLN PARK — According to the state of Michigan, the city is officially eligible for emergency management. Whether that declaration results in the appointment of an emergency manager, a consent agreement or declaration of bankruptcy may be determined this week.
“A financial emergency exists within the City of Lincoln Park,” reads a cover letter dated April 4, which reflected the findings of a state review panel charged with reviewing the city’s financial status.
City officials expect to consider on Tuesday their options during a special meeting, by which time they expect to have in hand a response to the report from Gov. Rick Snyder. In accordance with state guidelines, Snyder has until Monday to agree or disagree with the review team’s report.
Should Snyder confirm that a financial emergency exists as expected, city officials have the option of appealing the decision. If not, one of four paths will be taken: Accept an emergency manager to oversee city finances, enter into a consent agreement with the state to monitor financial decisions, begin a neutral evaluation process, or declare bankruptcy.
According the the 10-page report, there seems little debate a financial emergency exists.
“A substantial majority of the City and union officials with whom the Review Team met indicated that, in their view, a financial emergency exists,” the report concluded.
A number of factors contributed to the declared emergency, both within and outside of the city’s control. Property values in the city have declined steadily in recent years, which resulted in a shrinking general fund with which to operate.
General fund revenue and taxable valuations had decreased by more than 30 percent, a loss of more than $4 million as of June 2013. Expenditures during the same period had exceeded income by more than $2.3 million. The ending balance of the general fund had decreased from $2 million in June 2012 to a deficit of $89,803.
“Therefore,” the report concluded, “in just three fiscal years city officials depleted a $4.5 million fund balance in the General Fund.”
The review team also determined that communications within city hall may have made a bad situation worse. Department heads told the review team that purchasing decisions — which had been kept at a bare minimum — were often made, “without regard to, or knowledge of, their budget status.”
Budgets had been exceeded without the knowledge that the previous year’s allotment had already been exceeded.
Review team members concluded that most city managers and employees agreed on the state of city finances, but solutions to the problem were less clear: “There was, however, less agreement among city officials concerning a specific strategy for addressing the City’s financial situation.”
Determination that the city faces an emergency began in September 2013 when a state review had been requested. City officials at the time anticipated a $1 million budget deficit, and an initial review determined that Lincoln Park was in “financial distress.” A state panel was appointed in February, and review team members spent much of last month at city hall reviewing budgets and meeting with department heads.
The review team’s report is available to the public at www.lincolnpark.govoffice.com.
(James Mitchell can be reached at [email protected].)