By JAMES MITCHELL
Sunday Times Newspapers
LINCOLN PARK — The options were limited, but elected officials Wednesday approved what City Attorney Ed Zelenak and City Manager Joe Merucci called “the best option,” the acceptance of a consent agreement with the state to resolve the city’s financial struggle.
“You have to decide which is the most viable option,” Zelenak said. “Here at least the city will have a period of years to take care of outstanding issues.”
Council voted 6-0 — Councilman Mark Kandes was absent — to enter into a consent agreement with the state of Michigan, which will oversee financial decisions made by city officials. A consent agreement was one of four options available to Lincoln Park after a review panel and Gov. Rick Snyder confirmed that a financial emergency exists.
Other options were to accept a state-appointed emergency manager who would have financial authority over the city, a neutral evaluation in which state officials would negotiate with the city’s creditors, or filing Chapter 9 bankruptcy.
Although leery of how the consent agreement will address the city’s budget issues, council members agreed it was the best choice among the four options.
“The best way to move forward is to have the the state give you a hand,” Zelenak said. “You lack the resources to take care of outstanding costs. This is the best option.”
The city expects a budget deficit of at least $1 million when the fiscal year ends in June. Last year officials asked the state to review the financial issues, and a state-appointed team began in February meeting with department heads.
The report submitted earlier this month to Snyder revealed that a $4.5 million general fund balance had been depleted in the last three years, and that annual expenses exceed projected income by more than $2.3 million.
Based on that report, Snyder declared a financial emergency exists in Lincoln Park, and confirmed that ruling Monday. Council held a special meeting Wednesday to determine which of the four options to take.
“Tonight is step one,” Zelenak said Wednesday. “No one knows what happens next, and you have no idea what the agreement will look like.”
The consent agreement will next be drafted by the state treasurer’s office, and a series of negotiations with city officials will be held to clarify the terms. Under state law, an agreement must be confirmed by both parties within 30 days.
Typically, Merucci said, consent agreements last for five years, and state oversight includes monitoring labor negotiations, reviewing financial statements and addressing any vendor contracts that aren’t satisfied on time.
Council members approved the decision but had concerns about loss of local authority.
“Once the agreement is put together, control is taken out of the hands of the mayor and council,” Councilman Tom Murphy said. “I want to know who’s running the show if we’re not.”
Under the terms of a consent agreement, if the city fails to adhere to the conditions the state would have the authority to nullify the deal and override any local input.
Councilwoman Deborah Henderson said city leaders will have to ensure that the terms are met.
“I wonder if this council can be strong enough to carry out what the state demands,” Henderson said. “If not, we’ll get an emergency manager anyway.”
Mayor Thomas Karnes said a consent agreement represented the best opportunity for city officials to retain a voice in local management and fix a financial problem that has been developing for years.
“This is something we have to do,” Karnes said. “I’m sure all of us will work to make it happen.”
(James Mitchell can be reached at [email protected].)