By ZEINAB NAJM
HEIGHTS — The City Council did not have enough votes to override a veto by Mayor Daniel Paletko to establish separate bank accounts for the city restricted and assigned corporate funds during a Nov. 24 virtual meeting.
Council members Dave Abdallah, Robert Constan and Denise Malinoswki-Maxwell were opposed and Bill Bazzi, Ray Muscat and Tom Wencel were in favor of overriding the veto. The council needed five votes to override.
According to the resolution, “the revenues raised by general taxation, or by loan to be paid by such tax, shall be divided into such and so many funds as the council may determine; provided, that all moneys raised for the retirement of debt and for interest thereon, shall be kept in a separate fund and in a separate bank account.”
The part of the resolution that was discussed during the meeting was that the city council directs the city treasurer to deposit the $2 million assigned by the city council to fund the future liability of the general government retirees health care 115 trust fund.
Paletko said that former City Treasurer John Riley came to the city council in February and March saying loan arrangements needed to be set up with the water and sewer fund and the library because he was going to run out of cash as a treasurer.
“That’s how we funded the shortfall,” he said. “We finally got to a point where we have a cushion of cash that this year we did not need to do a borrowing; however, we came very close. If you recall, John Riley indicated that if we did not get that money from Wayne County then we would’ve had to borrow money so he set up the arraignment for the borrowing and that cost the general fund money.”
Muscat said he puts himself in the position of the employees who count on having health care funded 20 years from now.
“If it was me, I wouldn’t like somebody playing with the money that’s set aside for my health care,” he said. “That’s my main concern.”
Paletko responded by saying the state required them to come up with a plan to do the health care legacy costs which the city submitted plans for last year and had them approved by the state.
“We are going to make those payments,” he said. “What you really have is an extra reserve to make sure that we have money available to make that payment.”
Abdallah said there was no major advantage, but a disadvantage would be not having access to the money.
“This administration could not take out this $2 million and use it for something else without our approval, anyways,” he said. “I have not been shown an advantage to doing this other than the fact that — I’m just going to talk about the elephant in the room, the lack of trust and that’s why they want to keep it in a separate account.”
Paletko confirmed that in his role of chief administrator he has no access to the funds and only the treasurer can move the funds from one account to another.
Constan said the most important thing to him is keeping the city operating and having sufficient cash on hand.
He said that just prior to Riley’s last day, a request was made at the council’s suggestion to do some inter-fund borrowing and that request was turned down by the council.
When asking if a little under $1 million has been moved and deposited into a separate account, Paletko responded by saying money has been transferred, but he did not know the exact amount.
“We had set up the plan with the state and we did make our contribution into the trust as was required and we will meet the obligations of the commitment that the city made — the mayor and council both had to sign off on it to the state for that legacy cost.
Constan said the money has been allocated, it just hasn’t been placed into the fund.
“The city’s got a big checking account to balance and a big check book to balance and our long serving Treasurer John Riley felt that we were doing things properly,” Constan said. “The money is separately allocated, but if the city has a drop in their bond rating, has bad cash flow problems, I think that is more damaging and dangerous than taking $2 million and setting it aside in perpetuity.”
On Nov. 10, the original resolution was passed with Bazzi, Lisa Hicks-Clayton, Malinoswki-Maxwell, Muscat voting in favor and Wencel with Abdallah and Constan voting against.
In the mayor’s veto he said that the decision to adopt the motion was based on a misunderstanding about the requirements of the city charter.
He wrote that the resolution is premised on the seriously flawed idea that charter requirements pertaining to accounts are charter requirements related to bank accounts and that idea is completely and fundamentally wrong.
Paletko also explains that the council did not understand the charter’s requirement for separate bank accounts since they assumed separate accounts are required.
He says the charter provisions he cited where “account” is used does not mean “bank account” and that to insist that does not even make any sense when considered in this context.
One narrow exception he mentions is part of the wording of Charter 8.11 which is the only relevant provision using the term “bank account” versus the word “account.”
“Yet, it only applies in the very narrow context of keeping money, ‘for the retirement of debt and for interest thereon.’ Since the resolution goes well beyond addressing this issue, the motion and the resolution are still fundamentally flawed.”
Another reason Paletko vetoed the motion adopting the resolution was that it would be extremely financially imprudent to do what is required by the resolution.
Paletko said that Riley stated during the last council meeting that the resolution would have serious negative effects on the city’s liquidity and potentially the city’s bond rating.
“I must also note that the resolution threatens the city’s ability to maximize its returns on the investment of its funds,” he wrote. “In these difficult times, doing what would be required by the resolution would be extremely irresponsible. For my part I cannot agree to such financial mismanagement.”
To watch the council meetings go to the city’s YouTube page, City of Dearborn Heights.
(Zeinab Najm can be reached at [email protected])