Skip to comments.Here Come the Municipal Bankruptcies - government planning attempts gone bad
Posted on 04/23/2012 7:29:44 AM PDT by MichCapCon
The city of Allen Park has a $2.6 million budget deficit this year and doesnt know how its going to pay for it.
The city is asking taxpayers for more money but theyve said no before and theres no reason to believe theyll be in any more of a mood when the May 8 millage election arrives.
The problem with Allen Park is not so much due to the recession, declining property values or reduced state revenue. Rather, it is a loss of trust and a lack of confidence that even the citys new panel of leaders wont be able to fix the current financial mess.
Over the past 10 years, this Detroit suburb of just over 28,000 people suffered from the same malaise afflicting other Michigan cities. Its population dropped, in this case, 4 percent. Property values shrunk nearly 50 percent. Instead of doubling down by restructuring and cutting expenses, the city made a bet: Enticed by a state law requiring taxpayers to reimburse movie producers 42 percent of their expenses of movies shot in Michigan, the city decided to get into the movie business.
Without voter approval or an appraisal, Allen Park bought an old Visteon plant (originally Montgomery Wards main distribution center) to turn into a movie making enterprise to be called Unity Studios. It paid nearly $40 million for the property and improvements.
The city found a partner in Jimmy Lifton, a native Michigander with Hollywood ties.
Lifton would lease the property and use his connections to create a new industry for the city, including a training center, studio and postproduction facility. The state kicked in $2.8 million in tax credits. Taxpayers also paid $83,000 for job training. Wayne County offered to declare the area a Renaissance Zone so the entity would be exempt from state and county property taxes.
In the spring of 2009, the publicity wheel for the project went into overdrive. In a promotional video, Lifton predicted the project would create at least 3,000 jobs. He credited the state, and its economic development arm, the Michigan Economic Development Corp.
The process was fluid and easy, even though we had to meet strict guidelines," Lifton said at the time. "We would not be here without the help and guidance of the MEDC.
In a May 2009 videotaped press conference that took on the image of a Hollywood premier, Allen Park Mayor Gary Burtka was giddy with excitement as he talked about the meeting he and Lifton had with Gov. Jennifer Granholm hours earlier.
She loves the package we presented, he said.
The movie studio never happened. There was no grand opening. No job fair. No prospects to pay off the millions of dollars in bonds the city sold to buy the property.
Bob Armstead and a number of angry residents have since spent countless hours trying to figure out how taxpayers were hoodwinked. He calculates that the city will be stuck with the mess for 28 years and ultimately it will cost taxpayers more than $100 million.
Somebody dropped the ball big time. They had stars in their eyes, possibly, but until the SEC (Securities and Exchange Commission) and the FBI can determine what went on, I dont think well ever know. As a citizen, its too hard to get all the facts, he said.
Taxpayers began to hold their own meetings in a local park. Harry Sisko was one of the organizers.
I never ran for office. I never had a desire but there was too much lying. I couldnt take it anymore, he said.
It wasnt just the failed movie studio that voters discussed. There was concern about the citys spending and its generous union contracts. Even city workers realized something was wrong but some told the group they were too intimidated to speak up. There were reports of cronyism. Taxpayers grew tired of watching public services and infrastructure deteriorate while spending went on as usual.
Soon, the meetings grew to about 100 people. They were starting to meet resistance. Hecklers were showing up. Organizers suspected the citys unions sent them.
Last fall, taxpayers made their voices heard. They elected a new city council and mayor. Four months into their new term, they realized the citys woes were beyond traditional fixing. Sisko, who is now a city council member, urged the city to ask the state to send in a review team under Public Act 4. If the review team determines there is a financial crisis and an inadequate plan to address it, it will recommend that the governor appoint an emergency manager, an unelected official who will have a free hand in running the city, including the ability to set aside union contracts. Workers in Allen Park are represented by three unions, including AFSME and those representing employees in the police and fire departments.
I think its needed. I think its a wakeup call for everybody, Sisko said at the March 13th council meeting. Council members were especially dismayed when the citys biggest unions, those representing police officers and firefighters, refused to reopen their contracts for concessions.
The contracts have been a special irritant to taxpayers. Firefighters and police can retire at age 52, can factor in the best three of 10 years in salaries for pension formulas and receive full medical, dental and optical care for life. Members of the two unions contribute 6 percent of their salary to the pension program. According to the attorney representing the firefighters union, the city owes the pension fund $26 million and has no money set aside to pay for retiree health benefits.
Firefighters say they gave $2.8 million in concessions but the city has failed to live up to minimum staffing requirements in the contract. In February, Wayne County Circuit Judge John Gillis ordered the city to hire more firefighters and to give back pay dating back to July 2011. The city has appealed that decision and is seeking a stay on the order. Currently, there are 22 firefighters on the force with one on disability. The contract calls for 28.
In addition, the union has filed an unfair labor practice complaint with the Michigan Employment Relations Commission.
The city is seeking to subcontract fire services from neighboring municipalities. Taxpayers are doubtful the move will save money. Neighboring fire departments have similar pension liabilities that will likely be factored into the subcontracting cost. Currently, 60 percent of the city's budget is spent on police and fire protection
The attorney representing the firefighters, Charles Wycoff, said the union anticipates the appointment of an emergency manager. He denied that is the reason firefighters are refusing to renegotiate their current agreement, which expires in June 2013.
The letter requesting a review team was sent March 21st. As of April 4th, the city says it has not received a response. The Michigan State Department of Treasury did not return phone calls.
Where to start?
(Allen Park Mayor Gary Burtka was giddy with excitement as he talked about the meeting he and Lifton had with Gov. Jennifer Granholm hours earlier.
She loves the package we presented, he said.) THAT GUARANTEES IT’S A BAD IDEA.
(There was concern about the citys spending and its generous union contracts.) YOU THINK?
(Firefighters and police can retire at age 52, can factor in the best three of 10 years in salaries for pension formulas and receive full medical, dental and optical care for life. Members of the two unions contribute 6 percent of their salary to the pension program.)
(Wayne County Circuit Judge John Gillis ordered the city to hire more firefighters and to give back pay dating back to July 2011.) HE ALSO ORDERED PIGS TO START FLYING.
Back in the day, it was ILLEGAL to unionize a publicly paid employee.
Now that Government Unions are legal, we, the taxpayers, need to pressure our elected representatives to make it illegal, once again, for Government Unions to exist.
BTW, it is ALL about the money, your Grandchildren’s money.
Looks like the citizens of Allen Park have been blown away by the now California resident professor.
I wouldn’t call it a planning attempt gone bad: it was willful incompetence and/or fraud.
Public employee unions need to banned outright.
Look at the numbers on these public pensions. Let’s use easy round figures:
Suppose a cop or firefighter works for 30 years on the job at an average of $30/hr, contributing 6% of gross towards his pension, and retires at 52. $30/hr * 2000 hr/yr * 30 years *0.06 = $108,000 contributed to pension. There is no “investment income” because as we know, pensions are already underfunded.
Now when he retires, say he draws 80% of his salary for the next 25 years of his retirement. $60,000/yr * 0.08 * 25 years = $1,200,000.
So the pension fund has to pay out $1.2 million on $108k contribution. The city is in the hole to the tune of ONE MILLION DOLLARS for a single employee, not even counting the lifetime health insurance costs!
Folks, our “public servants” are robbing us blind.
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