PONTIAC — Gov. Jennifer Granholm appointed an emergency financial manager for the city of Pontiac after officials there failed to abide by an agreement with the state to address its financial disarray. Fred Leeb, a nonprofit consultant, was put in charge.
The state cited a number of factors when declaring that the city was in a financial emergency. The city's cash reserves decreased from more than $60 million in 2003 to less than $20 million in 2007, and it has a general fund deficit of $6 million.
The mandatory personnel requirements of the city were also cited as problematic, with the state saying they pose "a significant limitation upon the ability of City officials to weigh competing budgetary needs from one year to the next and to allocate scarce financial resources accordingly."
The Mackinac Center detailed Pontiac's finances in its winter 2007 issue of Michigan Privatization Report. It highlighted a number of issues that an EFM may have to address. These issues included Pontiac's then-decreasing cash position and a general fund that spent 68 percent on police and fire expenses — meaning that addressing these major expenses would result in a lengthy and uncertain binding arbitration process. MPR argued that structural reforms were necessary, including selling city assets, privatizing city public works services and contracting with local governments for police and fire services.
References: "Financial manager faces difficult task," The Oakland Press, Feb. 27, 2009
Correspondence between Gov. Granholm and Pontiac Mayor Clarence Phillips, Feb. 20, 2009