Hamtramck Update: Will City Thrive Without Emergency Financial Manager?

When I was asked in November 2000 by the Michigan Emergency Loan Board to take the job of "emergency financial manager" for the City of Hamtramck, the city was faced with several mounting financial problems that past mayors and council members had been sweeping under the rug for years. The city’s general fund deficit had grown to $2.9 million and financial record-keeping was in total disarray. Computer technology was close to non-existent, and there were hardly any knowledgeable department heads or financial staff in any department of the city.

Other major problems facing the city included a dysfunctional Department of Public Works operating out of a poorly maintained facility, a police department housed in a dilapidated unsafe building with dinosaur technology, an underfunded library operating out of a building needing major repairs, and outdated non-working or poorly working water meters throughout the entire city. The city’s labor contracts had expired, and the city was also about to lose a major grant and other funding for a streetscape project due to the city’s inability to put a streetscape plan together.

In addition, the city had numerous unresolved legal matters. Some of the biggest legal problems confronting the city included inaction for 17 years on a brownfield site remediation case, inaction for 32 years on building court-ordered housing resulting from a segregation case, and a suit brought by retired firefighters and policemen for unpaid pension benefits that was ultimately settled for $8.1 million. This case alone resulted in an extra city property tax levy of 14 mills for three and one half years.

I believe that an emergency financial manager has to take one of two strategic options. One approach is to manage the crisis; the other is to fix the problem. I made it clear to state officials that, if appointed, I would not be a babysitter and would aggressively pursue changing how the city operated in order to permanently fix the city’s financial problems.

And so I began the venture by consolidating departments and hiring a controller and other key personnel to run the city. This small but dedicated staff of department heads helped bring about a complete change in how the city now does business. Unnecessary services and employee positions have been eliminated. Essential services have been, for the most part, contracted out to private companies on a lowest bid basis. Contracting out has greatly improved services and has and will continue to save the city substantial sums of money.

Contracting out DPW services meant that the city no longer needed the DPW building and all of its poorly maintained equipment (garbage trucks, snow plows, water meters, street sweepers, etc.). The former DPW building was sold and is now the site of a very successful charter school.

A former three-story hospital owned by the city has been completely renovated and houses all city offices, the 31st District Court and a modern updated police department. Major building improvements have been made to the library and a millage passed to make it self-funding.

All water meters have been replaced, and meter reading is done by a state of the art system. A private contractor does the billings. A private contractor was hired to repair or replace 110 fire hydrants that were not working. Several streets have been completely repaved.

Labor contracts were negotiated with all unions providing substantial savings to the city. The above mentioned brownfield site was remediated which produced $1.9 million for the city’s general fund. The infrastructure has been completed for the court ordered housing case. The downtown streetscape, including a newly repaved parking lot, has been completed.

As a result of the above, and of numerous other improvements, the city’s cost of doing business has been greatly reduced. For example, the city’s annual insurance premium dropped by over $600,000 in the past year by hiring an outside private legal firm to be the city’s attorney for numerous lawsuits that were resolved, saving the city several million dollars.

So is everything in Hamtramck fine now? That is not exactly the case. The only reason Hamtramck is temporarily out of financial trouble is because of four years of hard-nosed professional management provided by a state-appointed emergency financial manager. Because of the absence of professional management, past Hamtramck mayors and councils have given the city labor unions excessive pension, healthcare, days off, and numerous other benefits that are far beyond the city’s ability to pay. In addition, the lack of good management has cost the city millions of dollars in lawsuits.

On November 1, 2004 the town was turned back to the system of governance that created the financial mess. However, in February 2005, the city adopted a new charter, which provides for a city manager form of government. Hopefully, the new city manager will be able to provide the necessary leadership and professional management which can prevent the city from falling back to its old ways of cronyism and fiscal irresponsibility.

Louis Schimmel is an entrepreneur and emergency financial manager in charge of labor negotiations for the city of Hamtramck.