CHICAGO - Michigan Gov. Jennifer Granholm has declared the city of Pontiac to be in a state of fiscal emergency and will likely appoint a manager to take over its finances after a hearing scheduled for next week.
Granholm's decision comes after Pontiac officials showed a "lack of urgency" regarding its fiscal problems, according to a letter Granholm sent to Mayor Clarence Phillips Feb. 20. The state first began reviewing the city's finances in July 2007.
Located in southeastern Michigan between Detroit and Flint, Pontiac has been hit hard by the loss of manufacturing jobs. The city faces a growing deficit, declining revenues, and an ongoing political struggle between the mayor and the City Council.
Pontiac's deficit reached $32 million by the end of 2005, but was mostly eliminated by the issuance of $28 million of fiscal stabilization bonds in 2006. Since then, the deficit has grown steadily and by the end of 2008 was estimated at $12 million, according to the state. The budget totals roughly $52 million.
Another lingering problem has been the city's inability to sell the Pontiac Silverdome, the former home of the Detroit Lions. The stadium has been on the market since 2002 and several potential sales have fallen through over the years.
Last year, Pontiac entered into a consent agreement with the state to improve its finances. As part of the agreement, the city agreed to give the state a detailed plan for reducing its deficit, hire an income tax administrator, and pursue negotiations with neighboring governments to consolidate or privatize some public services. The city has failed to take those steps, Granholm said in her letter.
While the violation of the consent agreement automatically allows the state to declare a fiscal emergency, Granholm said she would hold a "courtesy hearing" for city officials to respond to the state's move. A hearing is scheduled for March 4. City officials have said they would protest the move at the hearing.
A 1990 law allows the state to take over local governments' finances. Since then, the state has declared fiscal emergencies in four cities and at least two school districts.
In December, the state declared Detroit Public Schools to be in a state of emergency, and a manager took over the district's finances in late January.
