CHICAGO — Michigan Gov. Rick Snyder Tuesday formally declared the city of Allen Park to be in a state of fiscal emergency after denying the city’s appeal last month.
The city, a once-wealthy suburb of Detroit, faces a series of fiscal challenges that are due in part to a failed $30 million bond-financed film studio development. The city’s inability to meet debt service on the 2009 bonds without dipping into its general fund has aggravated its fiscal situation and sparked a series of downgrades into junk-bond territory.
Allen Park is now the eighth local government to be placed under Michigan’s state-controlled fiscal distress program. Three other jurisdictions, including Detroit, operate under consent agreements.
Allen Park officials, at a Sept. 19 appeal hearing, lobbied the state to craft a consent decree instead of appointing an emergency manager. City officials argued that they had a plan to eliminate its $6 million deficit, and that appointment of an emergency manager “may not be solved” by appointment of an emergency manager.
“The city’s argument in support of the existence of a satisfactory plan to resolve their financial crisis is fraught with inconsistencies,” deputy state treasurer Roger Fraser wrote in an Oct. 1 letter to Snyder. “The city’s ‘plan’ was viewed by the review team as a series of disjointed efforts, none of which had been or were likely to be successful.”
Fraser said that after the city’s appeal, he continued to recommend that Snyder appoint an emergency manager.
In addition to the bond debt, Allen Park faces a chronic general-fund deficit, severe cash-flow problems and political infighting that the original state review team said rendered the City Council “manifestly dysfunctional.”
Standard & Poor’s rates the city B with a negative outlook.
