DALLAS—Benton Harbor, Michigan has won release from state oversight.
The city's internal operation and finances will once again fall under the governance of its city council effective immediately. Michigan's Department of Treasury released the city from oversight on Friday after more than six years of emergency management that was approved to address a general fund deficit of $2.3 million.
Benton Harbor entered state-controlled emergency management in March 2010 and began transitioning to local control four years later when it transferred to a state consent agreement.
It has since been operating under a state-appointed transition advisory board in charge of overseeing the city's return to local control. The board is authorized under Michigan's law for distressed local governments and exists to smooth the transition out of state control.
Benton Harbor, which was run by two emergency managers since the city entered the state emergency management, has adopted fund balance policies, developed multi-year cash projections, and outlines annual goals and objectives.
At the end of fiscal year 2015, the city's general fund balance increased by $759,130 from $2,321,261 in 2014 to $3,080,391.
The city has paid 110 % of its Annual Required Contribution to the Municipal Employees' Retirement Systems to reach an 80 % funding level.
"This is an important day for the citizens of Benton Harbor, the mayor, and city council who have all worked diligently to move the city from a financial hardship to a place of stability," Michigan Gov. Rick Snyder said in a statement.
"Benton Harbor is an example of a community where the emergency manager worked hand-in-hand with the local community to right-size the city and help stabilize finances. In the two years since the city left emergency management, local leaders have continued on the path of sound fiscal management and they are well-positioned for success going forward," he added.
The emergency management system has come under heightened scrutiny over the last year. Snyder has been criticized for the EM driven decisions that led Flint to break off from Detroit Water and Sewerage System in 2014 when its contract to receive Detroit-supplied water ended and to improperly treat its new source of water.
The decision ultimately led to the water contamination crisis that the Michigan City is currently grappling with. Flint began pulling water from the Flint River and intended to use it until later this year, when it links to a new Karegnondi Water Authority pipeline.
Flint River water was not properly treated and it corroded pipes throughout the system, creating lead contamination that remained even after the city switched back to Detroit water. Darnell Earley, who was appointed by Snyder as the Flint EM in October 2013, delayed the city's return to Detroit water.
Earley later was appointed to the role of emergency manager for Detroit's Public Schools. DPS has been under state oversight for seven years and has seen its operating deficits ballooned over the last four years to an expected $335 million at the end of 2016 from $83 million in 2012. In June lawmakers finalized a $617 million rescue package for the troubled school district that will restructure the system.
The emergency manager program, in which the state governor appoints a manager with extensive powers over a troubled municipality or school district that meets certain criteria, was launched in 1990. The law requires that school districts, intermediate school districts and charter schools with reserve funds of less than 5% of their general fund budget send their budgetary assumptions to the state. They must choose between working with the Intermediate School District or the state to build their reserves.
Benton Harbor's School District, although not under emergency management, has been under a state consent agreement since Sept 2014. The district reported a $15 million deficit, according to the latest quarterly deficit report submitted to the state legislature by the Michigan Department of Education. In June, the state approved a $3.3 million emergency loan to fund day to day operations.