CHICAGO -- Three years after local officials begged the state to allow it to file for bankruptcy, the city of Hamtramck stepped closer to state takeover Monday when Michigan Gov. Rick Snyder Monday declared it to be in a state of financial emergency.
The city has seven days to appeal the decision. If it loses an appeal, it would become the 11th local government in Michigan to be taken over by the state. The state recently removed an emergency manager from the city of Ecorse, though it retained oversight through a transition advisory board. Pontiac Public Schools is under review for a takeover.
Hamtramck would also become the first city to come under state control after passage of a new state law for distressed municipalities, Public Act 436. The law gives local officials more control in the beginning of the process by outlining four options: an emergency manager, a consent agreement, a neutral evaluation process or a Chapter 9 bankruptcy. The governor’s permission is required for a bankruptcy filing.
Three years ago, Hamtramck officials pressed state officials to allow it to become the first municipality in Michigan to enter bankruptcy. The state refused.
Snyder’s decision comes a week after a five-member state review team said it found major problems in the Detroit suburb. The team said the city has delayed making required monthly pension contributions in order to manage cash flow and that the projected general fund deficit totals $3.3 million, more than 5% of the $16 million 2013 general fund budget.
The team also said the city’s general fund has had a structural deficit for the last three fiscal years.
“There was essentially unanimous acknowledgement from those interviewed that a financial emergency exists and despite the worsening financial condition, city officials did not adequately address the condition,” the state said in a press release Monday.
Hamtramck, population 23,000, was under state control from 2000 through 2007.