Michigan Governor Declares Allen Park Is in Fiscal Emergency

CHICAGO — Michigan Gov. Rick Snyder Friday declared the city of Allen Park to be in a state of fiscal emergency due in part to its struggle to pay bonds issued for a now-failed film studio.

Allen Park officials have 10 days to request a hearing to appeal the decision.

"We are committed to helping Michigan's struggling communities, and while declaring a financial emergency in Allen Park is not a decision we like to make, it is a necessary one to restore the city's financial stability and put it on a path to success," Snyder said in a statement.

Unless the city successfully appeals, Allen Park will become the eighth local government to be placed under the state-controlled fiscal distress program. Three other jurisdictions, including Detroit, operate under consent agreements with the state.

Allen Park is a formerly wealthy suburb of Detroit that, like many other Michigan cities, has suffered from declining property values and high unemployment over the past several years.

In 2009, the city issued $31 million of limited-tax general obligation bonds to finance a film studio project that failed to come to fruition. Allen Park has since struggled to pay the roughly $2.6 million in annual debt service from its general fund. Voters have twice rejected tax increases to pay off the debt.

Snyder's announcement also noted that the Allen Park paid $10.8 million over the previous valuation price for the film studio property.

In addition to the bond debt, Allen Park faces a chronic general fund deficit, severe cash-flow problems and political infighting that the state review team said rendered the City Council "manifestly dysfunctional."

The city's problems have sparked a trio of downgrades from Standard & Poor's that has pushed the city into junk-bond territory. The agency now rates the city B with a negative outlook.

Snyder announced his decision ahead of a highly anticipated ballot referendum in November that asks residents to overturn Public Act 4, the controversial emergency management law that governs how the state deals with fiscally stressed municipalities.

If overturned, the previous emergency management law, which lacks many of the powers of the new statute, will become law.

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