CHICAGO - After more than three years of state control, the Detroit suburb of Ecorse no longer needs an emergency manager, Gov. Rick Snyder said Tuesday.
But Michigan will maintain a measure of control over the city, a lower-income suburb located in Wayne County about 10 miles from Detroit.
While announcing he was removing Ecorse’s emergency manager, Snyder said he was appointing a three-member board to oversee the city’s financial operations for an undetermined period of time.
It’s the first time the state has appointed a so-called Transition Advisory Board, which is a tool allowed under the state’s new emergency management law for distressed governments. Ecorse is the first city to exit state control under the new law, Public Act 436.
Including Ecorse, the state has nine local governments under emergency management.
“I’m really pleased with the fact that the financial emergency related to Ecorse has been resolved and the city will be moving forward with the final stages of transition,” Joyce Parker, who has served as Ecorse’s emergency manager since October 2009, said Tuesday in a conference call with reporters.
Since October, Parker has also been emergency manager of Allen Park, another cash-strapped Detroit suburb.
Before the state took over, the city had a structural deficit of roughly $5 million a year, and an accumulated deficit of $14.6 million. Parker said she eliminated both deficits and crafted a new two-year balanced budget.
Key to the city’s recovery, Parker said, was the ability to issue financial recovery bonds that paid off a series of lawsuits that would have otherwise forced the city to nearly double its property tax rate. The borrowing was enabled by special legislation approved by lawmakers in 2011.
“The other major accomplishment was related to special legislation that allowed the city to pay off judgement levies,” Parker said. “That special legislation also allowed the city to change their bond rating from a junk rating to an A rating, which again was something very positive.”
The city paid interest rates in the 6% range on the $9.7 million of bonds, issued in June 2011. The debt featured an intercept structure crafted to reassure bond investors who feared the city could go bankrupt.
Parker cut expenses by $4.3 million annually and increased revenues by $2.3 million. The current general-fund balance is $2.1 million. The city also imposed a special assessment that raises roughly $1.5 million a year to support police and fire services.
Elected officials cannot make any significant financial decisions without the approval of the transition board, Parker said. That allows the state to maintain some control over the city, Michigan Department of Treasury department spokesman Terry Stanton said.
“That’s a new part of the emergency management act,” Stanton said. “It was put in the act because of situations where you wanted to continue to have some involvement to assist locals in making the transition back.” There is no timeline for how long the board will remain in place.
Parker will be on the board, as will Ed Koryzno, administrator of the Department of Treasury’s Office of Financial Responsibility, and Rob Bovitz, president of a Michigan-based accounting firm.
In related news, the school district in the city of Pontiac could become the next local government to get an emergency manager. State education officials plan to launch a preliminary investigation into the district’s books on Monday, wrapping up by the end of the month. The district faces a $37.7 million deficit, local reports said. The city of Pontiac is already under state control, though its emergency manager, Louis Schimmel, has said he hopes to exit by June 30.