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Tough talk about city finances

Discover the financial turmoil in Hamtramck as the council pushes for budget cuts amid a $3.3 million deficit, potential layoffs, and union tensions. City Manager Cooper seeks solutions to avoid insolvency.

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Tough talk about city finances

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  1. Tough talk about city finances Charles Sercombe January 6, 2011 THE HAMTRAMCK REVIEW http://www.hamtramckreview.com/2010/11/tough-talk-about-city-finances/

  2. The Budget Ax • The budget ax is slicing and dicing in Hamtramck’s City Hall. • Well, at least threats of budget cuts and layoffs are flying. • At Tuesday’s City Council meeting, the council issued a series of orders to begin deep cuts in the city budget. The decision on what cuts – if any – will be made is expected to happen at the next regular council meeting. • The talk of cuts could have been a signal to city unions that the time for contract concessions is now, not later.

  3. Budget Deficit • Council members stressed that action needs to be taken to let state officials know they are serious about wiping out a projected $3.3 million budget deficit and the possibility of payless paydays come Feb. 1. • On top of the council’s list of things to do is an order to each department head to come up with a 20 percent budget cut. For many departments already cut to the bone, that means only one thing: lay off employees and essentially reduce city services to almost nothing.

  4. Lower revenues, no concessions • City Manager Bill Cooper said that unless Detroit hands over the $3 million it is withholding from Hamtramck in a dispute over how much in tax revenues is owed from GM’s Poletown plant, the city will be broke by the end of this January. • Even if that payment comes forward, which at this point looks doubtful, the city could operate only until next June or so. • Cooper has been trying to convince the city’s unions to agree to a less expensive health insurance program. City employees now enjoy a top-notch Blue Cross plan. Cooper said switching to a less expensive plan could save the city anywhere from $1 million to $2 million a year. • So far, the unions have refused to budge on that concession.

  5. Taxes? • At the same time that the City Council is forcing the issue of concessions, a majority of the council refuses to increase the city’s property tax rate to its legal limit, another 2.3 mills. If that increase were made, the city would generate an additional $500,000 a year, Cooper said. • Still, that’s not enough to ward off insolvency. Cooper said he needs to find an additional $3 million a year – either in savings or new income streams – to keep the city afloat. • Unless something comes along, the city is heading toward another state takeover. Cooper received the go-ahead Tuesday night to send a letter to the state Treasury Department outlining the city’s financial woes.

  6. The Economics Revenues andExpenditures • Suppose H is in deficit? Revenues • How do they get out of it? Expenditures • Lower Expenditures and/or Deficit Revenue Base

  7. The Economics Revenues andExpenditures • Raise revenues Revenues • Aid from State is an upward shift. Expenditures Deficit • Higher taxes change the slope. Why? Revenue Base

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