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00SL2
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City of Flint hopes to avoid state takeover of finances by borrowing $20M
Published: Monday, January 10, 2011, 10:28 PM Updated: Tuesday, January 11, 2011, 9:20 AM
Kristin Longley | Flint Journal By Kristin Longley | Flint Journal
FLINT, Michigan — The city of Flint is moving forward with a controversial plan to borrow $20 million to cover its debt — a move that could help avoid another emergency state takeover of the city’s finances, officials said.
Without the bond, members of Flint Mayor Dayne Walling’s administration said the city is in danger of not being able to cover its employee payroll come March 1, which would spark a state investigation into the city’s finances that could lead to an emergency financial manager.
The $20 million bond would allow the city to pay last year’s debt — as well as some newly projected current debt — over a longer period of time, up to 20 years, officials said.
The bond would cover last fiscal year’s $16.5 million deficit and estimated current debt of about $3.3 million. It can only be used to cover the debt and could not be used to rehire laid off employees, such as police, officials said.
After a lengthy discussion, the Flint City Council voted 6-2 tonight to ask the state’s permission to go to the bond market to take out the “fiscal stabilization bond.”
Voting against the proposal were Councilman Joshua Freeman and Council Vice President Dale Weighill, both of whom said the city needs to reform its spending habits before it borrows money to pay off debt.
Weighill also said he still has unanswered questions about the proposal, which wasn't officially brought to council until this evening and wasn't on the meeting agenda.
“If we can’t even fix our current deficit, how are we going to fix that problem next year?” said Freeman, chairman of the council’s finance committee. “I can’t vote to kick the can down the road.”
But others said the matter is too urgent to put off.
The last time Flint’s deficit topped $20 million was in 2002, when the state appointed an emergency financial manager to reduce the city’s $28 million debt.
City Administrator Gregory Eason said the city’s cash flow is so tight that “without fail” the city won’t be able to make payroll or pay vendors without getting some money in the next 60 days.
“I can assure you the state will be here,” he said. “We don’t want to put the city in this kind of jeopardy.”
Councilman Scott Kincaid said he voted for it because he doesn’t want the “city to shut down.” He’s worried, however, that the state won’t approve the bond because the city hasn’t gotten its spending under control.
“The state will take over (without the bond),” Kincaid said. “There’s no question.”
Now that the bond application has been approved by the council, the city will need to forward it to the state for its approval. Eason said he hopes that will happen over the next week.
Once the State Administrative Board has the application, it has seven days to approve or deny it.
The city will have to prove it has a plan in place to correct its long-term budget issues. Eason said the city is considering serious budget cuts as well as ways to increase revenue.
Walling also has proposed putting a property tax increase before voters.
Eason said the city hopes to have the money from the bond by Feb. 1.
“Time is really critical,” Eason said. “We’re faced with some serious cash flow problems.”
© 2011 MLive.com. All rights reserved.
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Source: http://www.mlive.com/news/flint/index.ssf/2011/01/city_of_flint_hopes_to_avoid_s.html |
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Wed Jan 12, 2011 1:25 pm |
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Dave Starr
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| What they're really worried about is the loss of their paychecks, power & prestige. |
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I used to care, but I take a pill for that now.
Pushing buttons sure can be fun.
When a lion wants to go somewhere, he doesn’t worry about how many hyenas are in the way.
Paddle faster, I hear banjos. |
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Wed Jan 12, 2011 1:36 pm |
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00SL2
F L I N T O I D
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Let's hope the state says no to the loan and takes over the finances of this city. The city must learn to live within its means just as the poor taxpayers do.
City of Flint to await state's decision on $20M bond proposal
Published: Wednesday, January 12, 2011, 3:37 PM Updated: Wednesday, January 12, 2011, 3:39 PM
Kristin Longley | Flint Journal By Kristin Longley | Flint Journal
FLINT, Michigan — The city of Flint is banking on a $20 million infusion of borrowed cash to avoid another state takeover — but will the state approve the loan?
The problem that could hold up approval is what some officials call the city’s structural deficit, its tendency to spend more money than it takes in each year.
This year is no different.
Auditors last week confirmed the city had a $16.6 million deficit last year. Now, even as it devises a plan to erase the old debt, the city is already projecting it will be about $3.3 million in the red this year.
Added to the uncertainty is the new governor and other newly elected state officials who sit on the State Administrative Board, which will consider the bond request. No one knows yet what their opinions are on “fiscal stabilization bonds” because they took office just this month.
“We’re very hopeful,” Flint Mayor Dayne Walling said at a news conference today.
After a lengthy discussion, the Flint City Council voted this week to move forward with a plan to ask the state’s permission to borrow $20 million to cover the deficits. Two council members, Joshua Freeman and Dale Weighill, voted against the move partly because of the city's current deficit.
“I have a concern they (the state) won’t approve it,” Councilman Scott Kincaid said. “We have a significant structural deficit.”
Without the bond, members of Walling’s administration said the city is in danger of not being able to cover its employee payroll come March 1 — a move that would spark a state investigation into the city’s finances, which could lead to another state takeover.
The city’s debt was about $28 million in 2002, when the state appointed emergency financial manager Ed Kurtz to take over the city’s finances. At the time, Kurtz used a similar type of bond, which the city finished paying off last year, to reduce the debt.
“We have a current cash flow problem,” Finance Director Michael Townsend said. “The urgency of this bond is to ensure we will continue operations over the next three to four months.”
But applications from cities seeking approval for a fiscal stabilization bond are rare, according to state records.
Since 2006, the state has only received two requests from cities wanting to issue the bonds, said Kurt Weiss, spokesman for the state’s department of technology, management and budget.
Only one of those was approved — $250 million for the city of Detroit. The other was from Benton Harbor.
Still, members of Walling’s administration are optimistic the state treasury department will look favorably on the city’s application.
“The state is fairly aware of where we are at,” Townsend said. “They are well aware of our projected deficit that we have.”
Once the state Administrative Board has the city’s application, it has seven days to issue a decision. City officials said they hope to send in the application this week.
State board members include the governor, lieutenant governor, secretary of state, attorney general and treasurer, who usually send delegates to the meetings, Weiss said.
If it’s approved, the city would then go to the bond market to issue the bonds.
According to information provided to city council members, the $20 million plus interest would be paid off over 25 years.
The payments, ranging from $515,000 to $1.3 million, would come from the capital improvement fund, which is for building projects and debt payments. Walling has said that would allow the city to avoid deeper cuts to the general operating fund, which pays for public safety and other services.
Even with the bond, future layoffs remain a possibility. The city also has to prove to the state it can stick to the long-term budget projections it submits with the application.
The projections rely on the premise that property tax revenue — which has steadily declined over recent years — will drop this year and next year, but then remain steady until 2015 when they predict revenues will begin rising again.
City Administrator Gregory Eason said future budget cuts could be necessary to make sure the city doesn’t continue to run up more debt. He didn’t specify what cuts could be made.
“We will cut and we will make whatever cuts are absolutely necessary to stay in line with this budget,” he said. “Nothing is sacred.”
© 2011 MLive.com. All rights reserved.
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Source: http://www.mlive.com/news/flint/index.ssf/2011/01/city_of_flint_awaiting_states.html |
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Wed Jan 12, 2011 9:46 pm |
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Dave Starr
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quote:
City Administrator Gregory Eason said future budget cuts could be necessary to make sure the city doesn’t continue to run up more debt. He didn’t specify what cuts could be made.
“We will cut and we will make whatever cuts are absolutely necessary to stay in line with this budget,” he said. “Nothing is sacred.”
© 2011 MLive.com. All rights reserved.
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Source: http://www.mlive.com/news/flint/index.ssf/2011/01/city_of_flint_awaiting_states.html
Nothing is sacred, EXCEPT Greg & his cronies jobs. |
_________________
I used to care, but I take a pill for that now.
Pushing buttons sure can be fun.
When a lion wants to go somewhere, he doesn’t worry about how many hyenas are in the way.
Paddle faster, I hear banjos. |
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Thu Jan 13, 2011 9:31 am |
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lacyw
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There are many cities facing insolvency at the moment. Governor Snyder has said he sees this as just the beginning, there will be more to come. This was before he officially took office, but it did not seem like he was overly interested in the state taking over these distressed cities. The state is hurting too. As Michigan is the only state to have lost population according to the census, our federal funding may suffer as a result.
It looks to me like the governors office is going to try to find a way to avoid taking over these cities. Maybe demanding a solid plan for solvency before any monies are released might help?
I do hope whoever the Governor has on his team addressing these issues compares data from cities that have been given money to stay solvent versus those taken over by the state currently being run by an EFM and measures their level of success. The ideal would be to evaluate each one an a city by city basis and make a decision that would best benefit that particular city. |
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Thu Jan 13, 2011 2:04 pm |
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Ryan Eashoo
F L I N T O I D
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by increasing property taxes and personal income tax. Then they build a factory that will employee thousands of people. The factory will produce a new product line of can bug killer called Poplar Raid ® : House & Garden Bug Killer (also can be used at the workplace) The higher income taxes will fill the city coffers with millions of new dollars.
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Flint Michigan Resident, Tax Payer, Flint Nutt - Local REALTOR - Activist. www.FlintTown.com |
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Thu Jan 13, 2011 2:33 pm |
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Dave Starr
F L I N T O I D
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| And, don't forget the Poplar paper airplane factory. |
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I used to care, but I take a pill for that now.
Pushing buttons sure can be fun.
When a lion wants to go somewhere, he doesn’t worry about how many hyenas are in the way.
Paddle faster, I hear banjos. |
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Thu Jan 13, 2011 5:54 pm |
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