Lincoln Park is the latest Metro Detroit community to have its finances come under state review after the Downriver community saw its property values plummet and pension liability swell.
Gov. Rick Snyder on Monday empaneled a financial review team to pore through Lincoln Park’s books, one week after declaring financial emergencies in Highland Park and Royal Oak Township.
Officials from those communities have requested separate hearings this morning before state Treasurer Kevin Clinton on the state’s finding, said Treasury Department spokesman Terry Stanton.
Eight of the nine communities in which the state already has emergency managers or maintains financial oversight are in Metro Detroit, and the majority are in Wayne County.
Scrutiny of Lincoln Park’s finances was prompted by the Treasury Department’s preliminary review, which found the city:
■ Borrowed $2.3 million from its water and sewer fund to make its pension payment in the 2013 fiscal year.
■ Has a $69.1 million unfunded liability in its municipal employees and police and fire pension plans, amounting to funding levels of 28 percent and 34.6 percent, respectively.
■ Ran a $711,302 deficit in the 2012 fiscal year in violation of a governmental budgeting law.
The preliminary review also found the taxable value of property in Lincoln Park declined 31.5 percent during the past four years, contributing to a $4.3 million loss in annual funding.
“It’s been huge over the last four or five years and continues a little bit into next year,” Lincoln Park City Manager Joseph Merucci said of the property tax revenue decline. “I have a feeling if you unplugged our name, you could plug in a dozen other communities (with those statistics).”
With declining revenue and a 3-to-1 retiree-to-employee ratio, Merucci said Lincoln Park officials had no choice but to use water and sewer funds to make pension payments.
“If we didn’t, we would have had a lawsuit. We had a pension payment that had to be paid,” Merucci said.
A Treasury Department news release Monday said Lincoln Park also defaulted on a loan from SunTrust Bank and is being sued in federal court for nonpayment. But Merucci said the lawsuit was settled late last year.
Under Michigan’s emergency manager law, if the financial review team and Snyder conclude a financial emergency exists in Lincoln Park, the city’s leaders will have four options: the appointment of an emergency manager, a financial consent decree, neutral mediation with creditors or Chapter 9 municipal bankruptcy.
Emergency managers are running the cities of Allen Park, Benton Harbor, Detroit, Flint and Hamtramck and school districts in Detroit, Highland Park and Muskegon Heights. State financial oversight remains in place in the cities of Ecorse, Inkster, River Rouge and Pontiac, and Pontiac’s school district.
The Treasury Department also is reviewing the finances of the East Detroit and Ecorse school districts.
In 2011, Snyder beefed up the state’s 20-year-old emergency manager law, placing a high priority on intervening in cities with chronic budget deficits.
Voters repealed the law in November 2012 in a backlash against the new powers of emergency managers to cancel labor contracts. In the December 2012 lame-duck session, Snyder and the Republican-controlled Legislature adopted a new emergency manager law that gave financially troubled cities and school districts alternatives to emergency managers.
Snyder’s proposed 2015 fiscal year budget includes a $36 million increase in statutory revenue sharing for cities to split up, with special consideration for cities in the top 25 percent of crime and unemployment rates.
“I personally think it’s too little, too late,” said state Sen. Coleman Young II, D-Detroit, an outspoken critic of the emergency manager law. “This seems more like an election-time stunt.”