Michigan Gov. Rick Snyder on Friday announced that a financial emergency has been declared in Allen Park.
Snyder said the determination was made after an independent six-member financial review team dug into the city's budget.
“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.
Under Public Act 72 of 1990, the City of Allen Park has 10 days to request a hearing before the governor or his designee. Should that condition not be met the Emergency Loan Board would be directed to manage the emergency.
In his letter to the City of Allen Park, Snyder cited the following conditions, found or confirmed to be in existence by the review team, following its discussions with City officials, the City’s audit firm, and other relevant sources:
According to the City’s 2011 fiscal year financial audit, the ending balance in the general fund
decreased from $3.7 million as of 6-30-2010 to $505,023 the following June. The negative net change in fund balance ($3.2 million) resulted from an operating transfer out of the general fund of nearly $4.7 million. The 2011 fiscal year-end balance in the general fund was 91 percent less than the $5.5 million balance that existed as of June 30, 2009.
- Financial audit reports for the City for its last three fiscal years reflect variances between general fund revenues and expenditures, as initially budgeted and as amended, versus general fund revenues and expenditures actually realized.
- In 2009, City officials purchased the Southfield Lease Properties for the purpose of establishing a movie studio. At the time of purchase, the City paid $10.8 million more than the property had previously been valued. The City issued limited tax, general obligation debt to finance the acquisition of the property. Because the studio was never realized, the City was left with annual debt service payments of approximately $2 million, which are remitted from the general fund.
If the city requests a hearing before the Governor or his designee, it will be held on Sept.19 at the Richard H. Austin Building in Lansing.
Public Act 4 of 2011, the Local Government and School District Fiscal Accountability Act, was suspended in August due to a pending referendum to be voted on in November. Attorney General Bill Schuette issued a formal opinion on Aug. 6, stating that, upon suspension of PA 4, "1990 PA 72 is revived until certification of the November 2012 general election results."