Grim News at the Finance Committee Meeting
November/11/2009 21:45
This following guest blog was written by Dr. Jan Pemberton. Her opinions on the extremely bleak fiscal picture painted by Grosse Pointe Shores own auditors, Plante Moran, at the November 10, 2009 finance committee meeting are most enlightening.
After reading what Jan has to say, how could anyone question the legitimate need for a recall of Mayor Cooper and his slate of the four incumbent council members? They are the ones who failed to recognize and react to the issues which have led to our current fiscal crisis. Don’t Mayor Cooper and finance committee chair Brian Hunt and finance committee member Fred Minturn bear the highest level of culpability for this mess? Consider these issues when a petition volunteer asks for you signature!
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Grosse Pointe Shores Neighbors:
The news is dire and extremely serious. And potentially very, very costly for each and every taxpayer in Grosse Pointe Shores.
There were about 20 residents in attendance at the November 10th Finance Committee Meeting. This committee includes chairman Brian Hunt and council members Ted Kedzierski and Fred Minturn. Mayor Cooper was in the "audience" as was Dan Schulte. Rhonda Ricketts and Brian Vick were at the table with the 3 Committee Council members. Plante Moran had 2 representatives to explain the huge financial problems of this city. We are, as you know, under State Fiscal watch. The status of our financial affairs is of enormous concern and far, far more serious than previously stated by Brian Vick. We are literally bankrupt, people.
There was an opportunity for residents to speak up at the end of the meeting. John Booth was present and with his usual sharp analysis of the city's facts and figures, he clearly told the members of this meeting that we are now facing a financial future of impossible debts.
Some facts:
(from the figures of John Booth)
The Shores General Fund Balance on June 30, 2009 was $75,000. The village was supposed to reserve, by State mandate, $285,000 for future liabilities. Now, Plante Moran said they must report to the State of Michigan that the Village General Fund Balance as of June 30, 2009 was actually a NEGATIVE $210,000.
Because the Village ran short of operating funds with full knowledge of its finances and obligations, the former Village Council, PRIOR to the February Election, voted knowingly to overdraft - by wire transfer - funds out of their reserve account to meet the spring quarter cash shortfalls, thereby overdrawing the General Fund.
So, we have a general fund deficit AND an unfunded retiree health care deficit (in the range of 700K) for starters. The city's revenue is not increasing, but decreasing at a rapid rate with our property values plummeting each and every year. The city's expenditures are rapidly increasing with unsustainable pensions, health care, benefits, union contracts, and salaries. In fact, revenues can be expected to be permanently reduced from now on. Since this city has not built up any "cushion" (or fund equity) to meet this decrease in revenues, we must increase revenues and decrease expenditures IMMEDIATELY.
By the way, the real reason for the recent one mil tax increase was to restore last year's account overdraft before the Village auditors were required to disclose the problem to the State authorities. (The incumbents weren't honest with us here, folks.) Oh, and this year's portion of the unfunded post retirement medical benefits is NOT in the budget. There's also this "little bit of bad news" - the pension fund market performance (and of course, you know the "projected" returns are way below the actual returns) has not yet been factored into the required annual pension funding. This bad news will continue to hit us next year and the following two years!
Attention Lochmoor residents...forget about the repaving project...we have no money for ANYTHING....it's all getting sucked up by our HUGE deficits!
The Council cannot pass a deficit budget by law, but this is exactly where we are right now - WITH A DEFICIT BUDGET. Accuracy of internal accounting is now critical. Fortunately Councilman Ted Kedzierski has already initiated a clean up of a faulty "wire transfer" record process in the city. There are more checks and balances now. (This is your one ray of sunshine I brought you from this meeting!)
One resident said that he saw the only potential relief as bankruptcy for this city. In fact, bankruptcy was mentioned several times by different residents in attendance. It's the only way to get out from under these union contracts and salary and pension benefit packages.
HOWEVER, it must be mentioned that our new Charter allows Grosse Pointe Shores to raise the city portion of your property taxes to 20 mils. We must fully burden this 20 mils upon the taxpayer before we can declare bankruptcy. And, guess what, folks? Rhonda Ricketts just revealed at the meeting that we really are not really at 15 mils right now - but really at only 12 MILS...you see 3 mills are put aside for general expenditures. So we, THE TAXPAYER, CAN BE TAXED AT NOT JUST 5 MORE MILLS, BUT AT 8 MILS! This is a HUGE revelation! 8 mils more on a hypothetical $600,000 home with a taxable value of $300,000 means $2400 more of your hard earned money going to the Shores!
Because, with the enormous and mounting deficits we are facing, you can count on the incumbent council members voting to levy higher taxes as soon as possible. You see, the budget must be presented to the State by the end of December. AND, since the majority of taxes for the city are received in the summer, the city cannot collect this winter's taxes and then have a deficit mounting in April thru June. Remember, THE CITY CANNOT PASS A DEFICIT BUDGET - BY LAW!
Residents said that we should have a "blue ribbon" committee of key residents with this finance committee to immediately tackle this very serious and devastating problem. John Booth offered the name of a key individual who would come right to the table of the finance committee and provide the needed insight and expertise to advise us on how to "get our house in order." Brian Hunt answered, "we'll get thru this, our parents did, and we will, too!" (I wonder if Brian was referring to the depression...when unemployment was at 10%....maybe he doesn't know that it's at 30% in MICHIGAN and during the depression, the majority of the population did not own their own homes....so, the loss of property value and equity - personal worth was a lot less! - Or maybe he just has this eternally optimistic vision when he hears depressing news.) He said "they" - meaning Ted, Fred and himself would meet with who they thought would be the best to get "thru" this problem. Brian Hunt plans on reviewing the calendar for another finance meeting next month! I guess he sees no reason to address these critical problems any sooner.
The only people that seemed concerned about this news were the attending residents. Brian Vick said that "all the other municipalities" were facing the same problems" - so, according to Vick, as long as we're one of the group, we don't have to expect anything more - we can all go down the same path of destruction.
John Booth also pointed out that we need to look at serious consolidation of services NOW - police, fire, and DPW with the other Grosse Pointes, and there are ways to handle the union contracts (they are up for renegotiation in June). Can the Shores afford more retirees like Mike Kenyon who left with a last year payout of about double his base salary? Vick said that these were all areas that were "being looked into." I recall this same rhetoric from Vick back in the summer, but to date nothing has changed in those contracts or benefit packages. We're still liable to pay employees for unused sick days, and currently this unfunded liability to Shores taxpayers is in the range of $700,000!
Attorney McInerney's hourly fee of $220 for legal services was also brought up. Vick said that it was going to be "considered" for adjustment when the figures for other city attorneys were compared. We already know that the Woods' city attorney charges a lot less than McInerney. Our legal bill from Clark Hill for September was $10,000. Plante Moran's fee was also brought up. Every time two people from Plante Moran attend one of our meetings it costs us about $1000.
I'm not an accountant...but what I heard and could digest tonight was the stuff of nightmares. We're stuck and facing huge tax increases, (the incumbents on the Council will see to that quite easily). There is a desperate need to have a severe overhaul of everything and to evaluate everyone who's employed in this city. For this, it's clear to me that Mr. Vick does not appear to be up to the job. Every time this has been brought up, he comes up with excuses as to why it's not possible. Of course, none of the incumbents bothered making any serious cuts in the budget, either in the past or in the present. Because of the crisis brought on by the incumbent’s failure to recognize and react to our serious fiscal issues, Shores properties continue to be home values are plummeting?
That's quite a hand this city's incumbent council has dealt us, wouldn't you say?