MI state denies Hamtramck permission to declare bankruptcy

from theblogprof by The blogprof


MI state denies Hamtramck permission to declare bankruptcy: "How a Municipality Files for Bankruptcy

The state's response to Hamtramck? Go pound sand. From The Detroit Free Press: Hamtramck can't declare bankruptcy, state says

Hamtramck officials are still considering four loan options after meeting with current state Treasury officials Monday, as well as future state Treasurer Andy Dillon.

Loan options? Is that a joke? They're spending too much so the state wants to give these clowns a credit card?

'On the one hand, the meeting was productive because there was a lot of listening on both sides and clarifying positions, but the end result is the current administration made it clear that they won't allow us to declare bankruptcy,' Hamtramck City Manager Bill Cooper said.

...Hamtramck officials hope Gov.-elect Rick Snyder's administration makes a different decision, Cooper said. 'We haven't given up on the pursuit of bankruptcy.'

1) why does Hamtramck need permission from the state to declare what they are - bankrupt. 2) Is Granholm protecting the unions that are fleecing taxpayers? 3) Why is Hamtramck in such dire financial straits with a $3-million deficit? The end of the article:

'Bankruptcy can help some municipalities, but it depends on the issue,' said Robert Gordon, head of the corporate restructuring and bankruptcy practice group at Clark Hill law firm in Birmingham. 'It can help municipalities struggling with capital projects, bond debt and pension and health obligations.'

Hamtramck officials have said it has been difficult to make budget cuts, especially in the area of pension and health care costs because union contracts must be honored. Officials said bankruptcy would allow them to renegotiate those contracts.

Pension and healthcare costs are bankrupting Hamtramck. In the bigger picture, healthcare and union pensions are bankrupting Michigan. Speaking of, this related piece from Michael Barone: Allow states to declare bankruptcy. If states could do that, would constitutionally-protected union pensions be tossed by a judge? Hmmmmm...

UPDATE: Via Instapundit:

HARBINGER IN HAMTRAMCK: The bankruptcy lesson from a Detroit suburb.

More bad news out of Michigan: Facing a $3 million deficit on its $18 million budget, the Detroit suburb of Hamtramck is seeking permission to file bankruptcy. Other towns may not be far behind.

Hamtramck suffers from high unemployment and falling income, but its budget problems go deeper than the recession. The town began running million-dollar deficits 10 years ago due to union contracts that would make Greeks blush. City workers were entitled to annual wage increases at four times the inflation rate and eight paid weeks of vacation each year. That’s in addition to 15 paid sick days, three paid emergency leave days, three paid personal days and one paid birthday.

In 2000 the state appointed an Emergency Financial Manager who in five years managed to balance the budget by cutting the city work force, privatizing services and selling bonds. He got the unions to renegotiate some benefits by promising retirement service credits and promotions, but that set the city up for future pension woes.

Fast forward and the city again teeters toward bankruptcy. Workers still receive five weeks paid vacation and their health plans have no co-pays or deductibles. City health costs have risen nearly 40% this year and are expected to shoot up another 40% next year. Pension costs have climbed 36% in a year. . . . While many cities blame their deficits on the recession, their insolvency is the natural result of politically dominant public unions. By allowing workers to collectively bargain, states and cities have ceded control of the public purse to workers whose main interest is enlarging government. Hamtramck is a harbinger of bankruptcies to come, and a case study in why politicians from FDR to Fiorello LaGuardia opposed the creation of government employee unions.

They’ve only almost run out of other people’s money.

Give them till next week. They will.

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