The Review Magazine May / June 2021

Municipal Finance Column

Hamtramck on the Precipice By Rick Haglund

HAMTRAMCK pop. 22,423

H amtramck, a historically Polish-American enclave that now attracts immigrants from throughout the Middle East, Eastern Europe, and South Asia has ridden a financial rollercoaster for decades. The two- square-mile city, surrounded by Detroit, has been run by state-appointed emergency managers twice since 2000. A General Motors assembly plant that was the city’s largest employer and biggest taxpayer closed last year. COVID-19 Hits “We were wobbling, but doing OK, and then came COVID-19,” said City Manager Kathy Angerer, who took the position in 2017 as the city emerged from state financial control. Tax revenues plunged in the wake of pandemic-related stay-at-home and business-closing orders. The city struggled to make required multimillion-dollar employee pension payments. Liability insurance costs ballooned because of nationwide protests over racial inequality. And state law prevented Hamtramck from levying its city income tax on unemployment insurance benefits collected by thousands of laid-off workers. “We really got hit hard,” Angerer said. While COVID-19 sickened Hamtramck’s finances more than most, the city was far from alone in taking a budget hit during the pandemic. A third of Michigan municipalities said they were less able to meet fiscal needs last year than they were in 2019, according to an annual survey by the University of Michigan’s Center for Local, State, and Urban Policy. Hamtramck serves as a stark example of how already cash-strapped local governments can be pushed to the precipice when a crisis hits. Hamtramck is a city of about 22,000 people. About 42 percent of the population is foreign born, the largest share in

Michigan. Many of the city’s residents are poor. Hamtramck’s per capita income in 2019 was $11,762, about a third of the state average. COVID-19 has taken a harsh toll on the city’s public and economic health. “Our community is hurting,” Angerer said. “I’m most concerned about residents who don’t have jobs and businesses that are no longer open.” Austerity under Emergency Management Years of austerity measures imposed by emergency managers left Hamtramck ill-prepared to serve the needs of residents and businesses when COVID-19 took hold, Angerer said. The last round of emergency management lasted 18 months, plus two years of state oversight. “Departments were slashed and there was little staffing. Employees here have weathered years of stress,” she said. “We’re down to one- and two-person departments.” Some traditional government functions, including property assessment and building code enforcement have been at least partially outsourced to private contractors. “We’re down to hundreds of dollars of office supplies,” Angerer said in mid-March. “We’re at a barebones budget and barebones staffing. We are seriously financially strapped.” The city’s fund balance reserve has fallen from $6.8 million in 2019 to $2.1 million this year. At the current rate of withdrawals, the balance will be depleted in less than two years. General Motors Closing Hamtramck took a devasting body blow in 2018 when General Motors announced it was closing its sprawling Poletown assembly plant that straddles the Detroit-Hamtramck border. The underutilized plant, which employed about 1,600 workers, provided about $1 million a year to Hamtramck’s $14 million

36 THE REVIEW

MAY / JUNE 2021