December 5, 2010
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.
"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.
The meeting came days after the legal counsel to Gov. Jennifer Granholm informed city officials that she has no power under Michigan law to issue an executive order granting the city permission to file for bankruptcy.
In a letter dated Nov. 22, Steven Liedel, legal counsel to the governor, issued a response to Hamtramck City Attorney James Allen, stating, "There is absolutely no precedent for an order of that nature under the state's current constitutional framework."
Liedel urged city officials to communicate with Treasury officials to come up with a way to solve the budget issues.
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."
Hamtramck sent a letter to the state in November asking to become the first city in Michigan to file for bankruptcy, because of its $3-million deficit. Officials say they will not be able to pay debts or make payroll by January's end.
Hamtramck officials say their budget troubles began when the City of Detroit refused to pay millions in tax revenue from a project that includes the General Motors Poletown plant. Hamtramck filed a lawsuit against Detroit in September seeking $4 million in tax revenue. Hamtramck officials hope a Wayne County circuit judge will hear the case this month.
Outside Michigan, only a few municipalities have filed for protection under Chapter 9 of the bankruptcy code. In the mid-1990s, Orange County, Calif., filed for bankruptcy, and last year, the City of Vallejo, Calif., filed. Officials in Harrisburg, Pa., are considering the option.
"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.
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.
"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.
The meeting came days after the legal counsel to Gov. Jennifer Granholm informed city officials that she has no power under Michigan law to issue an executive order granting the city permission to file for bankruptcy.
In a letter dated Nov. 22, Steven Liedel, legal counsel to the governor, issued a response to Hamtramck City Attorney James Allen, stating, "There is absolutely no precedent for an order of that nature under the state's current constitutional framework."
Liedel urged city officials to communicate with Treasury officials to come up with a way to solve the budget issues.
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."
Hamtramck sent a letter to the state in November asking to become the first city in Michigan to file for bankruptcy, because of its $3-million deficit. Officials say they will not be able to pay debts or make payroll by January's end.
Hamtramck officials say their budget troubles began when the City of Detroit refused to pay millions in tax revenue from a project that includes the General Motors Poletown plant. Hamtramck filed a lawsuit against Detroit in September seeking $4 million in tax revenue. Hamtramck officials hope a Wayne County circuit judge will hear the case this month.
Outside Michigan, only a few municipalities have filed for protection under Chapter 9 of the bankruptcy code. In the mid-1990s, Orange County, Calif., filed for bankruptcy, and last year, the City of Vallejo, Calif., filed. Officials in Harrisburg, Pa., are considering the option.
"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.
Closed November 2010
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