City Council Asked to Approve Loan Application for $7 Million to Eliminate Deficit
Flint, Michigan – April 8, 2015 – Flint Emergency Manager Jerry Ambrose is asking the Flint City Council to approve an application to the Michigan Local Emergency Financial Assistance Loan Board for a loan of up to $7 million, for the purpose of eliminating Flint’s accumulated General Fund deficit. The deficit, which was as high as $19.1 million in 2012, was one of the primary reasons that the City was placed into state receivership in late 2011.
Since that time, many difficult steps have been taken to place Flint on a path to sustainable financial solvency, with taxpayers, employees, retirees, and those utilizing city services affected. Taxes and fees have been raised, including a six mill special levy for police and fire; an assessment for street lighting has been created; utility fees have been raised to among the highest in the state; services have been reduced, as has the workforce and employee compensation. And, retirees have seen their cost of retiree health care increase
As a result of these and other actions, the accumulated General Fund deficit as of June 30, 2014, had been reduced to less than $9 million, and it is now projected to be less than $7,000,000 by June 30, 2015. The $7 million loan would eliminate the deficit, and allow efforts to focus on building financial solvency.
Eliminating the accumulated deficit through such borrowing, according to Mr. Ambrose, would be a significant step in hastening Flint’s return to financial solvency. With the commitment made through ordinances adopted by the City Council to develop and maintain a multi-year budget based on a strategic plan; to establish adequate financial reserves, and to address the funding of long term liabilities, Flint’s financial solvency can be sustainable.
Mayor Dayne Walling called the loan application a good strategy. “Eliminating the deficit with a low-interest loan will keep the general fund focused as much as possible on public safety.” The majority of the general fund is currently devoted to public safety.
City Council President Josh Freeman called the loan application another step toward financial stability. “I am confident that City Council will take advantage of this opportunity,” said Freeman.
The term of the loan to be applied for would not exceed 15 years and the interest rate would not exceed 3%. Annual payments on such a loan would be less than $600,000 annually. The resolution will be discussed at today’s Finance Committee of the City Council, with final action to be considered at the regular City Council meeting on Monday, April 13.