1988 General Fund Operations

Despite the Mayor and Council’s attempt to have their proposed 1988 budget approved by the Court (and the receivership terminated), the Council refused to approve the sale of real and personal property throughout the 1988 fiscal year. Ultimately, many of these facilities and equipment were sold in the 1989 fiscal year and beyond.

The costs of litigation in 1988 continued to be excessive as the Receiver negotiated labor agreements and fought several of the Mayor and Council’s objections to his actions. The AFSCME settlement of $669,650 was charged to the 1988 fiscal year. Finally, the equity of several terminated funds was transferred to the General Fund.

After considering the above matters, the General Fund operating expenditures exceeded the related revenues by $2.2 million for the year ended June 30, 1988. After considering an operating transfer from the Water and Sewer Fund of $1.3 million, the General Fund’s ending deficit at June 30, 1987 had increased from $2,217,147 to $2,872,704 at June 30, 1988.

1989 General Fund Operations

By July 1, 1988, many of the legal costs, litigation, labor agreements, receivership challenges and other issues were resolved. The December 1, 1987 pension judgment levy of 2.5 mills (generated $433,000 in additional property taxes) had assisted the receiver in funding the pension contribution for the 1988 fiscal year. By fall 1988, the disputes with the Pension Board were substantially settled and the permanent 6.0 mill pension judgment levy (would generate approximately $1.1 million in additional property tax revenues) would be levied on December 1, 1988.

By 1989, the General Fund operating revenues exceeded the expenditures by $55,000. After considering an operating transfer from the Water and Sewer Fund of $1,550,000, the deficit of $2,872,704 at June 30, 1988 had been reduced to $1,245,359 by June 30, 1989.

The receivership was scheduled to end in December 1989. However, the deficit reported in Ecorse’s financial statements for the year ended June 30, 1989 prevented the receivership’s termination.

1990 General Fund Operations

By 1990, virtually all of the issues causing the fiscal distress had been addressed by the Receiver. The General Fund operating revenues exceeded the expenditures by $464,000. The Pension Plan disputes had been finally resolved, allowing for deferral of a portion of the 1990 pension contribution of $844,000. In addition, no operating transfer from the Water and Sewer Fund was required to assist in alleviating the General Fund deficit in 1990.

After considering the above, the General Fund deficit of $1,245,359 at June 30, 1989 had been eliminated by June 30, 1990. As the General Fund reflected a surplus at June 30, 1990 of $95,700, Judge Rashid ordered the receivership ended effective August 31, 1990. Objections to terminating the receivership were filed by the Pension Board as they were concerned that the Mayor and Council would fail to make the pension contributions. Judge Rashid denied this petition.

Concerns were expressed by the Mayor and Council in the need to fill the position of City Controller. While they performed a search for a replacement of Mr. Eva, he was encouraged to remain beyond the end of the receivership.

Pension Plan

A comparison of the financial condition of the Police and Fire Pension Plan at the inception of the receivership and at its conclusion is provided below (in thousands):

 

 

Inception

 

August 31, 1990

 

 

 

 

 

Actuarial accrued liabilities

 

$15,817

 

$15,391

Pension Plan assets

 

$( 5,132)

 

$( 5,040)

UNFUNDED ACTUARIAL ACCRUED LIABILITIES

 

$10,685

 

$10,350

While the Receiver was unable to significantly reduce the Pension Plan’s unfunded actuarial accrued liabilities, its increase was stopped. The unfunded actuarial accrued liabilities was effectively a form of borrowing that eventually would have to be funded. Prior to the receivership, this obligation was increasing at a rate of over 6.0% annually due to Ecorse’s failure to properly fund the Pension Plan. Regular pension contributions in accordance with the actuarial reports assisted in stopping the downward spiral of the Pension Plan’s financial condition.