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Government > News Hits

Poletown meltdown

Tax fracas over GM plant revenues pits Detroit against tiny Hamtramck

 

Published 8/11/2010

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A serious struggle is quietly playing out over tax revenues from the General Motors' Poletown plant, pitting the city of Detroit against the tiny city-within-a-city of Hamtramck.

Detroit, which collects taxes from the assembly plant straddling the border between the two cities, normally gives Hamtramck about $2 million a year under a revenue-sharing plan that's been in effect since the plant was built in the early 1980s.

But a dispute flared after a 2007 state audit revealed that Detroit had overcollected some $22 million in taxes on the plant between 2001 and 2005. In 2009, as a result of the audit, Detroit began withholding normal payments to Hamtramck, claiming it had overpaid the city as a result of its overcollection.

Let's make sure everyone is clear about what's going on here: Detroit collected too much money from Poletown and has to repay it. Because of Detroit's mistake, Hamtramck may or may not have received too high a payment from Detroit.

And now Detroit, according to Hamtramck officials, is both improperly withholding payments to Hamtramck and failing to provide evidence to back up Detroit's claims that Hamtramck owes it money.

Hamtramck officials are skeptical of these claims, and are demanding proof that they now owe Detroit millions of dollars.

Of course, Hamtown is no stranger to budget woes, as it was in receivership until four years ago. Despite the economic downturn, as well as Hamtramck-based American Axle's shift of production to Mexico, the city has managed to avoid being placed in receivership again. At least for the time being.

Hamtramck City Manager Bill Cooper estimates Detroit owes Hamtramck approximately $3 million from previous years money has been withheld, with another $2 million or so expected for this fiscal year. "Right now," he says, "we're most interested in the $3 million we feel they currently owe us."

Unless those payments are restored, Cooper says, "It would mean Hamtramck would be in receivership by January. In other words, we'll be broke."

So far, Cooper has ordered layoffs and pay cuts, and the city has dipped into its budget stabilization fund, but it can only stave off state receivership so long.

Cooper says, "I've only got a couple of months before I've got to be talking about turning off the lights and locking the doors, because we won't be able to pay our bills."

Earlier this year, Cooper says, he and other Hamtramck officials began working with Detroit to try to resolve the issue, including having a meeting with Detroit Mayor Dave Bing.

"We went in to see Mayor Bing and had a brief conversation with him," Cooper says. "He was made aware of the situation."

However, in a television interview in late July, Bing claimed he was unaware of the dispute.

Dryly, Cooper says, "I would say we had a less-than-positive response to that comment."

A less charitable view is this: Either Bing, possibly having a "senior moment," failed to recall a meeting involving millions of dollars in disputed tax money, or he lied.

Hamtramck officials also met with Detroit City Council and the council's finance committee in an effort to resolve the matter. It all seemed to hinge on an independent audit of Detroit's Poletown tax collection, which Cooper says was supposed to be sent to the state at the end of July.

"We want to look at that," Cooper says, "so we can decide what our next step will be."

To the dismay of Hamtramck officials, they've had to file a Freedom of Information Act Request in an effort obtain the audit, as Detroit claims it contains proprietary information.

Hamtramck Mayor Karen Majewski says, "We're going to strongly dispute that. As far as I'm concerned, it's a public document. You and I could walk in off the street and ask to see that audit."

And Cooper points out, "As soon as they sent it to the state, all possible proprietary protections are long gone. So we sent our FOIA request to the state."

Or, it could be that the audit wasn't filed with the state on time. That's what Detroit officials are saying is the case.

Reached for comment on the matter last week, a spokesperson for Bing's office said, "The city is close to finishing the audit related to the facility. We expect it to be completed in the next seven to 10 days. Both cities have claims that will be resolved upon completion of this process."

Another problem, Cooper says, is that "Detroit's overlooking the fact that there's no provision in there that allows them to withhold funding."

Unable to get Detroit to pay the money, or to open its books and resolve the dispute, Cooper, Majewski and the Hamtramck City Council have put together an audacious plan: They will withhold payment of Detroit's water and sewerage bills — which adds up to a hefty $230,000 per month — until the money is recouped. Hamtramck City Council approved the plan on July 13.

Majewski stresses that Hamtramck officials are doing this the right way, publicly, approving the plan and putting the money in an escrow account. "It sends a message," Majewski says, "and it actually operates on the exact same principle that the city of Detroit is operating on. ... We're in a dispute with the city of Detroit about who owes what, and one party in that dispute has decided that — until that issue is decided — no money will change hands. This is an extension of that: While that larger issue is being decided, no money is changing hands."

Then again, as Cooper has joked, Detroit may not even notice it's being shorted. Cooper points out: "The last time we were in receivership, we were about 18 months behind in making payments to them — and it's my understanding that it took them more than six months before they started inquiring as to where our payments were. So I don't even know if they've missed the money yet."

Even though the inventive nonpayment plan gives Hamtramck a chance to dodge receivership for the time being, all signs suggest that this matter will have to be resolved in court.

"As each day goes by," Cooper says, "I figure that the likelihood of that increases dramatically. It won't be much longer. I'd say that probably by sometime next week we'll be in a position — assuming we get a copy of the audit — to make that decision. If there's no movement to sit down and talk to us, we'll have to go that route to get them to let loose of our money."

Charles Sercombe, editor of the Hamtramck Review, which has called the fracas a "David and Goliath" battle, is cautiously optimistic, saying, "I think eventually, with enough media attention, there'll be enough folks who'll come to their senses, realizing that letting Hamtramck go bankrupt is not good for Detroit ... or the general area."

And, despite the claims and counterclaims, Mayor Majewski seems determined to take the high road, and willing to pick up the pieces after the matter is smoothed out.

"I have a decent relationship with Mayor Bing," she says, "and none of this precludes any of the other ways that we work together. ... I suspect that once this is over, we'll continue to work together and cooperate."

News Hits is edited by Curt Guyette. Contact him at 313-202-8004 or NewsHits@metrotimes.com.

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