A seven member financial review team appointed by the governor to investigate Benton Harbor’s financial situation has found that a local government financial emergency exists in Benton Harbor and is recommending that the governor appoint an emergency financial manager.
The panel said that state intervention is necessary in Benton Harbor, “because no satisfactory plan exists to resolve a serious financial problem.”
According to the panel’s report, during the fiscal year that ended June 30, 2008, the City violated state law by incurring significant general fund operating deficits in several areas. The city also failed to have a deficit elimination plan certified by the State Treasury Dept. as required by law.
Here are some of the review team’s other findings.
The City did not meet its minimum contribution requirement to either its General Employees’ Retirement System or to the Police and Fire Pension System for the last several years.
Over the last several years, the City engaged in several street projects funded with grants from the Michigan Department of Transportation. However, these grants required matching contributions from the City which the City failed to remit.
The City withheld federal income taxes from City employee wages, but did not timely remit those withholding taxes to the Internal Revenue Service.
In a move that the review team said illustrated the city’s practice of using money for other than intended purposes, last year the city used $200,000 in loan proceeds from the Michigan Department of Transportation to cover payments to the Internal Revenue Service for collected but unpaid payroll taxes.
The report also noted that the City has had 15 different city managers in the last 28 years.
Michigan Treasury Dept. spokesman Terry Stanton said that according to state law the governor has 30 days from receipt of the report to decide whether the matter warrants further action from the state.