Emergency Managers, Pontiac — January 11, 2012 at 4:10 pm

US Rep Gary Peters rescues millions of dollars nearly forfeited by Pontiac Emergency Manager Louis Schimmel


This is shocking to me (though I suppose it shouldn’t be.) Pontiac’s Emergency Manager Louis Schimmel that all but gave away millions of dollars dedicated to the City of Pontiac due to a single decision he made as EM. He was able to do this with no accountability because he is, after all, completely in control of the entire government there.

Thankfully Congressman Gary Peters stepped in to literally save the day. Now millions of dollars that would have transferred to Oakland County with no strings attached will now be going to Pontiac, the intended recipient.

Take a look at the press release sent out today by Rep. Peters. I think you’ll be as shocked as I am. Even an Oakland County Commissioner realizes that this would have been devastating to Pontiac. As Rep. Peters says, this is Exhibit A why Emergency Managers are bad for Michigan.

UPDATE: Congressman Peters’ Act Blue page is HERE. He deserves to be rewarded for this. So reward him : )

U.S. Rep. Gary Peters successfully works to correct mismanagement of multi-million dollar decision by Pontiac’s Emergency Manager
U.S. Rep. Peters: “Replacing democratically elected officials with an emergency manager creates an environment where decisions are made with no accountability and no commitment to the long term benefit of the city”

Pontiac, MI – Today U.S. Rep. Gary Peters announced that he successfully worked to prevent the City of Pontiac from missing out on millions of dollars in Housing and Urban Development (HUD) funding for the Community Development Block Grant (CDBG) program which was at risk because of a mismanaged contract Pontiac’s Emergency Manager signed. Within a month of his appointment, the Emergency Manager entered into an agreement that attempted to relinquish Pontiac’s status as a direct recipient of CDBG funds, and instead enter into an agreement with Oakland County that would allow the county to receive Pontiac’s share of funding as part of their “Urban County” arrangement. Because of this decision, Pontiac could have missed out on millions of dollars in funding over three years. Additionally, the contract did not include any legal requirement binding Oakland County to spend the already depleted funding in Pontiac. Under the federal statute authorizing the CDBG program, had Pontiac relinquished its status as an “Entitlement City,” it would have been stuck with the arrangement for at least three years.

In December 2011, Congressman Peters was notified by HUD that Pontiac was to receive no CDBG funding for Fiscal Year 2012. Upon investigation he realized that the increase in funding to Oakland County did not fully offset Pontiac’s losses. He immediately worked with local elected officials and HUD to determine what could be done.

U.S. Rep. Peters learned that Pontiac had a number of options to eliminate the administrative burden and expense of administering the CDBG funding. Entering into Oakland County’s Urban County arrangement was one of these options, but the City could also subcontract with the County to administer the program on its behalf. The Emergency Manager and Oakland County chose the former option, even though they knew it would result in millions of dollars less CDBG funding for Pontiac residents and an important loss of local control and accountability.

At U.S. Rep. Peters’ insistence, HUD performed a comprehensive review of the agreement entered into by the Emergency Manager and Oakland County. As a result of U.S. Rep. Peters’ intervention, HUD determined that Pontiac’s decision to relinquish its status as a direct recipient of funds would not take effect in time to impact the FY12 CDBG allocations. This decision comes just days before the FY12 CDBG allocations are required by law to be finalized. It is expected that the Emergency Manager and Oakland County will enter into a new agreement that allows Oakland County to administer the funding on Pontiac’s behalf, but does not cost Pontiac residents millions of dollars in funding and legally requires the funds to be spent in Pontiac.

While this is an important victory for the families of Pontiac, U.S. Rep. Peters argued that the real lesson here is that replacing democratically elected officials with so called emergency managers that focus on short term budget goals instead of long term economic development. This is not the right way forward for Pontiac or other cities in Michigan.

“Replacing democratically elected officials with an emergency manager creates an environment where decisions are made with no accountability and no commitment to the long term benefit of the city,” said U.S. Rep. Gary Peters. “I have a hard time understanding why Pontiac’s emergency manager thought it would be in the best interest of the city to sign a contract surrendering millions of dollars in Economic Development funds that Pontiac is entitled to and then turn the rest over to Oakland County with no strings attached. I’m glad that I was able to intervene to ensure that Pontiac will be able to receive millions more in funding. During times like these, we shouldn’t have any officials turning down job creating federal funds and this episode should serve as hard evidence about how the emergency manager law is not serving affected communities well.”

“The Governor can appoint an Emergency Manager, but he can’t guarantee that his decisions are in the best interests of Pontiac residents,” said Pontiac City Council President Lee Jones. “While I know it’s critical to restore Pontiac to fiscal soundness, I will not accept cuts that diminish the capacity of the city to grow, develop, and thrive in the future.”

“The decision of the Emergency Manager to relinquish Pontiac’s status as a direct recipient of CDBG funds would have cost the city millions of dollars without saving taxpayers a penny,” said Oakland County Commissioner Tim Greimel. “Perhaps more importantly, it would have deprived Pontiac of the opportunity to decide for itself how federal economic development funds will be spent for years into the future. I thank Congressman Peters for listening to our objections to the previous arrangement and making sure that the administration of the funds is done in a way that doesn’t cost Pontiac any money and works in the best interest of the community.”

HUD uses a different formula to calculate CDBG allocations for disadvantaged communities like Pontiac than it uses for relatively affluent areas like Oakland County. As a direct recipient of funding, Pontiac’s allocation is determined under formula B which provides more money per capita than formula A in order to account for the greater need of those citizens. In FY11, Pontiac received $1.4 million. If the agreement between the Emergency Manager and Oakland County had been considered binding by HUD, in FY12 Pontiac would have received $0 and instead Oakland County would have received additional funds attributable to Pontiac’s inclusion in their Urban County. However, because Oakland County’s allocation is determined under formula A, the additional amount Oakland County would have received in FY12 attributable to Pontiac would have been less than Pontiac would have received on its own. HUD will release official CDBG allocations on Friday, but U.S. Rep. Peters’ office has estimated that Pontiac could have received $750,000-$850,000 less each year it was part of the Urban County arrangement.