Hamtramck: It’s Not The First Town To Be Left Behind

I … Kate Linebaugh in InsideHamtrack article Tax Dispute Squeezes Detroit’s Neighbor Hamtramck reports: Auto-plant tax revenue has helped power this working-class city of 22,000 for years, but a halt to this stream of cash amid a dispute with neighboring Detroit is driving Hamtramck to the brink.

Detroit used the send Hamtramck about $2 million a year in tax revenue from a General Motors Co. factory (Poletown)  that is now building the Chevrolet Volt electric car. The plant straddles the two cities, but since January Detroit has stopped giving Hamtramck any shared tax revenue, saying it has overpaid $7 million through the years.

In September, Hamtramck sued Detroit for the GM tax revenue and Detroit countersued in early October, with the dispute headed to court. In the meantime, Hamtramck is left with a $2 million hole in its $18 million budget and is considering across-board service cuts, emergency borrowing from the state and a bankruptcy filing.

Under the revenue-sharing agreement, set up in 1981, the first $3.4 million is split 50-50, and anything on top of that is split two-thirds for Detroit and one-third for Hamtramck. Detroit is arguing that the agreement has expired. Hamtramck believes it goes to 2014.

Without some kind of breakthrough, Hamtramck could run out of money as soon as March, said City Manager William Cooper.

The fiscal crisis casts a cloud over an otherwise successful urban community that has managed to do what few Detroit neighborhoods have: attract immigrants, maintain its population and sustain a lively business district.

Civic leaders say deep budget cuts would eliminate the very services that make Hamtramck an attractive alternative to Detroit, where frustration with municipal services has been driving people out for decades.

So far, the city’s four public-employee unions have refused to renegotiate contracts to save the city money and spare municipal services. Hamtramck doesn’t want emergency state loans that are available to municipalities in distress, as they would offer only a short-term solution.

Mr. Cooper said a possible Chapter 9 bankruptcy filing, which would require state approval, would be aimed at gaining protection from bondholders, not defaulting on debt. A bankruptcy process could also force unions to reopen contracts and give the city more breathing room on its financial obligations.

Michigan Democratic Gov. Jennifer Granholm, whose term expires at year end, won’t authorize a bankruptcy filing. Hamtramck declined her alternative, a state-appointed emergency financial manager, and the usual hardships that come along. So the city is waiting to see whether the incoming governor, Republican Rick Snyder, will take a different approach. In the meantime, said Mr. Cooper, “we’re forced to look at cutbacks.” Without the GM plant taxes, he expects a $2.7 million revenue shortfall next year.

We do not comment on pending litigation,” Detroit spokesman Dan Lijana said in an email. GM spokesman Chris Lee said the company would not comment because it was not party to the dispute.

Before the GM dispute, the city lost another major taxpayer, American Axle & Manufacturing Inc., which relocated a Hamtramck auto-parts factory to Mexico. Another major contributor to Hamtramck’s tax rolls, the county jail, might be shut down and rebuilt elsewhere. (Two year ago Dick Dauch, CEO of the auto parts supplier American Axle that sits on the Detroit and Hamtramck border, said, “We have the flexibility to source all of our business to other locations around the world and we have the right to do so.” He followed through by moving almost two thousand jobs, and the resulting taxes paid by the workers and the company out of the country)

But amid a protracted recession and housing crisis that have seen tens of thousands of residents leave Detroit, Hamtramck’s population and economy have held on. The city’s once-dominant but now-declining Polish-American population is being replenished by Bangladeshi and Yemeni immigrants attracted to its inexpensive housing.

With the new populations come new businesses, helping That has helped to prevent further erosion of the business district, which has an estimated 25% vacancy rate.

The new immigrant populations are taking an active role in city politics. A Yemeni-American chiropractor ran in last year’s mayoral race, but narrowly lost to a Polish-American woman. The City Council includes three members originally from Bangladesh.

Kazi Miah is one of them. His family moved to Hamtramck in 1998 from Queens, N.Y., because his father could rent a four-bedroom house here for $450 a month. “I love Queens, Queens is part of me,” Mr. Miah said, “but to find a four bedroom house for $450 was not an option” there. Hamtramck, he added, “is walking-friendly. It has the sense of community, and it has mosques.”

Mr. Miah said his pizza business, which offers chicken tikka and chicken tandoori toppings, is staying afloat because it caters to the South Asian population, which is now equal in size to the town’s Polish community.

Mr. Miah said his pizza business, which offers chicken tikka and chicken tandoori toppings, is staying afloat because it caters to the South Asian population, which is now equal in size to the town’s Polish community.

The town’s appeal has been its modesty. Homes are well-preserved and inexpensive, with well-established neighborhood block associations. Public safety is much better than in Detroit. Locals hail the city’s openness to new cultures as a strong selling point.

Sean Kowalski, co-owner of local coffee shop Café 1923, likens the city to an urban, modern-day Mayberry with halal meat markets and Polish bakeries. “Everybody knows everybody,” Mr. Kowalski said. “It’s a very easy city to live in.”

His business partner, Shannon Lowell, warns that a fiscal breakdown would threaten that environment. “If services diminish, crime statistics go up, people won’t want to come here,” Mr. Lowell said. And that, he said, would make it much more like Detroit.

II … Camden is Detroit on the East Coast.

Camden, once a thriving electronics manufacturing and ship building town is also officially America’s poorest city. A3PNews team reports: No less than three Camden mayors, all nonwhites, have been jailed for corruption. The nonwhite school system and police department were reduced to a Third World shambles and had to be taken over by the state of New Jersey in 2005.

In 2009, Camden had the highest crime rate in the U.S. with 2,333 violent crimes per 100,000 people, compared to the national average of 455 per 100,000. The Federal Bureau of Investigation ranked Camden as the nation’s most dangerous city in 2004, 2005, and 2009. The story of Camden represents precisely what has gone wrong in America, in the space of one century. It has been transformed from a prosperous, thriving, and leading edge industrial giant into a Third World slum.

Industry has been sacrificed in the name of “cheaper” (and inferior) Chinese goods, and whites have fled the nonwhite-induced chaos and destruction. Camden has, within 100 years, gone from a city which had the first mechanized fire engines, to one which now cannot afford to keep a full complement of firefighters. It is the tale of the Third World destruction of America

III … Moneyness has come to the stock market from anticipation of QE2 and a flight to safety in US based small cap shares.

A … Coming out of the subprime and commodities crash of  2007 and 2008, for the last two years, up until the 30-10 US Sovereign Debt yield curve, $TYX:$TNX, flattened on October 20, 2010, with the widespred conviction of the coming of QE 2, investing in Michigan closed end municpal debt fund MIY provided better returns than investing in gold and the small cap reveune shares, RWJ. It was anticipation of QE 2 tht provided moneyness to the small cap revenue shares as well as a perceived flight to safety away from the sovereign crisis in the Euro, the European Financial Institutions, EUFN, and in the European Shares, VGK. This being seen in the chart of MIY, RWJ, GLD, and EUFN, from 1-1-2009 to 12-22-2010.

B … Mark Jewll of the Associated Press reports that it wasn’t just closed end municipal bond funds, but also the a total attraction to bond funds that snapped in November 2010 as investors de-risked: The appeal of bonds may be dimming, as investors took more money out of bond mutual funds than they put in last month. The pullout snapped a two-year string of positive monthly flows into bonds, where investors have sought refuge after the financial crisis soured many on stocks.

Fund tracker Strategic Insight said Friday that investors pulled $1.3 billion from bond funds in November, the first outflow since December 2008 during the credit crunch.

Last month’s outflow stems largely from a sharp increase in the amount pulled out of municipal bond funds. The net withdrawal of $7.4 billion came amid fears about the financial health of state and local governments.

The overall shift out of bond funds marked an about-face from October, when bond funds attracted a net of more than $22 billion.

“As financial confidence slowly rebuilds, U.S. equity funds should benefit in the coming years,” said Avi Nachmany, research director with New York-based Strategic Insight.

Overall, the November flow into stock funds was $8.2 billion.

The recent surge into bonds has been global, with bond mutual funds attracting more than $1 trillion of new money since early 2009, according to Strategic Insight.

Although last month’s withdrawals from U.S. bond funds weren’t huge, bonds are clearly becoming less appealing to investors. Many are worried about rising interest rates and long-term inflation, which can erode bond returns.

Some of this concern was evident as investors pulled out a net $1.9 billion last month from the world’s largest mutual fund, Pimco Total Return, according to Morningstar. As with bond funds overall, it was the first monthly outflow in two years at Pimco Total Return. Still, the $256 billion fund run by star bond investor Bill Gross has seen a net $80 billion added since 2008.

Last month’s movement came as Pimco Total Return suffered a 1.5 percent investment loss in November, its worst month since September 2008, Morningstar said. By comparison, a broad measure of bond market performance, the Barclays Capital U.S. Aggregate Bond Index, fell nearly 0.6 percent for the month.

Bond investors now face substantial long-term risk from an inevitable rise in short-term interest rates, currently near zero. When the Federal Reserve raises rates, prices for bonds with locked-in rates will drop. That’s because investors will be able to buy newly issued bonds paying higher interest.

Prices of muni bonds, which are issued to build such public projects as roads and sewer systems, dropped last month at one of the fastest paces since the credit crisis. That decline has also hurt returns at funds that trade the bonds.

C …  Randall Woods of Bloomberg reports Stiglitz Says Fed’s QE2 Creates ‘Considerable’ Risks

D … The small cap revenue shares, RWJ, such  as DLLR, NICK, NEWS, FCFS, CSE, CCRT, EZPW, WRLD, saw a terrific rally beginning Friday December 17, 2010 … chart of DLLR  NICK, NEWS, FCFS, CSE, CCRT, EZPW, and WRLD. NewStar Financial, Inc., NEWS, is a commercial finance company, provides customized debt financing solutions in the United States and it rose to a new high on December 23, 2010.

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