Report: Municipal bankruptcy vs. Michigan’s emergency manager law

Storm clouds pass over downtown file photoDowntown Flint
As municipal bankruptcy is becoming more common, Michigan officials are comparing the process to the state’s revamped emergency manager law, known as Public Act 4.The law has been touted by Gov. Rick Snyder’s administration as providing an “early warning system” and tools to help cities in financial trouble avoid municipal bankruptcy.

Critics, on the other hand, say it undermines the democratic process by granting an unelected emergency manager broad authority to operate cities, including the power to change union contracts.

The mayor of Vallejo, Calif., which is the largest U.S. city to ever file and emerge from bankruptcy, told Advisor & Source Newspapers for a recent article that the experience is stressful and “demoralizing.”

“‘Bankruptcy makes you believe you have failed,’ said Vallejo, Calif. Mayor Osby Davis. ‘There is a stigma attached to the city in bankruptcy. It’s demoralizing … It’s a 24/7 stressor. It carries a long-term stigma, but I don’t think it’s a permanent stigma.'”

Officials said “fear of the unknown” is one of stigmas associated with bankruptcy. A judge would be in charge of bankruptcy proceedings, as opposed to a state-appointed manager.

Snyder has said he will deny any bankruptcy request from an emergency manager, according to the article. Any municipal bankruptcy would first have to be recommended by an emergency manager then approved by Snyder’s administration.

The cities of Flint, Benton Harbor, Ecorse and Pontiac and the school districts of Detroit, Muskegon Heights and Highland Park are all under state-appointed emergency managers.

For more on the story, view the article here.

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