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Michigan to Appoint Emergency Fiscal Manager for Detroit

Michigan to Appoint Emergency Fiscal Manager for Detroit

On Mar 01, 2013 02:21 pm

DETROIT — Gov. Rick Snyder of Michigan announced on Friday that the city of Detroit is so snarled in financial woes that the state must appoint an emergency manager to lead it out of disaster.

“There is probably no city that is more financially challenged in the entire United States. If you look at the quality of services for citizens it’s ranked among the worst. So we went from the top to the bottom over the last 50 or 60 years,” Mr. Snyder told Detroiters in a town-hall-style meeting that was broadcast live on local television stations across the city.

“It’s time to say we should stop going downhill,” he said. “There have been many good people that have had many plans, many attempts to turn this around, they haven’t worked. The way I view it, today is a day to call all hands on deck.”

The state-appointed manager, who could be selected later this month, would ultimately wield powers aimed at swiftly turning around the municipal government’s dire circumstances — powers to cut city spending, change contracts with labor unions, merge or eliminate city departments, urge the sale of city assets and even, if all else failed, to recommend bankruptcy proceedings.

After a state report that Detroit is carrying more than $14 billion in long-term liabilities and experiencing nearly annual projections of cash shortfalls, the decision was years — perhaps decades — in the making. Still, it set off a range of pointed, emotional reactions here about whether this was the first step toward true repair in a city that was once the nation’s fourth largest or one last very public sign of a city crumbling.

Some elected city leaders have widely criticized the notion of an outside manager as a takeover of their city and an affront to democratic principles, and they were expected to protest the governor’s decision. Under Michigan law, city officials have 10 days in which to seek reconsideration by the governor, as well as the possibility for a legal appeal in the courts after that. The decision comes during an election year for the mayor and City Council here, and even before Mr. Snyder’s formal announcement on Friday, members of the City Council had been mulling legal options, including the possibility of hiring outside lawyers to block the move.

While the State of Michigan has sent in managers to solve crises in other smaller cities over many years, the move is politically fraught in Detroit, the state’s largest city and a mostly black city dominated by Democrats in a mostly white state where the capital is now controlled by Republicans, including Mr. Snyder.

Some political experts in Michigan have speculated that Mr. Snyder will choose a financial expert who is African-American in an effort to calm racial dimensions of the move in a city that is 83 percent black. Mr. Snyder said he has a top candidate for the job — someone he declined to name on Friday — to recommend to a three-person state panel that will make the appointment.

Leaders of the local N.A.A.C.P. in Detroit vehemently denounced the notion. “This is anti-democratic, not needed, and it’s against everything that this nation was founded upon,” the Rev. Wendell Anthony, president of the local chapter, said in an interview. “For one individual to be able to wipe out the duties of our duly-elected officials, that’s more or less a dictatorship and it’s against everything that America is supposed to be about.”

Mr. Anthony added that the State of Michigan might want to consider whether it really wants to take on the difficult troubles of a city where residents have complained bitterly about darkened streetlights, slow response times by police officers and delayed buses even as city coffers are drained. “If you come into Detroit,” Mr. Anthony said, “you own Detroit. You own education. You own police and fire. You own public lighting.”

Some business leaders, however, said they welcomed the prospect of a state-appointed manager. Even as the city has wrestled with a shrinking population and tax base and shortfalls in the budget to pay for public services, there are signs of growth in the private sector, and some business leaders say the city’s financial tangle has become the one remaining factor still holding back Detroit.

“Our motto has been, ‘bring it on,’” Sandy K. Baruah, chairman of the Detroit Regional Chamber of Commerce, said of an outside manager. “This sends a positive message to business that Detroit is fixing its problems.”

Mr. Baruah discounted suggestions that news of a financial emergency in the city might now somehow frighten away industry or entrepreneurs. “My opinion is that every negative story about Detroit has already been written,” he said.

Last week, a state review team issued a dismal report on the city’s finances, describing a cash shortfall here that could reach $100 million by June, not to mention general-fund deficits year after year (in 2012, reaching more than $326 million), often dealt with by issuing long-term debt.

The team also outlined “operational dysfunction” in the city’s record keeping, describing, for instance, how it was unclear even after the state’s review what percent of police officers were patrolling the city as opposed to handling administrative jobs. The city’s district court, which collects misdemeanor fines and fees, had only a 7.7 percent collection rate, the report said, even as the court system was employing dozens more workers than its budget allowed. And city officials have regularly overestimated revenues as they wrote their budgets, the team found.

For months, city officials had tried to ward off an emergency manager. Last April, with a similar possibility looming, city officials entered into a legal agreement giving the state some oversight as the city tried to cut spending and collect more revenues. But by this year, state officials said the efforts had not gone far enough and more extreme measures were needed.

But still uncertain, many here acknowledged, is whether even an outside manager can do enough to solve the financial challenge of a city that once had a population and tax base of more than 1.8 million people but now hovers somewhere around 700,000.

From The New York Times

The post Michigan to Appoint Emergency Fiscal Manager for Detroit appeared first on Labor Relations Information System.

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