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Jack Lessenberry

Jack Lessenberry

Change is Only Guarantee in Detroit Situation

March 16, 2012

DETROIT — There is now no doubt that the state will soon take effective control of the city of Detroit, one way or another.

The city is on the point of financial collapse. Detroit expects to run out of cash to pay its bills in April or May. Borrowing more isn’t an option. The city is $33 in debt for every dollar it has in assets.

There are more than twice as many city retirees drawing pensions and health care as there are employees.

None of this is a surprise. The law says when any city can’t pay its bills, the state has to take over.

But when the governor tried to throw the city a lifeline, the reaction of Detroit’s elected leaders might seem astounding to any rational person who has been following Detroit’s long agony.

Not only have they not taken any steps to prevent the city from collapse, many seem to be out of touch with reality.

That was never more clear than Tuesday (March 13), when Gov. Rick Snyder offered the city a proposed “consent agreement” aimed at bringing radical change and fiscal responsibility to Detroit, to give it a shot at a future.

Essentially, it would establish a nine-member “financial advisory board” with vast powers to structure city government and finances. Mayor Dave Bing and Detroit’s nine-member council would lose some — but not all — of their powers.

They would also have a role in restructuring the city, and would be able to appoint some members of the board.

The consent agreement, which needs to be accepted by the mayor and council, was clearly an attempt at compromise, to avoid appointing an emergency manager who would assume all power.

But when the details were known, the mayor and city council angrily rejected it. The mayor, who had earlier seemed inclined to favor a consent agreement, said the agreement “does not represent the spirit of partnership needed.”

Councilwoman Saunteel Jenkins said the council should insist on playing a role, and added, “I think it has been shown that when we wait for other people, we are often left out.”

Which, ironically, part of how all this happened.

The governor said he hadn‘t wanted to become involved, but felt he had no choice. “For several months I have made it very clear through my discussions with the mayor that the best possible outcome would be for the city to develop its own workable plan.

“Over time it has become increasingly clear that may not come to fruition.” Which was a diplomatic way of saying that city leadership has shown no signs of taking the hard steps needed just to prevent running out of money, let alone finding long-term solutions.

Someone who has served as an emergency manager in another Michigan city said he was impressed by Snyder.

“You have to commend the governor for attempting to sweeten some medicine that may not taste too good. For trying to give the city something they can accept and that solves the problem without bringing in an emergency manager.”

But there was no sign of any gratitude on the part of city officials. The day after he put forth the agreement, the governor said he had expected the early reaction to be negative.

“The real question is, how do we solve the problem? How do we get better basic services to Detroiters? How do we get to financial stability? So let’s focus the discussion on that,” he added.

Unfortunately, too many Detroiters didn’t seem willing to do that. There was muttering that this was a case of outstate Republican whites imposing their will on poor black Democrats.

U.S. Rep. John Conyers, facing a tough primary election fight in the city, charged that the agreement “essentially asks the city to forfeit its citizens’ rights for no tangible benefit.”

Others simply clamored the state to give Detroit more money, no strings attached. Perhaps the most bizarre idea was that of State Sen. Virgil Smith (D-Detroit) who made the suggestion that the state allow the city to levy its own sales tax.

Nobody is in a mood to trust Detroit with more money. The day the consent decree was announced, it was also revealed that Detroit is forfeiting $72 million in federal aid meant for the poor.

Why? Because the mayor had to shut down the city department of human services, thanks to incompetence and corruption. Some of the officials lavishly spent money for the poor on themselves.

Without the equivalent of a managed bankruptcy, it is hard to imagine the 700,000 remaining Detroiters ever getting their heads above water. Nearly half the adult population is functionally illiterate. Mayor Bing estimates the true jobless rate at 40 percent or more.

The governor has said he won’t impose the terms of the consent agreement unless city officials agree to it. But if they don’t, an emergency manager seems certain to follow. However, a possibility exists that the state’s emergency manager law soon may be put on hold, pending a November referendum on it.

However, that would mean the state’s old Emergency Financial Manager law would again be in force. Either way, city officials would lose their power, though EFMs lack power to set aside contracts.

That may well lead to whomever is appointed eventually asking the governor to have the city declare bankruptcy.

Whatever happens, it is clear there are no easy fixes for Detroit. The governor’s proposed consent agreement is designed to essentially allow the city to reinvent itself, and address the decades-long problems resulting from decline and mismanagement.

But that would require Detroit’s elected leaders to agree to lead, and assume some responsibility for a cure certain to be painful and politically hard. So far, that’s what they aren’t willing to do.

Veteran journalist and national Emmy Award winner Jack Lessenberry teaches at Wayne State University, serves as Michigan Radio’s senior political analyst and writes regularly for several publications. He also serves as The Toledo Blade’s writing coach and ombudsman and is host of the weekly television show Deadline Now on WGTE-TV in Toledo.

March 16, 2012 · Filed under Jack Lessenberry Tags: , ,

8 responses so far ↓

  • 1 Paul Rozycki // Mar 26, 2012 at 10:05 pm

    Jack, thanks for a great program in Flint tonight on the emergency manager law. It was good to have you here. On the last point you made about sharing or consolidating local governments I’d like to send you my recent column for a local Flint magazine on the same topic.

    Flint, Emergency Managers, and Local Governments

    A recent forum at the Flint Public Library showed that the recent Emergency Manager takeover of the city of Flint can generate much conflict and anger.

    This current takeover is a result of the recently passed Public Act 4, which gives emergency managers near dictatorial power over local governments. In particular, under the current law, emergency managers have the power to modify or cancel contracts with public employee unions.

    Earlier versions of this law allowed the state to intervene in local governments, but generally did not give the manager the power to cancel contracts.

    In the past, one could make the case that the state should intervene in those local governments that were clearly incompetent or corrupt and unable to pay their bills. There were a few local governments that were taken over in the late 1980s or early 1990s for that reason.

    But today, there are over 100 local governments that might face a ‘financial crisis’ in the near future. Those governments face a takeover by a harsher, and more all encompassing, Emergency Manager Law under PA 4. To be sure, many of these governments face serious financial problems.

    Why the difference?

    In the past the financial problems of local governments may have been the result of incompetence or corruption, but today the problems are far more widespread and endemic. Today, those governments that face takeover share at least three things in common.

    First, they have lost population–often a great deal of population. (Flint has lost about 100,000 people—half its population, in the last 40 years.) And with that population loss there has been a huge loss of both the property tax base and the income tax base.

    Second, as the manufacturing/auto industry has declined, plants have closed. Each closed factory means an additional loss of tax base for local communities. Each lost job also means a loss of income tax base for those same communities. (Genesee County once had more than 80,000 GM jobs. Today we have a little over 6,000).

    Third, the property tax, which is the major source of revenue for most local communities, had historically been a very reliable source of revenue. Property values either remained stable or increased over the years. However, in the last three years, the nationwide collapse of property values has also reduced the property tax revenue to local governments. (By some calculations, property values, statewide, have declined almost 30% in the last 5 years.)

    So, local governments have faced the perfect storm of bad news: loss of population, loss of property tax base and decline in the remaining property values. The current problems of local governments are not primarily due to incompetence or corruption (though it exists). It is due to the basic structure of our society and economy.

    So what can be done about it?

    One of the advantages of local governments is that they are “creatures of the state”. That makes them highly dependent on the state for their powers. All local governments are created by the state and they can be undone by the state. That’s why the state can step in with various emergency manager laws.

    However, that also means that local governments can be more flexible. Unlike the states, boundaries can be changed. Tax policies can be changed.

    Most governmental boundaries in Genesee County, and in nearly all of Michigan, have been in place and relatively unchanged for 50, 75 even 150 years. At one time these boundaries may have been very logical and made sense. But Genesee County (and all of Michigan) is a very different place than it was in 1950, 1920 or 1880. People have moved from cities to suburbs, some areas have grown richer, others poorer. Many have changed racially. We’ve gone from a lumber based economy, to a farming society, to a manufacturing economy and beyond. But the governmental boundaries are pretty much the same.

    Should those governmental boundaries be changed to reflect this? Maybe.

    The same could be said of tax policy. Those tax policies that worked so well when we most of us lived in cities, worked in factories or worked on farms in the rural parts of the state may not work as they did before. They can be changed.

    Saying we need change is easy. Doing it is something else. (And the devil is always in the details.)

    No change is painless and there would be plenty of pain to go around if we were to rework our local boundaries or revise our tax system. Lots of people have a stake in the status quo.

    Some people would end up paying more in taxes than they do today.

    Some might pay less.

    Some might receive more government services.

    Some might receive fewer services.

    Local loyalties might be erased or modified.

    So would local control.

    Everyone would have to give up something.

    But maybe, just maybe, we might all gain something.

    Paul Rozycki

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