Imagine an unelected entity that has the legal authority to lay off employees or ask them to take significant pay cuts, vanquish vendor contracts, throw out labor agreements, overhaul or merge whole departments, and overturn ordinances, to name a few. This tyrant is deemed by Michigan state law as an emergency manager. However, in Detroit, mum’s the word.
Talks of an emergency manager are in the scraps for now, although it took on a new form in a consent agreement delivered by Gov. Rick Snyder in the beginning of March. The agreement calls for the appointment of a nine-member financial advisory board, a chief financial officer, and a project manager, all with similar broad-reaching powers as an emergency manager. The difference is that city leaders can keep some control, albeit significantly less.
When it comes down to implementing real change for Detroit’s financial woes, city leaders should accept responsibility, keep pride aside, and act in the best interest of the city. If this means ceding some powers to the state then so be it.
Extraordinary times call for extraordinary measures. Detroit is facing just that. With high crime rates, poor public transportation, failing street lights, and abandoned buildings and vehicles, it is no surprise that a Detroit Free Press/WXYZ-TV poll found that 70% of Detroit residents believe any action by the city should be done in such a way that will improve basic services, even if it means calling people in from the outside.
Projections show that the city will run out of cash as early as May. The city is already $200 million in debt from previous failed budgets and holds an estimated $12 billion in long-term liabilities, according to multiple local sources. To fan the fire, the city’s credit ratings were downgraded by Moody’s Investors Service two weeks ago and Fitch Ratings last Thursday.
According to the final report by the state-appointed financial review team released mid-March, Detroit spent between $100 million and $300 million more each year than it had coming in from 2005 to 2011 and this hefty spending was only financed by more debt.
Compounding the problem is the city’s shrinking population. U.S. Census data shows that the population contracted by 25 percent between 2000 and 2010 which means the tax base shrank too.
The report concluded that the city leaders were “incapable or unwilling” to manage the city’s finances and attempts at eliminating the deficit or budget proposals “proved to be unrealistic.” Last week, the review team declared Detroit under “severe financial stress.”
A fresh pair of eyes may be what is needed for Detroit. As unpopular with the public as it may be, some big act can bring meaningful change to the city and build the foundations that will reduce the deficit, address basic services, and keep and attract more investment into the city.
Inevitably, revisions to union contracts and cuts to pay, benefits, medical care, and even jobs will occur as it has in other cities that have emergency managers, but this is like trimming a plant's leaves or a tree's branches for growth.
The clock is ticking for the hard-hit motor city and if Detroit’s leaders fail to reach an agreement on a sufficient finance overhaul by Thursday, they could be kicked to the curb and the state government would take over. Detroit leaders should accept the governor’s proposal or face a crippling financial crisis alone.