DETROIT

Rick Snyder, Michigan Gov., Declares Detroit Financial Emergency Exists

03/01/2013 12:04 pm ET | Updated Mar 02, 2013

Detroit is in a state of financial emergency, Michigan Gov. Rick Snyder (R) said Friday.

"There's probably no city that's more financially challenged in the entire United States," said Snyder. "We need to start moving upward with the city of Detroit."

Mayor Dave Bing has a 10-day period in which he can request a hearing, after which point, according to the Associated Press, Snyder can appoint an emergency financial manager for the city or revoke his decision.

Snyder said Friday he had several names in mind for the position. He describes his top choice as someone with a strong professional resume who is, he said, "a people person." He did not name the individual.

His statement at Friday's forum holds up a state review team's findings of a severe financial emergency in the city, pointing to more than $14 billion in long-term liabilities, including underfunded pensions. The city is also poised to end the fiscal year more than $100 million in the red without an infusion of cash. Snyder received the report last week.

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"I think we have to learn to make the best out of a bad situation," he said. "The state and the city will have to work together to get us out of this."

"I never fought help, I never pushed back. I’m a team player,” the mayor added.

Neither Bing nor any City Council members were present at the announcement. Snyder said Friday both had made steps towards resolving Detroit's fiscal problems, particularly in the last few months, but it wasn't enough to fix the city's massive debt.

"Additional action is needed to fix the financial crisis in Detroit," he said in a statement. "Chronic budget troubles have taken a significant toll on everyday life for citizens in the city. Detroiters deserve to feel safe when they walk down the street, to have their streetlights on, to have the bus show up to take them to work. Working together in partnership we can and will develop solutions to fix the city's finances, stop the cycle of overspending and one-time fixes and collectively get Detroit on the path to being a great city once again."

However, City Council members are not so amenable to Snyder's vision of the city. Bing indicated he was expecting Council to challenge the decision and was waiting to see what they proposed.

According to the Detroit News, Council prepared a report Friday that called the appointment of an emergency manager "premature" and called instead for a more detailed consent agreement. The city and the state entered into a consent agreement last year that gave a financial advisory board certain powers over the city. The consent agreement was meant as a reform tactic to stave off the need for an emergency manager.

Two other politicians with a stake in the future of Detroit's leadership have taken issue with the review team's findings of a financial emergency. Wayne County Sheriff Benny Napoleon, potential mayoral candidate and former state Rep. Lisa Howze, who has announced she will run for the position this year, disputed the inclusion of the Water and Sewerage Department's $6 billion long-term debt. Their debt is separate from the city's General Fund, Napoleon said, and is secured by more than $8 billion in assets.

The emergency manager law itself has also caused concern. The current law, PA 72, was replaced in 2011 by PA 4 to strengthen the powers of emergency financial managers appointed to struggling municipalities and school districts. After PA 4 was repealed by state voters in November, legislators rushed PA 436 through a lame duck session in December. The new law will take effect March 28.

Many have objected to the powers vested to an emergency manager in PA 4 and PA 436 on the basis that it is "undemocratic." They include Tony Paris, lead attorney for the Sugar Law Center, which challenged an older version of the law in 2011.

"[Emergency managers] can unilaterally tear up union contracts, take over pension funds, make and repeal laws, sell public assets, the list goes on," he said in an earlier interview with The Huffington Post. "Imposition of the EM must be understood in the context of the many other methods conservatives are using today to suppress democracy –- especially among people of color and people in poverty."

Liberal site Eclectablog has pointed out that if Detroit were to come under the power of an emergency financial manager, nearly half of Michigan's African-American population would cede local control. Five other cities have EFMs.

If Council or Bing requests a hearing to challenge Snyder's decision, it will take place Tuesday, March 12, the governor said.

03/02/2013 2:23 PM EST

How Detroit's Financial Emergency Could Affect The Auto Industry

03/01/2013 6:12 PM EST

'What's Happening Here Isn't Fair'

Cecily McClellan was hardly surprised by Gov. Snyder's Friday declaration of a financial emergency in Detroit. She's a spokeswoman for Concerned Citizens Coalition of Detroit, an alliance of citizens and community groups opposing the expected takeover of Detroit by the state.

"We anticipated the governor would do what he did. It's almost identical to what he did last year.

We believe it's clearly a fabricated case for an emergency manager."

She told The Huffington Post she believes the declared "financial emergency" is a situation that could be handled by local government leaders without state intervention. She said her coalition will encourage Detroit's city council to use the legal system to challenge emergency manager laws.

"There's going to be litigation and there's going to be agitation, and we're not going to accept the taking away of our voters rights," she said. McClellan hopes the current spotlight on the city will help bring outside scrutiny to the governor's actions.

"We need some external eyes on the city of Detroit, because what's happening here is not fair. It's not justifiable. If it's allowed here [emergency managers] will be able to go into every city in the country."

03/01/2013 6:11 PM EST

Turnaround Expert: Detroit Needs A 'Unifier'

John Filan is a vice-president for Development Specialists, Inc, a Chicago-based turnaround firm that met several times with Mayor Bing's administration and other city officials.

And despite what mayoral candidates Lisa Howze and Krystle Crittendon, as well as potential candidate Benny Napoleon have argued in the past few days about the city's long-term debt being miscalculated, Filan said he is convinced the city needed help.

"Detroit, in particular, has been analyzed to death," Filan told The Huffington Post on Friday. "There's been more financial analyses, by the city itself, by offices of the city, by the state, by any number of independent research organizations. They all have the same conclusion."

"I can't imagine anyone thinking this isn't an extremely financially distressed city government," he added.

That doesn't mean Filan doesn't see the potential of a Motor City comeback. But he said stability from executive management will be the single most important factor in creating a fiscal recovery -- whether that's achieved by a mayor or emergency manager.

Filan had good things to say about Detroit's mayor. "I think Mayor Bing has articulated a number of things have to be done, is very will intentioned and is, i think, a courageous mayor."

But whoever takes charge, he added, "they really have to have a commitment. It will take several years, maybe a decade, so they can attract economic growth and investment."

He also listed the most important qualities for an emergency manager -- and they aren't found on a resume line.

"That person really needs to be unifier and a communicator," he said, because the decisions that have to be made have to be are ones that have to be properly communicated and understood and part of an overall plan. So that people can see, in the fourth or fifth year, this is where we expect to be, if we take these 10 steps."

03/01/2013 5:43 PM EST

Dear Tim Cook..

@ NathanBomey :

Apple could pay off ALL of Detroit's long-term debt and still have about $100 billion in cash left over ... give or take a few billion.

03/01/2013 5:01 PM EST

Detroit City Council's Saunteel Jenkins Calls Snyder's Speech 'Disingenuous'

Detroit City Councilwoman Saunteel Jenkins talked to HuffPost Detroit this afternoon. She says she wasn't surprised by anything Snyder brought up at Friday's "forum" -- but she was very surprised by what he didn't say.

"I thought we would get more details," said Jenkins, who is finishing her first term on Council after being elected in 2009. "First of all, I thought he would say, unequivocally, that we would be getting an emergency manager."

Jenkins argued that Snyder's speech was long on "relentless positive action," but short on actual specifics.

"He said we interviewed a lot of good candidates, but it's too soon to say whether we'll have an emergency manager," she said. "He said the city doesn't have enough resources, but he didn't say what resources the state will bring to the table. He talked about the short-term cash crisis and long term liabilities and the need for a plan, but he didn't talk about what should be included in the plan."

And about that plan? Jenkins called Snyder's dismissal of Detroit's plan, "disingenuous."

"We've been working with the state's plan for nearly the last year now," Jenkins said. "Not the city's plan -- we've been working with the state's plan. We brought in the so-called financial experts that they demanded we hire, we brought in the restructuring firm that they demanded we hire, the law firm, the actuarial firm that's supposed to help us.. we've done everything that the state has asked us to do in the milestone agreement."

Jenkins said the Council hasn't come to a decision over whether it should appeal Snyder's decision, but that they plan to continue conversations next week. She did, however, express doubt that the body would seek outside counsel to sue the state of Michigan over the emergency manager law itself.

"It has been recommended by a couple of council members, but I do not think that the majority of my colleagues agree that that is the way to go," she said.

03/01/2013 4:11 PM EST

Rep. Gary Peters: 'I'm Deeply Disappointed'

U.S. Rep Gary Peters (D-Bloomfield Twp), who won Michigan's newly redesigned 14th House District in November's election, issued a statement containing a strong rebuke to Gov. Rick Snyder.

"I’m deeply disappointed that Governor Snyder has opted to go around local elected officials to install an emergency manager in the City of Detroit. All of us agree that the city has serious financial challenges which must be addressed, however I fundamentally disagree with taking measures that disenfranchise the families I represent in Detroit.

Having represented the City of Pontiac for years, I've seen the kind of damage that can occur when emergency managers sacrifice opportunities for long-term growth in order to achieve short-term budgetary goals. In practice, emergency managers in Michigan have consistently failed to address the systemic problems plaguing older urban areas like Detroit.

Making deep cuts in core city services and first responders, while ignoring the need for critical job creating investments, will not put any city on a path toward long-term sustainability. By refusing to specify what ‘resources’ he will devote to solving this crisis, Governor Snyder has generated more questions than answers for the families of Detroit.”

Pontiac's finances have been under state control since March 2009, according to The Oakland Press. Current EFM Lou Schimmel is the city's third emergency manager. According to the OP, Schimmel has said he will be leaving his post as EFM by this summer. it's unclear whether that means Pontiac will no longer be under state control, or if Schimmel is merely making way for a fourth state-appointed EFM.

03/01/2013 3:57 PM EST

Seconding

@ NYTjamescobb :

Doubt that. MT @nickbunkley: Chamber of Commerce: "Every negative story about Detroit has already been written" http://t.co/ixweva2Lzd

03/01/2013 3:47 PM EST

#DreamEM Candidates Keep Rolling In

@ alisapriddle :

Candidate for Detroit emergency manager: former CEO of Groupon is now available......

25% off living in Detroit coupons? This could get weird.

03/01/2013 3:45 PM EST

EM Law A 'Silver Bullet'? No Way, Says Sugar Law

The Sugar Law Center, which has challenged Michigan's previous emergency manager law in court, had harsh words for Gov. Rick Snyder's declaration of a financial emergency in Detroit and likely appointment of a leader to run the city.

“The Governor continues to use unconstitutional laws to implement unworkable plans,” said John Philo, the Center's legal director. “He and others are trampling over the rights of voters in their search for a ‘silver bullet’ they hope will undo complicated financial problems that have many causes built up over the years. The track record of emergency managers proves otherwise. The idea that anyone can come in and fix things in eighteen months is absurd. These managers that rule by fiat inflict a lot of pain on residents and workers but provide no long term solution to the problems of dwindling tax bases.”

03/01/2013 3:38 PM EST

'A Throwback to Jim Crow'

Gov. Rick Snyder's declaration of a financial emergency for Detroit is being categorized as "a throwback to Jim Crow," by potential mayoral candidate Tom Barrow, who ran against Mayor Dave Bing in 2009. The governor's decision is expected to lead to the appointment of an emergency manager for Detroit.

"I feel like my city is being taken from us," he said. "Democracy had died. [The governor] has robbed people of color of the ability to self govern."

Barrow, a certified public accountant, believes the financial emergency is "a fabrication designed to take over the assets of the city," which include Belle Isle, the bus system and the water department. He disputes the report issued by the state's emergency review board, saying that they used "phony financial data" to spread a false story about the city's financial situation. For example, he says the state's numbers were misleadingly bundled to include bonds for the water department intended to be paid over a 50-year period out of the agency's own revenues.

As the president of a community group called Citizens for Detroit's Future, Barrow also told The Huffington Post that a number of organizations were banding together to oppose the expected takeover -- and that the governor could expect pushback for his decision.

"This country is being changed by a conservative agenda that flaunts the law," he said. "In my opinion it's unconstitutional. He may take [over] the city, but we're going to organize and fight."

Where Do Michigan Pols Stand On An Emergency Manager for Detroit?

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