Huffpost Detroit

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

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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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Bing said Thursday he was aware of Snyder's decision and ready to work with the state.

"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.

Council has directed the City Law Department to research the possibility of suing the state over the new emergency manager law.

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.

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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."

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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."

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@ NathanBomey : Apple could pay off ALL of Detroit's long-term debt and still have about 0 billion in cash left over ... give or take a few billion.

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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.

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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.

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

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

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

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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.”

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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."

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Mayor Dave Bing said Thursday that he had talked to Gov. Snyder earlier in the morning, but that he thought it was right to let Snyder make the announcement first.

Now Detroit's Mayor has his say. UPDATE: Here's the video.

The Governor has made his decision, and it was his decision alone to make. While I respect it, I have said all along that I do not favor an Emergency Manager for the City of Detroit. I will look at the impact of the Governor’s decision as well as other options, to determine my next course of action.

"There needs to be additional conversation with Lansing regarding their plan to move the City forward. We have always said that we need help from Lansing to implement our initiatives such as public safety, transportation, lighting and others. If, in fact, the appointment of an Emergency Financial Manager both stabilizes the City fiscally and supports our restructuring initiatives which improve the quality of life for our citizens, then I think there is a way for us to work together."

"I firmly believe that Detroit’s best days lie ahead, and my sole focus has been and will continue to be working to bring about the great Detroit that we all know can be achieved.

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@ MichiganDems : "I am deeply dissapointed by today's hostile take-over of Detroit. We need to trust the democratic process not throw it out." - Lon

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Wayne County Sheriff Benny Napoleon reiterated his opposition to an emergency manager in a statement Friday. Napoleon, who has said he is exploring a mayoral bid but has not made it official, straddled the fence a bit, saying:

"While I question whether Detroit is in a state of fiscal emergency, I certainly believe that it is in a state of fiscal urgency. The only way to build the Detroit that we all aspire to be is to deal with the fiscal challenges that we do know to exist, place a priority on making the city safe, and provide services that are core to our city. That is the only way to move our city forward."

That doesn't sound too far off from Gov. Rick Snyder's statement:

“Additional action is needed to fix the financial crisis in Detroit,” he said. “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 street lights 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 being a great city once again.”

Napoleon, who has questioned the financial review team's high figures for Detroit's debt, also had stronger things to say.

“The concept of an emergency manager is antithetical to democracy, home rule, and everything I believe in, which is why I campaigned aggressively to repeal Public Act 4," he wrote. "Detroit, just as any community, has a constitutional right to self governance."

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Jerry Paffendorf, founder of tech startup Loveland Technologies, has a critical request for the next EM: transform the city's information technology. It might sound far down the list of priorities compared to improving public safety and city services or paying off debts, but Paffendorf says the problem underlies all others in the city:

from the emergency inspiration department: with an emergency financial manager on their way, i think my weekend homework is to write an open letter to the EFM about how important the transformation of detroit's information technology is:http://www.freep.com/article/20130301/NEWS01/130301048/Snyder-name-emergency-financial-manager-Detroit-has-candidate-mind . you might remember our friend vince's site where he lists out the city's 5 2012 IT budget:http://newdetroitstyle.com/ . that's an incredible amount of money spent to very little noticeable effect, and in a very real sense there is an information problem underlying every other problem in the city. reworking city IT may be the easiest, highest leverage point for reducing costs and improving all other systems, not to mention better informing residents so we can have a functional democracy. to be continued... - jerry

From Facebook.

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@ davidshepardson : New Mich Dem Party chair calls Detroit EFM "nothing but a hostile take-over; we would expect this from a CEO, but not from a Governor."

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They don't call him @onetoughnerd for nothing!

Immediately after announcing that the city of Detroit is in a financial emergency, Gov. Rick Snyder unveiled a subsection of the state of Michigan website entitled, "Detroit Can't Wait."

That's www.michigan.gov/detroitcantwait for all of you who can't wait to learn more.

Before becoming governor, Snyder was a venture capital CEO and also served as the former chairman of Gateway, Inc.

The website contains fact sheets, charts and several videos outlining Gov. Snyder's belief that only an emergency manager can help right Detroit's financial crisis.

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Many Michiganders, including Gov. Snyder, were disappointed by City Council's refusal to agree to the state leasing Belle Isle, Detroit's island park.

Council and some local residents were wary of handing over one of the city's assets for 30 or more years without more stipulations, but had the park's operations been handed to the Department of Natural Resources as proposed, the city stood to save million annually.

According to the Detroit News, Snyder doesn't think it's necessarily a good idea for an emergency manager to immediately go in and do what Council wouldn't -- in part because of what HuffPost Detroit would call an "optics problem."

From Detroit News columnist Nolan Finley:

If you think Gov. Rick Snyder is naming an emergency manager for Detroit so he can impose his will on the city, listen to how he answered a question about whether he'll now push ahead with the state takeover of Belle Isle:

"I have some concerns about if we were to do it in the emergency manager context," Snyder said in an interview prior to Friday's announcement. "It would be viewed as we're ignoring the fact that the city didn't want it. I really don't view it as something appropriate for an emergency manager."

Snyder says this even though he cites the city's refusal to accept his offer to run Belle Isle as a state park as one of his greatest frustrations in dealing with Detroit, and also sees it as an opportunity to post an early success for the takeover.

More here.

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The Detroit News reports that, as expected, City Council members aren't happy about Snyder's decision to eventually appoint an emergency manager. The News says the members are working on a plan to change the governor's mind.

Council member Andre Spivey told reporters that "I am not surprised by anything the governor said today."

When asked if he believes an EM will be appointed he responded, it "looks that way." Spivey said the city will "probably appeal."

"We will meet with the mayor today or next week and get a joint statement," Spivey said.

More at the News.

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Mike Duggan's campaign emailed this statement to HuffPost Detroit on Friday afternoon. We've reprinted part of it below.

It’s clear from the Governor’s statement today that he has made the decision to appoint an Emergency Manager for the City of Detroit and will move forward in 10 days. This didn’t have to happen. There were many opportunities for the Mayor and Council to head off an EM and there were other paths the Governor could have taken.

But today, as Detroiters, we have to face the reality that the decision has been made and change is coming.

It’s okay to be angry at the Governor, Mayor or Council over the fact Detroit is getting an EM and, at the same time, still be supportive of the person who has to fill this very difficult EM job.

If the new EM will listen to the community and work at fixing broken city services as well as restructuring the finances, we should be supportive of those efforts. We don’t want Detroit to linger under EM rule for years on end as we’ve seen in Benton Harbor or Ecorse. We want the EM to succeed and move on.

Duggan is still running for mayor of Detroit in November. He also wrote in the statement that the job should go to the candidate with "the most credible turnaround plan and the strongest turnaround team in order to speed the return of city government back to the hands of those elected by Detroit’s voters."

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@ DetroitDodge : Is this about the city or the Pistons? RT@TerryFoster971 Does anyone believe Detroit can rebound without an emergency manager?

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@ Eclectablog : .@onetoughnerd Gov Snyder to name an Emergency Mgr for #Detroit leaving 1/2 of Mich black residents w/o a democratically-elected govt

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@ HuffPostDetroit : Snyder says it's a tough decision: "Clearly one of the most difficult and clearly a challenging situation" #Detroit #emergencymanager

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@ tundeolaniran : @tokennerdgirl @HuffPostDetroit it's ridiculous he sounds like a manager at Circuit City

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@ HuffPostDetroit : Snyder says he has an #emergencymanager candidate in mind. Do you think it's one of our Twitter picks? http://t.co/00pOSqhe7L

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Michigan State Sen. Bert Johnson responded to Gov. Snyder's declaration of a financial emergency -- that will likely lead to an emergency financial manager -- with the following statement:

“Governor Snyder just does not understand. The people of the State of Michigan rejected Emergency Managers at the ballot box in 2012. To not let the will of the people be the law of the land is reprehensible," he said.

“The real issue is systemic disinvestment from our urban centers across the state. Governor Snyder and his Republican Legislature have slashed education funding for public schools, dramatically decreased revenue sharing which keeps city services like police and fire protection intact, and raised taxes on working families everywhere. The answer to Detroit’s fiscal distress is not to sell off assets and indiscriminately fire employees, which is the standard operating procedure of Emergency Managers. The answer is to invest. Until Governor Snyder understands this, our cities and school districts will continue to struggle with insolvency."

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@ HuffPostDetroit : Snyder believes financial review is correct, says he has confidence in team "These are really good people. they know their stuff" #detroit

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@ HuffPostDetroit : Snyder on mediation, wants to happen: "I'm talking about all the creditors. You bring everybody to the table" #Detroit

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@ HuffPostDetroit : Snyder on referendum: "We listened to the people. There were issues that they brought up, does the city have any say or choices or options"

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@ spencersaysthis :

Say what you will, I stand by and love my city: Detroit. The night is always darkest before the dawn. #Detroit.

http://t.co/UGThB0wem6

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@ LovemyDVF : @freep @onetoughnerd go Snyder go. Finally the grown-ups have arrived to join the only other adults running the city. Bing & Brown

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