State Partnership Needed to Address Detroit's Fiscal Crisis But Emergency Financial Manager Not Answer
Today, the Financial Review Team, appointed by Governor Rick Snyder, released its report on the current state of the City of Detroit's finances and deemed there is a "financial emergency." The report's findings are nothing new. It reflects the short-term and long-term financial issues we have been well aware of during the past few years.
I stand with Detroiters and other stakeholders that the pace of change has been frustratingly slow. The political will has often not been there to make the necessary and bold fiscal reforms, many of which I have recommended since 2009.
Without a doubt we need the support and accountability that a State of Michigan partnership offers. We cannot address our legacy obligations alone. And, as Detroit goes, so goes Michigan.
I have long said, I believe that the consent agreement (with the political will) provides us the tools and accountability to repair our fiscal house. I don't support the draconian appointment of an Emergency Financial Manager (EFM) nor the filing of municipal bankruptcy.
The City of Detroit is not unlike other government entities across the country that are dealing with similar unsustainable legacy costs and long-term debt.
The widely reported nearly $14 Billion long-term debt of the City of Detroit is compromised of two segments. The Detroit Water & Sewerage Department, a revenue-generating enterprise, debt represents approximately $12 Billion. The debt for the City's General Fund is $2 Billion. Looking at the debt in this manner helps us to pinpoint solutions. With a best practice strategy to refinance and manage the debt, Detroit's current leadership can address these structural issues.
An EFM appointment, if Governor Snyder ultimately chooses this measure, means that the Governor is responsible for the success or failure in addressing the fiscal challenges, as well as accountable to Detroiters for the crime, EMS issues, streetlight outages, and general city services' ineffectiveness. Also, it will be a hard sell for an EFM to attain the qualified professionals to oversee the departments and other city operations when it's a short-term scenario. Further, the draconian cancellation of union contracts and sale of city assets under an EFM will affect the economy in dramatic fashion, including raising unemployment and negatively impacting businesses operating in the city.
A municipal bankruptcy will not be similar to the corporate managed bankruptcies of Chrysler and GM, and as such I do not support this route. A federal judge likely based in Cincinnati will wipe out much of the city's debt which will result in the closure of many businesses and dramatic job losses due to the funds owed to Detroit and southeast Michigan businesses. Additionally, it will affect Detroit-based businesses' ability to secure lines of credit to retain and hire employees. A federal judge has no vested interest in the impact to Detroiters.
Often in the fever to get the City of Detroit on the right path, some will jump to another option without considering the consequences. We need to be aware of the benefits and drawbacks to our options.
I will continue to serve you and other Detroiters as an elected official, and as I have done in the past push for bold implementation of reforms to repair our fiscal house and restructure city services to create a thriving environment for residents and businesses.
Together, we possess the power to become the best of Detroit.
Gary A. Brown
President Pro Tem