Thursday, 20 December 2012 12:16
One day after Gov. Rick Snyder appointed a 6-member team to conduct a financial review of Detroit’s finances, Mayor Dave Bing rolled out a “revenue enhancement” plan estimated to bring the city $50 million in revenue.
But at this point, after years on financial insolvency, many are wondering if the city’s new collection initiative is “too little to late”.
City and State officials have warned that a wrong move at this crucial time in Detroit’s history could land the city in bankruptcy court.
But here’s the twist: Under state law, the city must first be appointed an Emergency Financial Manager (EFM) before being eligible to file for bankruptcy. Snyder’s review team’s findings could result in him appointing an EFM to Detroit, someone who would take away the Bing Administration and the City Council’s power to make financial decisions.
Just a month ago, city and state officials were squabbling over the release of $30 million in escrowed state funds. Now that the city has reached the milestones of an agreement that was contingent on the $30 million drawdown, the city is not in much better shape.
During the drawn out “milestones” tug of war between the mayor’s office and city council members, the mayor’s talking points made it sound like the $30 would stave off layoffs.
Turns out, layoffs are just one of the measures the city has to take in order to move not toward financial solvency but just to keep afloat.
One thing that’s different now is that City residents and business owners face tougher tax collection efforts now that the city has hired private collection agencies to go after delinquent accounts. No one is safe, not even the mighty Illitches who owe more than 1.5 million in taxes.
The city estimates that it could gain nearly $20 million in tax collection initiatives annually if stricter collection is enforced.
That begs the question: why were these collection measures not taken sooner?
The answer is a complex one that boils down to the fact that the city, until recent contracts with private firms, did not have the capacity to go after its debtors, Bing says.
As the city keeps skimming its payroll, there are less people doing work.
“Because of the loss of so many people—we had almost 14, 00 people when we came into office now we 9,700 people—we need some help on the personnel standpoint so we’re going to the outside and getting some outside firms to come in and help us. They are not going to be permanent.”
Meanwhile, the city plans to lay off 500 more workers in early 2013 mostly through attrition and retirement according to CFO Jack Martin.
Still, is this too little too late, Mr. Mayor?
“It’s too soon to say,” Bing said Wednesday. “We’re not throwing in the towel. Contrary to what a lot of people may believe there’s a lot of good things we have done. I think when we lay this plan out it’s going to surprise a lot of people. This is not a ‘get tough’ stance on anybody. It’s fairness and being correct.”
At this point Detroiters can only wait and see. Hopefully, people will get the surprise Bing looks forward to.
Tuesday, 27 November 2012 10:21
Think back to before Snyder, before Public Act 4 took effect. The city was broke then, too. Just as broke, in fact, as it is today. There was the threat of payless paydays, a recurring warning in the city these days. So what’s different now?
The state’s taking a firmer stance: Make big structural changes in Detroit government or no money from us, is the message coming from Lansing.
That’s why at a press conference last week, Mayor Dave Bing told reporters that, ultimately, he’s not the one calling the shots in these politically and financially stressful days. The State is. “I’m open minded but by the same token, the State is holding the cards at this point,” Bing said when asked whether he would reconsider terms of a contract that is necessary for acquiring state funds. Bing has brushed off City Council’s concerns of a conflict of interest with the controversial Miller Canfield contract.
If the state is holding the cards, a good poker face is in order.
Per the Snyder Administration’s deal with the Mayor’s Office, the City must hire and maintain private legal and turnaround firms, among other restructuring moves in order to get $30 million in bond sale funds. Now, heading into the New Year, the city is so broke it (apparently) can’t even pay attention to the simple legal requirements of holding a public meeting.
As Detroit faces a fiscal cliff of its own, the words “payless paydays” and “unpaid furloughs” have resurfaced as they have time and time before, especially over the past four years after former Mayor Kwame Kilpatrick left office and audits exposed the city’s financial nightmare. Essentially, the only difference between a payless payday and an unpaid furlough is notice not to come to work. And rhetoric. Either way, what usually would be a payday’s going to roll around and some unfortunate city workers are not getting paychecks. Either way, a check has to be missing a couple zeros or missing altogether.
We’ve heard it before, perhaps too many times: If the city doesn’t make drastic changes, it will crumble into the void. But by now Detroiters are a practically numb to the threat of running out of money. And that’s no good, especially if they city really is to run out of cash. But here’s the thing: it’s not.
The city won’t run out of cash any more than is has in the past. That’s not my opinion; it’s Detroit CFO Jack Martin’s. He spoke at a press conference last week declaring that a few unpaid furloughs will be enough to fill the cash gap. He and Bing last week promised “absolutely no payless paydays” and “no bankruptcy whatsoever.” But a slow trickle of furlough savings a $30 million lump sum is not.
But really, how do the two even compare? If a few unpaid furloughs for non-public safety or revenue generating workers is enough to stave off a financial crisis, was how critical was the crisis in the first place? It’s a question that perhaps touches on root of the issue between the legislative and executive branch of Detroit government.
Obviously, unpaid furloughs are being used as a threat to get council members to approve a controversial contract. But if it doesn’t work, then what? More lawsuits from unions? More back-and-forth?
As Bing and Martin have said, bankruptcy at this point is far from an option. The city is not close to being eligible ... yet.
Now that the State-City Milestone agreement benchmarks have not been approved by the City Council, and now that the state’s emergency manager leverage has been repealed, it’s back to the drawing board. Back to the unpaid furloughs hotly contested in 2010.
As far as bankruptcy goes, there’s a good reason we want to avoid it: “Bankruptcy costs a lot of money, ironically,” Said Eric Scorsone, extension specialist in State and Local Government at Michigan State University. He said the city of Vallejo, California spent over $10 million on bankruptcy lawsuits in 2008. “If you can get the same outcome at a cheaper price, you do that.”
Let’s do that.
Wednesday, 17 October 2012 23:44
It’s true. Michigan’s ballot this year is more crammed than I-75 North at 4:30pm on a weekday. Especially in Detroit were voters will face 18 proposals from the State, the County, the City, the public school district (DPS) and the community college (WCCC).
Voters have a big slab of homework to complete before voting.
As you read this, have you decided on your picks for Michigan Supreme Court justices? Or how you will vote on the Wayne County budget and appropriation ordinance? Luckily there are some pretty good voter guides out there.
Some people, the dream voter, keep an ear to the ground and slowly absorb information to make an educated vote. The rest of us have a date with Google a can of Red Bull on the evening of Monday, Nov. 5.
While I’m doing my best to avoid sucking down caffeine last minute in the name of democracy, no amount of ginseng, taurine or caffeine will be able to help me decide on one of this year’s biggest decisions for Michiganders (besides choosing the next President). That decision is on Proposal 1, more commonly known as the emergency manager (EM) law, or Public Act 4. When it comes to Proposal 1, I am the darling target of political ads: the elusive undecided voter.
The Proposal1, the EM law, would mandate a state-appointed official or advisory board to have full control of the finances and academics of financially failing cities and school districts like Detroit and DPS.
This issue is a repeated stumbling block and no matter how hard I study, discuss, or even mediate (ok, at this point I’ll try anything). The litany of opinion on Proposal 1 is off putting. I’m wary of those who are viciously for it as well as those who are vehemently against it. It’s getting harder to stand on the sliver of middle ground.
Maybe that’s what’s wrong with the EM legislation: it’s too polarized. Or maybe it’s what needs to happen to drag some sputtering municipalities in to 21st century? Obviously this can get dizzying.
Generally, supporters of the EM proposal tend to be more fiscal conservatives and supporters, more socially liberal. That’s just an observation. Some people describe the EM law like pulling teeth: “It’s not gonna be pleasant but it has to be done.”
Supporters of Proposal 1 say that without State intervention major cities will have no choice but to file for bankruptcy, plunging bond ratings into oblivion and spreading a dismal economic for all of Michigan. They say it’s the only choice for cities to avoid bankruptcy.
Critics of the EM law proposal say cities facing financial crisis should be able to file for bankruptcy if need be as a path out of a fiscal mess and skip the finance czar.
So when GOP presidential candidate (and Michigander) Mitt Romney framed bankruptcy as a chance to rebound during the presidential debate on Tuesday night it was a bit of a surprise. As a businessman, he basically said bankruptcy isn’t all that bad.
"[Obama] said that I said we should take Detroit bankrupt," Romney said in the debate, "And that's right. My plan was to have the company [GM] go through bankruptcy like 7-Eleven did and Macy's and Continental Airlines and they come out stronger."
Maybe someone can help me out here: If Romney’s right and bankruptcy can be a launching pad to higher heights, then why do we need the emergency mangers in cash strapped cities? Is it bond ratings that are the issue here?
Tuesday, 12 June 2012 08:13
But I remember three years ago when Bing just got into office and he was trying to do make the cuts needed without state intervention. Remember the union contracts? I particularly remember when lawsuits were flying then namely around AFSCME Local Council 25. The city charter was again in question. Bing had terminated union contracts saying basically the same thing: If I don't there will be payless paydays, the city is broke, and so on. Only, then he estimated the city had a month or two to go before it crumbled--financially that is.
Bing is doing what he and many others feel is best for the city. Concede some power to the state so the city doesn't go bankrupt -- which would be bad for everyone involved. What has to happen is it has turned into an "us vs them" argument when now is the time people need to be working together. If Bing is right this time and the city IS running out of cash, then that is, indeed, perilous for all residents. Too bad Bing used the running out of money in x amount of time warning too many times before.
No doubt he wasn't kidding then, but now, since he is giving the city four days before bust, it's similar to what he said before to get the cuts he needed. So now that the situation has escalated and the stakes have risen, people are acting apathetic. Threats of running out of money are nothing new because the city has been running out of money for a long time. What is the case now? Is it literally a count down to chaos? Does all of Detroit's future really hung on Krystal Crittendon and the lawsuit she filed to hold up the consent agreement? The stakes are high, yes. But does that mean the drama needs to escalate, too?
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