Proposal 1 may have been smashed but in Detroit, financial reforms sparked by the emergency manager legislation will be carried out as planned.
Just because voters struck down Proposal 1 doesn’t mean Detroit’s financial crisis was wiped out along with it. In fact, some argue that it’s quite the opposite; that without the State’s legislation to mandate emergency managers in cash-poor cities, these cities have no choice but to apply for bankruptcy, thus obliterating bond ratings and shaking the statewide economy.
With the defeat of Proposal 1 comes a new shower of questions.
Will state legislature draft up a new, similar, emergency manager law? Will any cities that already have emergency managers or advisory boards fight to keep them in place? Will elected officials, in order to avoid further financial chaos, carry on the work and advice that these state-appointed officials have given so far?
In Detroit, Mayor Dave Bing said he plans to carry out the suggested reforms that State and city appointed financial advisors laid out during the brief tenure of PA4. Bing wrote in a statement on Wednesday that the City's Consent Agreement with the State is still in place.
“I am determined to continue with vital reforms now underway in the City of Detroit, despite the defeat of Proposal 1 by Michigan voters in Tuesday’s election ... In the face of the City’s enormous fiscal deficit, I chose to negotiate a Financial Stability Agreement with the State of Michigan, rather than entertain the appointment of an Emergency Manager. The Financial Stability Agreement, approved by Detroit City Council last April, is still in place.”
That answers a couple of the immediate questions. Detroit is one of the municipalities whose leaders are electing to keep the financial advisors appointed through Public Act 4 and the reforms they have suggested.
There are 25 major reforms on the table as part of the consent agreement that Bing met with City Council to discuss last month. At the meeting, Bing got a positive response from the council.
“We are willing participants in the reforms," City Council President Charles Pugh said at the Oct. 22 meeting.
"You have our support," Councilman Andre Spivey told Bing regarding the reforms. "I don't see the Council being an impediment."
At the time, Councilwoman Saunteel Jenkins wanted to know if these reforms could be made Prop. 1 fell through on Nov. 6.
Bing said it didn't.
The Mayor has said that the reforms in question, which involve some compensation shifts for city employees, some reshaping of city departments and the creation of a lighting authority, are necessary for the City to be eligible for up to $80 million in bond sales from the State. Bing said Detroit could receive $10 million by Nov. 15, and another $20 million by Dec. 14 with more installments made as the City meets the reform requirements to boost bond ratings and sales.
Money is the motive for these 25 suggested reforms. Without strengthening bonding capacity Bing has warned over and over that the city will not be able to pay its employees at all, a much more grim outlook than pay cuts or a switch from salary to contract work.
Even opponents of the emergency manager law have to concede: Detroit is in dire financial straights. Just because the State can’t mandate new financial leadership is no excuse for elected officials to sit in denial while the city spins further into financial insolvency. Let’s hope our city leaders do the right thing and make the tough decisions needed.
Is it safe to assume that if we have the right leadership, we won't need Emergency Manager legislation like Public Act 4?
Last week on WDET (101.9 fm) radio, Craig Fahle made a good point. He had people call in to the Craig Fahle Show to sound off on the proposed slash of 80 percent of Detroit Water Department employees over the next five years.
Many callers were upset about the proposal and said that the city should not make these drastic cuts because people need jobs.
Then Fahle asked the million-dollar question: What is the water department’s responsibility? To employ people or to provide clean water in the most efficient way possible?
That’s a question many city departments have to ask themselves. When we talk about Detroit’s financial state, and cutting the number of employees to help curb spending, the uprising from people is that the city can’t keep cutting jobs. While unemployment is not good for the economy overall, it’s not the city’s job to keep people employed for employment's sake.
The proposals for these massive cuts came from consulting firm EMA Inc., hired by the water and sewerage department to study operations and map out a plan to cut costs. EMA conducted the study over three months. In addition to the job cuts, the plan calls for:
- Outsourcing 361 positions to low-cost contract workers in noncore functions, such as billing and mailing, grounds maintenance, office cleaning and facilities maintenance
- Outsourcing for large engineering projects and peak times
- Reducing job classifications from 257 to 31
The City of Detroit is not an employment service. It’s a service provider that should find the most efficient way to provide those services. Unfortunately that is going to mean a lot of jobs lost in the name of efficiency.
While leaders should be looking for ways to employ people to get work done, the other side to that coin is making services efficient and keeping the city afloat.
Detroit City Council Member James Tate had a question yesterday for the Financial Advisory Board's Chief Jack Martin. The Board met with the Council yesterday to discuss their proposed cuts to city labor contracts.
"PA4 we know is up in the air right now. Potentially it will be voted down if placed on the ballot. What is your contingency plan?" He asked Martin, who is in place under PA4 (the state's emergency manager law) to manage the city's finances in crisis.
"I can’t say specifically what we may do. But no matter what happens with PA4, we’re still running out of cash. We need the hard dollar savings to get through this year. There’s a million-dollar difference in expenses and revenue between 2012 and 2013. My standpoint is we stay on the current path no matter what happens to PA4."
At yesterday's meeting the City Council did not approve the Financial Advisory Board's proposed cuts to city worker's wages and healthcare benefits. But Mayor Dave Bing and the Financial Advisory Board urged the council to act and not stall the labor cuts as the city can no longer operate in the status quo. Under PA4, the Financial Advisory board does not need the council's approval to make these cuts.
"We can talk about this for the next six months, but the bottom line is we’re running out of cash. If we don’t do it in an organized fashion there is going to be chaos and we’ll end up like some of these jurisdictions that filed bankruptcy."
The rift between the Detroit mayor’s office and the city council over closing or privatizing city departments was clear at Tuesday’s open meeting. When residents lectured the council for putting the Human Services Department and the Public Health Department on the chopping block, Council member JoAnn Watson made sure to set the record straight that it was the mayor’s office, not the council, that was pushing the cuts. “That was the executive branch,” she told a resident who hotly voiced her concerns about department cuts. “You’re preaching to the wrong group, honey.”
While it wasn’t on the council’s agenda to vote on department decertification this Tuesday, when it does come up for a vote, council will likely vote it down.
But that doesn’t mean city departments are safe from trims. The financial advisory board, appointed under the consent agreement that was approved by the City Council and Mayor Dave Bing, would ultimately take financial decisions away from the council.
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