Teaching Detroit's leader the golden rule
Detroit could run out of cash by Friday
No, we are not speaking of the traditional golden rule here, but the business golden rule: he who has the gold makes the rules!
It’s a lesson everyone in Detroit city government might reconsider as the city itself careens ever closer to running out of cash. This is a city that has spent itself into oblivion.
The governor could have put an emergency manager in place and forced a solution [something he may still have to do] but he opted for a kinder gentler approach. Instead, he negotiated a consent agreement with the mayor and Detroit City Council approved it [in a 5-4 vote mind you].
The deal was firmly in place and the new financial experts started taking their positions.
Then the deal went off the rails.
Under a new Detroit City Charter the corporation counsel Krystal Crittendon decided that consent deal was illegal because the state of Michigan owed some money on parking tickets, old water bills and more than anything a quarter of a billion dollars in past revenue sharing council member JoAnn Watson has been loudly screaming about for nearly two years now.
Detroit Mayor Dave Bing read the charter and believes, though Crittendon is a mayoral appointee, he has no control over her lawsuit.
City Council says it can’t control her either. So, now a fractured city leadership sits as the lawsuit grinds any progress toward financial stability to a screeching halt.
So let’s do the math here, no one is in charge and the city decides to sue the governor over a contract both parties signed? You get the idea someone doesn’t like the consent agreement. You also get the idea someone isn’t paying attention to the golden rule. This of course is forcing the governor’s hand [which appears to be the real motivation here].
The city estimates it will run out of cash Friday June 15.
It will make payroll and that’s it.
The busses could stop rolling, the trash might not get picked up and it seems impossible to imagine but the cops who won’t get paid, won’t want to patrol the city’s dangerous neighborhoods for free!
The reason the money could run out is because the state has decided it’s going to require Detroit to pay off the bond deal cut in the consent agreement. It doesn’t have the cash on hand, so the state will simply garnish future revenue sharing dollars; $80 million worth.
Now consider council member JoAnn Watson saying in council chambers yesterday the city has time to wait for a Wednesday hearing with Judge William Collette regarding Crittendon’s lawsuit. She said not only should the city wait for a decision [which may or may not come Wednesday] she also said the mayor should be negotiating with the state to make the governor back down. She expressed disdain for the way the state is treating Detroit and felt the governor was committing “extortion” in his demands for the city to drop the suit or else.
With all due respect to the council member, she is living in a distant past.
It use to be that Detroit politicians could stomp their feet, threaten Lansing and get someone un-elected fast. Well, those days are gone. No one in Lansing fears Detroit or its politicians anymore.
Any grandiose proclamations of this kind are viewed as arrogant at best and suicidal at worst anymore. Mayor Dave Bing attempted to explain the concept to council yesterday, “We need to push this forward as fast as we can so that we can get cash to run the city. Without that we're dead. You can't force or make them [the state] do something at this point. You talk about negotiations we're doing that, we're doing that, but they have the hammer right now, they've got the money."
Yes, indeed the state does have the money and yes, Detroit does not.
The council, the mayor and the corporate counsel all have fiduciary responsibility to see to it that the bank accounts run dry does not happen. Yet there they stand helpless and hopeless at the same time. They had better get on the stick quickly here.
Council is expected to meet with Crittendon behind closed doors at some point over the next day or two to see if she would be willing to relent.
I spoke on the phone with her yesterday and she said she will not.
This morning Snyder, who is as positive and friendly as anyone holding the money can be, said through his patented smile, “It’s largely an issue in the City of Detroit. So, the mayor and the City Council and the Corporation Counsel should continue to work on how to resolve this issue. So we’re going to continue to be a supportive partner.”
UNCUT INTERVIEW: Gov. Snyder on Detroit
He’s not backing down.
Why? He has the gold.
The quicker the city’s fiduciaries figure out this golden rule, the better off its citizens will be.