You heard it here first

Published On: Mar 14 2012 09:22:48 AM EDT   Updated On: Mar 14 2012 09:30:37 AM EDT
DETROIT -

We in television news aren’t bashful about tooting our own horns.

Tuesday, it was no different as it was my day to be utterly immodest.

Tuesday was the day Michigan Gov. Rick Snyder sent a consent agreement proposal to the mayor of Detroit and Detroit City Council; just as I first reported he would about 10 months ago.

It would dramatically cut the mayor’s powers and make the City Council something just north of an ad hoc committee whose opinion is heard but in the end winds up with little real power. Both would serve at the mercy of a 9-member Financial Advisory Board. It’s not going over big at Detroit City Hall as you might imagine.

 

Here’s the history. It was roughly this time last year I did an interview in Lansing with Gov. Snyder. He exclusively told me he would seek a consent agreement instead of an emergency manager to balance, once and for all, Detroit’s books. It was the first time anyone in the governor’s office admitted their thinking on Detroit’s thorny fiscal problems. It came on the heels of an special report I did with former Detroit Auditor General and current Benton Harbor emergency manager Joe Harris who said Detroit was so far gone it will need an emergency manager. The governor was staking out the safer political space while at the same time leaving the possibility of an emergency manager; the stick to go with his politically correct carrot.

 

Indeed, back then it was obvious Detroit would crash into the financial rocks. It was just a matter of time. Mayor Dave Bing and a greatly frustrated City Council fought back then about how to avert the impending doom. They chose the hurry-up-and-wait approach to balancing the budget. They waited until the bitter end hoping beyond all hope an emergency manager would not come and tried desperately to find a way to get cost savings and increased revenue on their own to make the city run as it is supposed to. The mayor tried in vain to pull together union concessionary agreements that would get him at least $102 million in budget cuts and long term restructuring. That fell considerably short. So now, the governor and State Treasurer Andy Dillon have moved ahead by putting together a document that is a jumping off point to negotiate a final consent agreement and push the city toward fiscal health.

           

Now, there are a number of questions here.

The first begs how Detroit found itself in this mess?

The answer is any organization private, public; city or state that is built on the old General Motors model of overly generous lifetime benefits, defined benefit pensions, largely unlimited healthcare and feather bedding jobs is doomed to fail. If GM went fins up that way, why wouldn’t the city of Detroit?

Next up: what is a consent agreement and why is it necessary?

A consent agreement is in reality an operating contract negotiated between the city and another governing body. Detroit is already operating under one for its police department with the federal government. The city of Detroit Water Department, providing water for much of southeast Michigan, has operated under a consent agreement with a federal judge over its management for roughly 30 years. In this particular case, a consent agreement with the state treasurer and the city of Detroit is an interim step between operating as usual [where the city tenuously clings to right now] and an emergency manager that would take away all mayoral and city council powers, imposing a turn around plan with no input from anyone.

The reason for all of this is sadly simple. Detroit is broke. So broke it really can’t even afford an emergency manager.

 

Neither the consent decree nor the emergency manager are popular at city hall and there are tremendous cries of a “theft of democracy” and gnashing of teeth about unconstitutional seizure of citizen and elected officials’ rights. The problem with this line of thought is it ignores how Detroit got here. It was the elected leaders who, whether it was this year or a generation ago, steered this city into the rocks. They are the ones who have helped deny citizens of their basic rights of good public services rendered [like public safety and trash pick up] for the taxes they pay.

When General Motors went before that bankruptcy judge it did not want to see, it had no rights at that point to say where its future lay. The judge told the company how it would go. If you go into personal bankruptcy, you do what the judge tells you to do! You have few, if any, rights in the final determination of what becomes of what’s left of your financial life. If that is the case, then why is it somehow different for the city of Detroit?

Are you somehow suggesting the constitution allows elected officials who drive a city into the financial rocks to proceed with no accountability whatsoever; simply because they are elected?

Hardly.

How is it that the other two consent agreements are ok but not this one? How is it Washington, D.C., Cleveland and Philadelphia went through this same process and the constitutionality was upheld there?

One wonders if these same people believe these elected officials should have the unfettered right to keep running the city into the rocks. That is absurd.

Ultimately this line of thought ignores one fact; the governor is elected too. Michigan law says the state is ultimately responsible for all of this and the city essentially serves at the will of the state. There are many who disagree, it’s their right, but that’s where all of this originates. Thus the governor is stepping in and trying to give angry Detroiters a say in the process with a consent agreement.

           

It’s going to be a busy couple of weeks here as the governor’s appointed financial review team meets again on Friday. Dillon heads back down to City Hall to try and quickly hammer out a consent agreement council and the mayor can live with. He hopes to do it all by March 26. That is the date the governor has set to get that consent agreement he first told me about last year in place. If not, then he will pull the trigger on the emergency manager and that will be that.

 

Yes there are court challenges to all of this but everyone involved needs to remember one thing, the city is broke.

It’s going to run out of cash in the next month or so.

If all the hand wringing over state interference keeps this process from getting implemented then those people, those who believe Detroiters’ rights are getting trampled, will have committed a more grievous sin: making no decision is in fact deciding.

An emergency manager would surely come. Or, if the efforts in place now succeed in undoing Public Act 4 [that empowers the emergency manager system] it would lead to the worst of all possible outcomes: Chapter 9 municipal bankruptcy.

In that scenario, a federal bankruptcy judge [likely from out of town] will carve up what is left of Detroit’s carcass.

I have lived in Michigan for 22 years now. I have worked in the city of Detroit for nearly 17. I care deeply what happens to this city, its fortunes are connected to mine personally [and my employer’s too]!  Nothing would make me happier than to cover Detroit’s genuine rebirth.

That said, it is most important to understand the cash is running out as is the clock. A Chapter 9 would be the saddest end to this most tragic saga.