Politics & Prejudices
Detroit: Running out of time
$1 in assets for $33 in liabilities; push is coming to shove
Published: March 21, 2012
You'd have had a hard time finding a politician in Detroit last week with anything good to say about the proposed "consent agreement" the governor offered the mayor and City Council.
"This proposal is a passive-aggressive power grab," state Rep. Shanelle Jackson proclaimed. Jackson, who is now trying for a Democratic nomination for Congress, added that it "will likely lead to privatization, collective bargaining elimination, higher costs and lower quality public services for people."
Anyone who has waited in vain for a Detroit cop to show up may well wonder how services could get worse ... but opposing the consent agreement was pretty much the party line. Mayor Dave Bing blustered, even appearing to channel Coleman Young when he heatedly said, "Why the hell would I sign it?"
The answer, Mr. Mayor, is pretty simple: Because you have no other choice, other than an emergency manager.
One of the few notes of sanity was struck by Sheila Cockrel, a longtime council member who voluntarily retired a few years ago.
"I think the city has bought all the time it can buy, and there's going to be a change," she told The Detroit News.
In other words, Detroit's soon-to-be powerless politicians need to lead, follow or get out of the way. The city is really out of options — and time. Gov. Rick Snyder has given Detroit until next week to decide whether to accept a consent agreement.
Sometime in April or May, Detroit officials admit, they will run out of money to pay their bills. When that happens, the governor will be legally obligated to act, which means an emergency manager.
There are some, however, who mistakenly think that a state takeover of the city won't happen because the emergency manager law itself may soon be suspended. A group has collected what are almost certainly enough signatures to put a referendum on the November ballot. If the state, as expected, certifies them, the law is put on hold till after the election. What happens then?
I asked Joe Harris, who was Detroit's auditor for a decade, Detroit's chief financial officer for a few months, and is now the emergency manager in Benton Harbor. "The law pretty clearly states that it then reverts to the old Emergency Financial Manager Law," he said. If the governor names one of those, it would still mean Bing and the nine city council members would lose all their effective powers.
True, the EFM would lack the ability to set aside contracts, etc., that emergency managers now have. But any emergency financial manager could ask the governor to allow the city to declare bankruptcy, which would end up having much the same effect.
For months, many people have expected the governor to name an emergency manager. But instead, he offered a consent agreement under which an appointed nine-person board would have huge powers to restructure city finances. Bing and the council would still retain some powers and have some role in appointing the board.
But they would give up a lot, and they certainly don't want to do that. Unfortunately, they really do not have any rational choice.
The city is beyond broke. For every dollar of assets, Detroit has $33 in liabilities. Yes, a lot of people are to blame for the city's plight. The whites fled to the suburbs and took their jobs and their money with them. Yes, the state owes Detroit about $200 million in unpaid revenue-sharing money.
But the city has had very poor leadership, and decades of mismanagement and corruption have drained the city's coffers and sold out the people's future. Even if the state paid the revenue-sharing money tomorrow, it would just postpone the collapse a few months.
Nobody, however, is going to trust Detroit's leaders with any more money — and there is no reason why they should. On the very morning Snyder announced his proposed consent agreement, we learned the city is forfeiting $72 million in federal money that was meant to help the poor. Why? Because Bing had to shut down the entire Human Services Department for incompetence and corruption.
Under the Bing administration, the highly paid creatures running the department — which is reportedly being investigated by the FBI — allegedly took money and bought presents for themselves.
Bing is now on a trajectory to go down as a tragic figure, like Rick Wagoner and Bob Stempel, the General Motors CEOs who tried to fix the company, but were incapable of making the really hard decisions and of moving quickly enough, and so had to be fired.
There still may be hope, however, that the city and the governor agree on some form of a consent agreement. I talked with Councilman Ken Cockrel Jr. one night last week.
Cockrel is a thoughtful man who served as mayor for seven months after Kwame Kilpatrick was trundled off to jail. When I asked what he thought the odds were of getting a consent agreement, to my surprise, he said, "I would say good — even pretty good," adding that it all depended on what happened over these next few days.
There isn't any magic bullet to fix Detroit, no perfect outcome. Detroit's leaders have to choose whether or not to pitch in and help clear the deadwood, and build something new.
Three and a half years ago, remember, General Motors was essentially given up for dead. GM is making billions now. Let's hope that Detroit can someday end up in a similar place.
> Email Jack Lessenberry