It appears the appointment of an emergency manager to take over Detroit's failing finances is all but a done deal. But who will Gov. Rick Snyder name to?the difficult, thankless job?
Gov. Rick Snyder declares a financial emergency during a broadcast in Detroit Friday. The determination could lead to the appointment of an emergency manager over the city's finances.
Paul Sancya/AP
EnlargeIt appears the appointment of an emergency manager to take over Detroit's failing finances is all but a done deal. But one question remains: Who will get the difficult, thankless job?
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Gov. Rick Snyder is being coy about his selection, saying only the person is "top notch." Michigan's Emergency Loan Board will do the official hiring of the candidate, who will provide state oversight on spending and restructuring.
Whoever is chosen, he or she will not only have to tackle the city's massive deficits and debt but also succeed in pulling Detroit out of a fiscal tailspin so steep that it's had to borrow millions of dollars just to pay its bills and city workers' salaries.
"This will take somebody who has very deep and strong financial expertise and very deep and strong political and personal capabilities," said Timothy Horner, a partner in the Warner Norcross & Judd law firm. Horner, whose firm has been closely following Detroit's fiscal struggles because it represents businesses and creditors, told The Associated Press on Friday that the emergency manager job is "a very difficult assignment."
An appointment is unlikely to occur before Detroit Mayor Dave Bing has a chance to appeal Snyder's determination Friday that the city is in a financial emergency. The 10-day appeal period will be followed by a March 12 hearing. It's then that Snyder can change his mind or reaffirm his position and move forward with an emergency manager appointment.
Bing said Friday that doesn't agree with Snyder's determination and that he is looking into the city's options.
Emergency managers have the power under state law to develop financial plans, renegotiate labor contracts, revise and approve budgets to help control spending, sell off city assets not restricted by charter and suspend the salaries of elected officials.
Given the makeup of Detroit ? more than 80 percent of the 700,000 residents are black ? the emergency manager's job would be easier if that person is black, according to Bill Brandt, chief executive of Development Specialists, Inc., a national turnaround firm.
"If he's even toying with the idea of putting a white fella in charge in a city that's 80 percent black it will be seen as more of this plantation mentality," Brandt said of Snyder.
Detroit and its mostly white suburbs have shared an often-strained relationship for decades.
"You need to get a buy-in from the large population and the way is to get a spirited intellectually bright African American with a great deal of political chops," Brandt added.
Among the issues needing immediate attention, is Detroit's massive health care costs and unfunded pension benefits to retirees.
Detroit's sinking population ? a quarter-million people left between 2000 and 2010 ? and shrinking tax base will have to fund its legacy liabilities, Horner said.
"Over many years, the city made many promises to employees and workers and incurred debt based upon a city that was much larger," he said, noting the emergency manager will first need to address "short-term liquidity issues" while handling "long-term legacy liabilities."
Horner also pointed out the manager would need to have experience with bankruptcies.
"If the emergency manager is not able to restructure, we will end up with Chapter 9," he said.
But bankruptcy can be avoided if everyone comes to the negotiating table, said William M. Dolan, a partner in the Brown Rudnick international law firm.
Providence, R.I., had a $110 million structural deficit, $1 billion in unfunded health care and an $800 million unfunded pension. Dolan represented the city last year in negotiations with its active unions and retirees over concessions to address legacy liabilities.
Both sides negotiated everything down and converted health care coverage to Medicare from private plans.
"When you go into bankruptcy your pension is gone. It's gone," Dolan said.
But for residents, the appointment of an emergency manager runs deeper than ledger sheets and balance books.
"You are telling the people of Detroit that they are too stupid to manage their own affairs, and that's an insult," said Oliver Cole, a photography studio owner in the city and president of a 900-family neighborhood association on the northwest side.
"We want the city of Detroit to function," the 62-year-old added. "We want it to be a great city, have police, fire, good EMS, trash pickup and parks maintained.
"The emergency manager gives people the opinion he can do anything. That is tantamount to another mayor and that's why I disagree. You have supplanted the will of the people to elect their leader. Now you say 'your voice doesn't count.' "
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