Changing Gears

Detroit faces the possibility that its elected officials will be superseded by a state-appointed emergency manager. It’s happened in four other Michigan cities and there also is an emergency manager for the Detroit Public Schools.

Our partners at Michigan Radio compiled a list of Seven Things You Should Know about Michigan’s law. It’s a complicated situation that’s different from other places in the Midwest, but there are some similarities with what’s been done elsewhere in the United States.

How do you feel about an emergency manager for Detroit? Tell us.

Michigan Gov. Rick Snyder

Here are the answers to some questions about Michigan’s law.

Q. Why does Michigan have an emergency manager law?

A: The original process was put in place in 1988, in response to deep financial problems in Hamtramck, an enclave of Detroit . (You may know Hamtramck best as the home of a General Motors plant.) In 1990, the law was strengthened to provide “emergency financial managers” for municipalities as well as school systems that were facing bankruptcy.

Earlier this year, the 1990 law was amended to strengthen the powers of what are now called emergency managers. These managers, who would be appointed by State Treasurer Andy Dillon in consultation with Gov. Rick Snyder, essentially replace elected officials during the term of their appointment.

Q: Can communities still seek bankruptcy?

A: Yes. An emergency manager is considered to be a step taken before a community defaults and seeks reorganization. The state must approve a bankruptcy filing; an emergency manager essentially puts the community or school system into state receivership.

Q: Who has emergency managers now?

A. The cities of Benton Harbor, Pontiac, Ecorse and Flint, and the Detroit public schools. Emergency managers also could be added in Detroit, Inkster and for the Benton Harbor public schools, pending reviews.

Q: What can an emergency manager do?

A: Almost everything but raise taxes. The emergency manager’s most controversial powers include the ability to renegotiate, modify or terminate collective bargaining agreements, with the approval of the state treasurer. The emergency manager also can sell assets, revise local budgets, and hire and fire employees. While elected officials don’t go away, they only have the powers that an emergency manager gives them.

Q: Does an emergency manager serve indefinitely?

A: Emergency managers who govern municipalities are appointed to open-ended terms. Emergency managers for school districts serve one-year terms, subject to reappointment. Once the state deems the city ready to handle its own affairs, the emergency manager is terminated. Flint, for instance, had an emergency manager from 2002-2006; Hamtramck had one from 2000-2006.

Q: How is an emergency manager appointed?

A: Cities considered to be in financial distress are put through a review process. The city can ask for the review, or the governor can ask the state treasurer to begin the review, as Snyder requested for Detroit last week.

Generally, the state asks for a review because of concerns that a municipality will not be able to pay its taxes for state-provided services. The city also may face the possibility that it can’t make payrolls, cover interest payments on debt, or make pension payments.

Detroit Mayor Dave Bing

After an initial review, there may be a second review. Cities and school districts can present plans to the state showing the steps they will take in order to avoid an emergency manager. Detroit Mayor Dave Bing has laid out a program he says will avoid the need for an emergency manager.

Q: Is there anything else like Michigan’s law?

A: The process is something like the review process put in place in 1975 in New York City. (It sparked the famous New York Daily News headline reading, “Ford to City: Drop Dead” — something President Gerald R. Ford never said.)

But there’s a key difference. The Municipal Assistance Corporation was an oversight board; the emergency manager has sole authority.

For more on the emergency manager law, including potential legal challenges, read Michigan Radio’s Seven Things To Know.

Do you think an emergency manager is needed in Detroit? Weigh in.