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New Emergency Financial Manager Law in Michigan is More of the Same

The replacement law mirrors its predecessor, which was rejected by millions of voters statewide.

A new emergency financial manager (EM) law will go into effect March 27.

A little more than a month after voters repealed Public Act 4 (PA 4) on Nov. 6, Gov. Rick Snyder signed into law Public Act 436 (PA 436).

The replacement law mirrors its predecessor, which was rejected by millions of voters statewide.

The new law differs in two ways: local units of governments are given the option of choosing an emergency manager, filing Chapter 9 bankruptcy, consenting to mediation or signing a consent agreement.

More significantly the new law is referendum-proof.

Legislators attached a $700,000 appropriation that prevents citizens from repealing the law. It also leaves current emergency financial managers in place with all of their powers, under Public Act 72, which was repealed by Public Act 4.

State officials reinstated PA 72 when PA 4 was repealed.

The signing of the new law, some say, goes against the will of Michigan’s voters.

“We are absolutely not surprised by Gov. Snyder’s disrespect for democracy,” said Brandon Jessup of Michigan Forward.

“We feel the governor dealt us a raw deal by refusing to negotiate with us on the recovery and reinvestment plan we sent to him.”

Jessup, who along with others led the process of getting the repeal of PA 4 on the Nov. 6 ballot, said Snyder ignored all eight suggestions.

“The new dictator bill is exactly what voters repealed,” he told the Michigan Citizen.

“(But) we’re going to continue to advocate for real recovery and re-investment to make sure (those units of government affected) can recover successfully.”

Detroit Public Library Commissioner Russ Bellant, who helped to put the PA 4 measure on the ballot, says bankruptcy is not a likely option.

“I think it’s unlikely,” Bellant said, of any current local unit of government under an emergency financial manager to exercise the bankruptcy option. “They grandfathered in any location that has an EM so that EM can continue. They can’t exercise the four options.”

PA 436 does not apply to local governmental bodies including Detroit Public Schools, Flint, Pontiac and Benton Harbor. Those entities cannot apply for bankruptcy or public funds.

PA 436 grandfathers in the emergency manager control and will not allow the school boards to take actions to solve their deficits.

If an emergency manager is appointed to the city of Detroit before PA 436 goes into effect, according to Bellant, the city will not have the bankruptcy option either.

“They didn’t set it up that way,” Bellant said. “I don’t think that there’s anything being considered that would alter that.”

The signing of the new law comes just after the City of Detroit came under financial review, the first step in appointing an emergency manager.

Councilmember JoAnn Watson called the current review process illegal, as is an attempt to appoint an emergency manager over the city.

“There’s no basis for the review going on,” Watson told the M.C. following her speech at a Right to Work Town Hall meeting Jan. 1.

“It’s based on an Act that no longer exists … and whether you accept that it does, both (PA4 and PA 436) have repealed Public Act 72.”

After PA 4 was repealed, state officials declared that the preceding law, PA 72, which was repealed by PA, was the new emergency management law.

“If the rationale for the review was legal, there’s no emergency crisis if (we have) $800 million owed.

A resolution, drafted by Watson and passed Dec. 11 by City Council, states that the city of Detroit is owed $800 million from several sources including the reported $70 million owed by the Illitch family enterprises.

The $800 million amount was “verbally confirmed by the State of Michigan’s [sic] Treasurer Andy Dillon as recently as the week of Dec. 3, 2012,” according to the City Council resolution.

The $800 million does not include the $224 million “plus interest” Dillon previously admitted was owed by the State of Michigan.

Dillon was not available for comment at press time.

State Rep. Lisa Howze, D-Detroit, also a candidate in Detroit’s 2013 mayoral race, says the emergency manager law isn’t good or bad. The people’s reaction, she says, is putting them in a paralyzed state.

“The EM is being painted as the boogeyman. We cannot afford to be fearful of that,” Howze said. “I’m not stating whether it’s good or bad. We’re being paralyzed from moving forward.”

Howze, who announced her decision to run for mayor almost a year ago, said it was with complete knowledge of the possibility of Detroit getting an EM.

“If you do affirmative things and put forth an offensive you trump the need for an EM,” she said. “I refuse to tremble in fear.”

Mayor Dave Bing responded to the new law by saying he continues to move forward with the financial stability agreement, which included the controversial Miller Canfield no-bid contract.

Mayor Bing had not responded to questions by press.

Tom Barrow, who lost the mayoral election to Bing in 2009, said creating milestone agreements that are impossible to achieve will justify emergency management. Barrow announced his exploratory committee for the 2013 race late last year. He says he believes the city will get an EM.

“The railroad is running,” Barrow said.

Barrow added that the city should explore Chapter 9 bankruptcy.

“That will allow us to safeguard city assets and get rid of state interference,” he said. “Let Detroiters remain in control.”

In a statement following his signing of PA 436, Snyder said he heard, recognized and respected the voters. The new “meaningful reforms” for local government included in the measure will be beneficial to the state’s progress, he said.

“These new laws recognize the vital importance of financially stable, economically vibrant communities to Michigan’s future,” Snyder said.

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