Snyder To Use New York Model In Post-Bankruptcy

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Gov. Rick Snyder laid the cards on the table Monday at Pancakes & Politics after I asked him what a post-bankrupt Detroit would look like in terms of governance and providing stewardship of the city’s finances.

The governor, to the surprise of many in the room, said when current emergency manager Kevyn Orr leaves in October there will be a transition process to decide the next chapter of Detroit. Key to that process, according to Snyder, will be using a model similar to the one that was used when New York got into financial trouble in 1975. And that was the creation of the Emergency Control Board as an overseer of New York’s finances for decades. Among other things, the board required the city to balance its budget within three years and New York was required to follow accepted accounting practices.

In fact, Detroit’s protracted financial woes have some common features with New York’s past troubles because Felix Rohatyn, the man who was recruited to save the Big Apple from financial collapse with the creation of the Municipal Assistance Corporation as well as the Emergency Control Board, was the same individual former mayor Coleman Young brought into town to help him address Detroit’s financial instability in the 1980s.

Rohatyn, dubbed an urban financial expert, came in and diagnosed Detroit’s financial crisis, working with the Secrest Committee created by Young and led by former Ford Motor Company executive Fred Secrest. Rohatyn would later serve as U.S. ambassador to France under President Bill Clinton, and is now appointed by New York Gov. Andrew Cuomo to sit on the board of New York State’s $25 billion infrastructure bank, to help Cuomo get his “New York Works Fund” off the ground.

Gov. Snyder, now making it clear that he would follow the route that New York traveled since 1975, sets the stage for a fight with elected leaders in Detroit who have long opposed an emergency manager.

While it may be financially prudent to create another control board in the case of Detroit, elected officials who have been opposed to an emergency manager will still see the image of an overseer board as representative of emergency management, and in violation of home rule.

The argument is that if Mike Duggan is the elected mayor, let him run the city as the empowered elected official as well as the city council who are also elected by voters of this city.

In New York’s case, the city was prevented from going under; it did not declare bankruptcy. In Detroit, the city did declare bankruptcy, meaning that Duggan and the council would start with a clean slate as soon as Orr makes his exit.

But another issue here is what Duggan will be willing to accept. He has railed against emergency management during the campaign, talking about the importance of representative democracy. Duggan is not likely to agree to an overseer board. And this could complicate the relationship between Snyder and Duggan in post-bankruptcy, and also depending on the powers of the board.

To put it bluntly, neither the mayor nor the city council would want anyone looking over their shoulder after the emergency manager has gone. They would not savor reporting to another layer of bureaucracy or board members of a group designated to monitor the city’s finances, especially when they were not elected by the people of Detroit.

In the case of Mayor Young, he succeeded in avoiding a financial disaster in Detroit because he had a special relationship with then Republican Gov. William Milliken who’s been rated the best GOP governor in Michigan history.

Milliken, who was  a moderate and an environmental advocate from the liberal town of Traverse City, stood for Detroit during an era when it was rare for anyone in a key position to do so because of the racial climate at the time. Milliken did not walk away from Detroit. His bond with Young was a major factor in guiding and helping the city right the wrongs of its financial issues.

So Detroit under Young, working closely with Milliken, put together a coalition of Democrats from the city and Republicans from the other side of the state to provide the votes needed to get the legislature to approve a tax hike.

Conrad Mallett Jr., chief administrative officer at the Detroit Medical Center who was a member of Gov. Snyder’s Detroit Review Team and Duggan’s campaign, was a key lieutenant to Mayor Young. He then led the campaign for the tax increase during a special election and voters approved the hike by a 68-32 margin. Detroit was able to get the banks to purchase the bonds, and city unions including police and fire took the concessions. The city was saved then.

However, this time around it may not be up to Duggan to decide on the transition. It rests with the governor who has already made it clear when I questioned him this week that he will have a board in place. Yet the elected leadership of Detroit must have say in this decision.

Bankole Thompson is the editor of the Michigan Chronicle. Email bthompson@michronicle.com or visit www.bankolethompson.com.

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