This is the first of a two-part series on Detroit’s history of privatization of city services and navigating economically-stricken times.
Ten years ago, the city experienced an historically troubled economy resulting in an unprecedented municipal bankruptcy and consequent oversight of city management. In response, Mayor Dave Bing’s administration ushered in a government reform agenda that included the privatization of a range of critical city services. The move lead to a sweep of job losses and a lasting impact on the structure of a decentralized government and Detroit’s economy.
The Michigan Chronicle spoke with Charlie Beckham who served as a trusted advisor and executive manager under six mayoral administrations from Coleman Young to Mike Duggan. From 2009-2013, Beckham was the chief administrative operator of the city under Mayor Bing.
“The whole question of municipal bankruptcy started coming into play in the early 2000s and it wasn’t just Detroit,” said Beckham. “It was a lot of major cities, but it finally caught up with us in 2013 and the state did declare bankruptcy. Prior to that, we were running a lot of deficits; the tax base was declining and Detroit’s population was leaving so you didn’t have enough money to continue to run the place the way you wanted to…then we had an emergency manager, who in effect was kind of like a mayor who worked right across the hall from Bing. It was political and controversial, and nobody liked it.
“It was the kind of thing that does drive you into privatization. In other words, taking operations that you’ve been running that now you got somebody else come in and do it. You lose jobs, unions don’t like it. We got through it, but it wasn’t easy. “
From 2009 to 2013, Dave Bing served as the 74th mayor of Detroit in a special election defeating interim Mayor Kenneth Cockrel Jr. following the resignation of disgraced mayor Kwame Kilpatrick. The city was $18 billion in debt and leaned on austere economic measures that offloaded financial expenses of city-run services onto private contractors. In 2012, Governor Snyder signed a stronger replacement emergency manager law, Public Act 436, permitting emergency managers hired by the state to take municipal authority and break collective bargaining agreements.
In a deeply unpopular move, bankruptcy expert Kevin Orr was appointed by the governor as an emergency manager with unparalleled decision-making power over the city for the next 18 months.
During Bing’s administration and Kevin Orr’s oversight, there was decreased spending from $1.4 billion in 2009 to a an estimated $1.1 billion in 2013 and approximately 4,000 jobs from the city payroll were cut.
Privatized City Services and activities:
- Refuse collection was transferred from the Department of Public Works to Rizzo Environmental Services (now GFL Environmental) and Advanced Disposal (now Waste Management), eliminating 150 city jobs.
- In 2014, the Great Lakes Water Authority was created as a regional authority to replace many of Detroit Water and Sewage Department’s operations, which began shutting off water to an estimated 141,000 residents from 2014 to 2020.
- Steep budget cuts to Detroit’s public health department, which was housed at the long-standing Herman Kiefer complex, resulted in the cutting staff in 2008 and by 2013, most of the remaining staff left and the vacant building was sold off to an out-of-town developer. Nearly all of the city’s health services were outsourced to the non-profit, Institute for Population Health.
- The city’s street lighting system was cut in half from 88,000 to 46,000, and the 120-year-old Detroit Public Lighting Department was shut down, with DTE Energy taking over its operations.
- Detroit’s Department of Health and Human Services decided to relinquish the $55 million federal funding for the early education program Head Start.
- In 2014, the state took control of Belle Isle and, with support from the Michigan Emergency Loan Board, Gov. Snyder signed a 30 year lease of the park from the city.
“I was at recreation when we took some of the golf courses and privatized Cobo Hall,” said Beckham. “The public lightning department was turned into an authority. Obviously Detroit’s a strong union town and the biggest for municipal employees of course was ASME, so that was huge and meant job loss and some job classifications were eliminated altogether. A lot of things that the city had been running with city employees and city unions for a long time were all of a sudden gone. So, you had layoffs, strikes, It was a pretty tough time.”
A palpable dissatisfaction grew among residents who protested the outsourcing of city services, cutting down the city’s workforce and weakening of labor unions. A municipality’s ability to function is put into doubt when certain services are privatized. Whether it’s due to concerns about accountability, quality or motives, recent research casts doubt on several privatization decisions.
When asked if the city’s administration at the time could have made different decisions to privatize, Beckham said, “Yes and no. That’s a tough question because you can always manage better and manage more efficiently. The question becomes could you do it quick enough and fast enough to stay out of financial trouble and secondly, keep the union contracts that you’ve committed to and pay scales, etc., in place and do it all at the same time? And that’s not easy.”
Looking ahead, Beckham said the city is turning a corner since the dark days of municipal bankruptcy.
“I don’t think it’ll ever go back to the way it was, but we’re starting to get back to more local control now. Better management, but things are smaller and easier to maintain. The city of Detroit is not as big as it used to be, it has different demographics now than it had. At one time, 70 percent of the city was African American and that alone created dynamics and situations that are different than a city that doesn’t have that much of a Black population and certainly the level of poverty, so we’re not as poor a city now. All of that goes into play with where we are.
“The key is to not have the pendulum swing all the way back and stay out of extremes. If you keep the pendulum in the middle everyone is benefitting.”