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Detroit's Least Bad Option

How emergency management could help the ailing city

Spencer Platt/Getty Images News

It's hard not to feel like a failure. Detroit, my home since 2007, will soon be taken over by an emergency financial manager, hand picked by Michigan Governor Rick Snyder. Detroit's difficulty in financing public services over 139-square miles is well known, and the state-declared emergency is not surprising. I knew the EM was coming, which is why I am surprised at how tremendously sad I feel. For decades, talented people have worked so hard. There is more that is inspiring in Detroit than people realize when their acquaintance with the city is as thin as a headline. But it has not been enough to thwart the city's long decline. Which is why, despite my sadness, I find myself cautiously optimistic about temporary emergency management.

Because it is an emergency in Detroit. The scale of the disaster is scarcely comprehensible. Saddled with billions of dollars of debt, the current system can't do much beyond treading water. There are a lot of reasons for this—the auto industry, urban sprawl, white flight and institutionalized racism, revenue-sharing cuts, political corruption, disinvestment. Mayoral candidates like Mike Duggan and Lisa Howze are contesting the EM decision. (So did the city council, which officially challenged the state's conclusion.) However Detroit's current mayor, Dave Bing, stood alongside Snyder at yesterday’s press conference announcing Kevyn Orr, a Washington lawyer, as EM. "I'm happy that now I've got a team," Bing said. "Now I've got partners. Our citizens obviously deserve more than they're getting. … Today marks the beginning of bringing health back to the City of Detroit."

To my astonishment, I find myself agreeing. Snyder, a Republican, appointed Orr as EM, a self-described "lifelong Democrat" who helped guide Chrysler through its 2009 bankruptcy. If his time here is appropriately limited—he says he could complete his job in 18 months—he could be a crucial part of this city's future. Michigan's long track record with emergency management has some noteworthy successes, after all. The best hope for Detroit is that Orr learns from this history.

Emergency management in Michigan begins with Hamtramck, a small town bordered on all four sides by Detroit. In 1988, the Michigan legislature created a statute to assign an emergency financial manager to Hamtramck, and two years later, the act was expanded to provide EFMs for any seriously troubled municipality or public school district. The policy was designed for cities to escape municipal bankruptcy, which destroys credit ratings, while still tapping some of the advantages of bankruptcy, like restructuring debt. To date, nine Michigan municipalities and three school districts have gone into emergency management, some multiple times.

But the singular focus of EFMs on how much a city spent, rather than on what it brought in, was a decidedly short-term strategy for long-term problems. For many broke cities, spending is less a problem than a depleted tax base, a changing economy, and diminished revenue sharing. But the EFM could only subtract from budgets, cutting expenditures and selling off property. In cities that are already bled dry, what of substance remains to cut?

This is partly why Michigan expanded its emergency management law in 2011. Under Public Act 4, EFMs became EMs, signaling that their powers were no longer limited to finances. The EM newly took on the power of both mayor and council (or superintendent and school board). The move was intended to give EMs enough flexibility to respond to problems that go beyond spending. They can restructure departments, enact local legislation, and renegotiate contracts. (They cannot, however, raise taxes.)

The suspension of local governance—particularly in largely African American and immigrant communities—set off alarms. The Sugar Law Center filed a civil rights lawsuit against the state, and organizers launched a hard-fought ballot referendum that gave Michigan voters the chance to overturn the law last November. When the referendum passed, the state's lame duck legislature wrote a new EM law, with small changes, and a higher bar for citizens to challenge it again on the ballot. Orr will begin his job as "emergency financial manager" on March 25 and then become "emergency manager" on March 28, when the new law takes effect, according to The Detroit News.

If Orr is interested in cultivating the long-term success of the city, he should look to Michigan cities where emergency management has worked reasonably well. In 2009, Joyce Parker was appointed as emergency financial manager of Ecorse, a city in southeast Michigan that was burdened by a $9 million deficit. She depended upon elected leaders for local expertise. While she cut the salary of the mayor and councilmembers, she had an open door policy that kept relations friendlier than might be expected under tense circumstances. Parker also tapped the wisdom of residents in Envision Ecorse, the community's long-term visioning committee—not out of charity, but because their input is essential for the city's future viability. 

Orr spoke yesterday of tactics that may echo Parker's: He is interested in finding "consensual resolution" to difficult policies, and he cited his experience in working for voting accountability with the Obama campaign to illustrate his respect for democratic process. He acknowledged that he was serving as a "creature of the state, at the behest of the citizens of Detroit," and said he was obliged, under the law, to provide information in real time to citizens. But Orr said he wanted to go beyond that, by being "as transparent as possible."

That's good, because, as the case in Ecorse reveals, it works. In 2011, for the first time in nearly six years, Ecorse had a positive general fund balance. The numbers stayed in the black through 2012. Its budget is balanced, and it has a reasonable projected budget for the next couple years, despite drops in income and revenue sharing. It's bond rating is now 'A,' compared to the junk status it had in 2009. In January, Parker announced that her "work here is complete," and the city is ready to transition back to traditional leadership. Notably, Parker credits the expanded EM law with making Ecorse's turnaround possible. Among the tougher moves it made possible was the consolidation of Ecorse's police and fire services into a single public safety department, where firefighters and police officers cross-train each other.

Ecorse also had a substantial corruption problem in 2009, and Samuel Bagenstos, who taught a course on the EM law at the University of Michigan Law School and is otherwise skeptical of emergency management, said that the EM was "part of the solution to it." When Parker came to the helm, Ecorse had suffered from a scandal that implicated its former mayor and city controller, both of whom were arrested for fraud, conspiracy, and bribery. The EM was uniquely situated to cut through cycles of corruption. 

Detroit does not even need look outside its own borders for how emergency management can help. With impressive ferocity, the former EM of Detroit Public Schools hit hard on embezzlement schemes, systemic computer-stealing, contractors who didn't do any work, and 257 "ghost employees" on the payroll who didn't actually have jobs. The EM created an internal fraud investigation office, supported by the FBI, that uncovered millions in misappropriated funds. Detroit's school board had, for whatever reason, failed to intercede in this destructive pattern, contributing to the $259 million deficit the schools had when it went under emergency management in 2009.

In Detroit, Bing's administration is vastly more ethical than former Mayor Kwame Kilpatrick, who was convicted on Monday of running the city as his personal pay-to-play enterprise. Kilpatrick was found guilty of 24 out of 30 counts of extortion, racketeering, bribery and multiple fraud charges, and is now being detained as he awaits sentencing. Today, though, by and large, fair-minded people work for the city of Detroit. But this is a large and complicated city, and it's hard to imagine that self-serving practices have been eliminated entirely since Kilpatrick resigned from office in 2008. For this very reason, a new city charter created the just-opened Office of the Inspector General. Detroit's EM can bring substantial weight to first year or two of the OIG, skewering through the unjust practices that dampen the city's future. It seems promising that Orr opted to cut all ties to his Washington D.C. law firm, Jones Day, where he was a partner and specialized in bankruptcy and restructuring law. He wasn't required to do this, but he said that the EM job requires "the highest degree of ethical conduct." Orr wanted to remove "any appearance of a conflict of interest."

While certainly the best case scenario for Detroit's emergency management will see the city on sturdier economic ground, this is also an uncommon opportunity to advocate for policies that serve city residents in other ways. Informal conversations are already happening among many local leaders and organizers. What law should be changed to make Detroit a better place? What department needs to be restructured? How can positive social change be embedded in the accelerated, if flawed, process of emergency management?

As one model, Detroit citizens could look to nearby Flint, where activists took the opportunity of its emergency management to lobby for an expansive housing anti-discrimination ordinance that protects people on the basis of race, color, religion, national origin, sex, age, height, weight, condition of pregnancy, marital status, physical or mental limitation, sexual orientation, gender identity, gender expression, and actual or perceived HIV status. LGBT activists had been working for two years on this ordinance, but it had never reached citizens for a vote, despite the avid support of several councilmembers. With a swipe of the EM’s pen, the city instantly became a safer and more equitable place. Under an EM, Flint also developed a Title VI Non-Discrimination Plan, serving residents with limited ability to understand English.

"Anybody who is doing any work in Detroit should see this as an opportunity," said Michael Brady, the vice president for policy at the Center for Community Progress. "If you're not speaking up with thoughtful ideas, in language that's relevant to the role of an emergency manager, and offering specific recommendations ... then someone else is. … I don't think our work should stop until there's a more appropriate democracy."

I don't like emergency management, but I’m not sure there's a better option. And the stakes have never been higher. "If we can do this," Orr said yesterday, "we will have participated in one of the greatest turnarounds in the history of the country."

I want him—us—to succeed. There is every reason to proceed cautiously, to bring every bit of scrutiny and transparency to the process that we can muster. But I do think that we can make emergency management work for Detroit, not against it.

Anna Clark is a writer living in Detroit. Her journalism has appeared in The American ProspectThe Columbia Journalism ReviewGrantland, and other publications. She edits the literary blog Isak. Follow @annaleighclark.