Detroit’s Financial Turf War With Michigan

Detroit’s Financial Turf War With Michigan

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City and state government officials are gearing up for a public fight about how to rescue cash-strapped Detroit from a financial meltdown.

The Motor City’s money is dwindling quickly and they are headed toward insolvency by April. Rumor began to circle awhile back that the governor would need to appoint a financial manager for the city to manage its finances. The initial process began December 2 when State Treasurer Andy Dillon announced his office is reviewing financial management options for Detroit.

Mayor David Bing presented his plan to Detroiters in November that outlined proactive steps the city was taking to cut costs and avoid insolvency. His strategy included layoffs, higher taxes, and union concessions – something guaranteed to anger folks in union-friendly Detroit. Bing also suggested the state pay out a $220 million refund from revenue sharing from over a decade ago. The payout doesn’t seem likely since Michigan has experienced similar financial hardship over the past few years.

Michigan’s Public Law 4 gives the state power to take over the finances of distressed local municipalities. Financial managers replace the elected local government for however long the takeover is needed. This, however, has raised some serious questions about the constitutionality of the law and the type of precedent it could set.

As a result, Rep. John Conyers (D-Mich.) has sent a letter to U.S. Attorney General Eric Holder questioning the validity of the law. Conyers claims it is in violation of the Constitution’s Contract Clause and the Voting Rights Act. Holder has yet to formally weigh in.

At the same time in Michigan, signatures are being gathered to force a repeal of the law. Supporters need a total of 161,000 signatures to take the measure to the November 2012 ballot so voters can remove it.

Detroit’s resistance to interference from state leadership in Lansing stems primarily from leaders’ pride in fending for themselves when it comes to city affairs. They have taken this stand in spite of the obvious financial troubles plaguing Detroit.

“I’m here [with] City Council, with labor, with our faith-based community and our businesses to say we are opposed to the governor beginning this process,” Mayor Bing said last week.

“The presence of everyone here today shows we all agree. We have a majority of our City Council. We have labor, we have business and we have a community that understands what needs to be done to keep our city solvent,” said the mayor.

“Detroit needs to be run by Detroiters!” he said.

The mayor and his fellow leaders did not exactly get their way once the review was officially announced.

If the city gets a financial manager, they will join a few other municipalities across the currently under state management. Those cities include Benton Harbor, Ecorse, Flint, and Pontiac. Detroit would also join its own public school system which is also in state hands.

It is up for debate whether Detroit’s financial troubles are simply from a lack of funds or more systemic mismanagement and waste of money. If the latter is true, it may be time for leaders to swallow their pride to keep the city from going broke soon.

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