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Fri March 1, 2013
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Michigan Officials Take Control Of Detroit's Empty Wallet

Originally published on Fri March 1, 2013 7:01 pm

In a small public-TV studio before an invitation-only audience of 30 people, Michigan Gov. Rick Snyder made his case Friday for taking control of Detroit's finances away from the city's elected officials.

The state's signature city is grappling with a declining population, a dwindling tax base and decades of mismanagement — including corruption so pervasive at times that former Mayor Kwame Kilpatrick is currently on trial for federal racketeering charges.

That's left Detroit with a budget deficit of more than $300 million, and the city is unable to stem the flow of red ink.

"There's probably no city that's more financially challenged in the entire United States," Snyder said, in front of banners reading "Detroit Can't Wait."

"If you look at the quality of services to citizens, it's ranked among the worst," the governor continued. "It's time to say, 'We should stop going downhill.' "

Worse than that, Snyder says, a state review team found Detroit carries roughly $14 billion in long-term debt for pensions and other obligations.

"All the creditors need to be called to the table to say, 'Can it be renegotiated?' Asking something from everyone in the long term, to say, 'This just doesn't work,' " Snyder says.

A Manager 'To Make The Tough Decisions'

So Friday, the governor officially declared a financial emergency in Detroit and recommended that a state-appointed manager take over.

City officials have a 10-day window to appeal Snyder's decision to declare a financial emergency and recommend that a state-appointed manager take over.

But business leaders here say the city's elected officials had their chance. Sandy Baruah, CEO of the Detroit Regional Chamber, says potential investors have been concerned about the inability of the city's mayor and council to agree on just about anything.

"An ... emergency financial manager will come in and be able to make the tough decisions that have eluded local government to date," Baruah says. That manager, for example, would be able to wipe out some existing labor contracts.

Already, members of city unions are considering sit-down strikes to bring attention to their financial plight.

A manager would also attack that $14 billion in long-term debt — much of it stemming from pensions owed to retired workers. This week, some of those retirees joined a long line snaking down a corridor at Detroit's City Hall, all residents waiting to pay back taxes.

Shirl Ryan retired from her city job two years ago, basing the rest of her financial future on a guaranteed pension that now may be too much for Detroit to afford.

"We've been hurt over the last 20 years by less pay, which affects our pension too," Ryan says. "Now, when the emergency manager comes in, and if he touches the pension and does away with the pension system, we're lost. We don't have any income."

'We Already Don't Have Police'

Farther down the hallway, 30-year resident Daryl Manning says he welcomes the appointment of an emergency financial manager, no matter what measures are taken to slash spending.

"What are they gonna cut? We already don't have lights. We already don't have police," Manning says. "If a house on fire you better have insurance, 'cause the fire truck, when it get there, if you upstairs they can't come and get you 'cause the ladders don't work.

"We're gonna suffer anyway," Manning adds. "I'd rather suffer and have someone come in and fix it than to suffer forever."

Others here, like Alexander Marshall, say they're just past the point of caring. He doubts the city's finances can be fixed anytime soon, so he plans to leave Detroit.

"I lived in the city my whole life, but I think it's getting ready to take a toll," Marshall says. "I think that things will definitely get worse before they get any better. There's so much debt. I think that an emergency manager really wouldn't do much right now."

Snyder says when Detroit is on firm financial footing, the city can then reinvest in services like police and fire. But with the city desperately needing to find savings, the short-term pain of deep cuts now appears very near at hand.

Copyright 2014 NPR. To see more, visit http://www.npr.org/.

Transcript

MELISSA BLOCK, HOST:

The city of Detroit is broke, bleeding far more cash than it takes in each month, so the state of Michigan is taking control of Detroit's finances. That announcement came today, and Quinn Klinefelter of member station WDET has the story.

QUINN KLINEFELTER, BYLINE: In a small public TV studio in front of banners reading Detroit Can't Wait and an invitation-only audience of 30 people, Michigan Governor Rick Snyder made his case today. Detroit faces a declining population, dwindling tax base and decades of mismanagement, including corruption at times so pervasive former Mayor Kwame Kilpatrick is currently on trial for federal racketeering charges. It's left Detroit with a budget deficit of more than $300 million.

GOVERNOR RICK SNYDER: There's probably no city that's more financially challenged in the entire United States. If you look at the quality of services to citizens, it's ranked among the worst. It's time to say we should stop going downhill.

KLINEFELTER: Worse than that, Snyder says, a state review team found Detroit carries roughly 14 billion in long-term debt for pensions and other obligations.

SNYDER: All the creditors need to be called to the table to say: Can it be renegotiated? Asking something from everyone in the long-term to say: This just doesn't work.

KLINEFELTER: The governor today officially declared a financial emergency in Detroit and recommended that a state-appointed manager take over. Detroit officials have a 10-day window to appeal the decision, but business leaders here say the city's elected officials had their chance. Sandy Baruah heads the Detroit Regional Chamber and says potential investors have been concerned about the inability of the city's mayor and council to agree on, well, just about anything.

SANDY BARUAH: An emergency manager or emergency financial manager will come in and be able to make the tough decisions that have eluded local government to date.

KLINEFELTER: For example, that manager would be able to wipe out some existing labor contracts. Already, members of city unions are talking sit-down strikes to gain attention for their financial plight. The manager would also attack that 14 billion in long-term debt, much of it stemming from pensions owed to retired workers. Some of those retirees are in this long line of people snaking down a corridor at Detroit's city hall, residents waiting to pay back taxes. Shirl Ryan retired from her city job two years ago, basing the rest of her financial future on a guaranteed pension that now may be too much for Detroit to afford.

SHIRL RYAN: We've been hurt over the last 20 years by less pay, which affects our pension too. Now, when the emergency manager comes in and if he touches the pension and does away with the pension system, we're lost. We don't have any income.

KLINEFELTER: Further down the hallway, 30-year Detroit resident Daryl Manning says he welcomes the appointment of an emergency financial manager no matter what measures are taken to slash spending.

DARYL MANNING: What are they going to cut? We already don't have lights. We already don't have police. If a house is on fire, you better have insurance because the fire truck when it get there, if you upstairs, they can't come and get you because the ladders don't work. We're going to suffer anyway. I'd rather suffer and have someone come in and fix it than to suffer forever.

KLINEFELTER: Others here, like Alexander Marshall, say they're just past the point of caring. He doubts the city's finances can be fixed any time soon, so he plans to leave Detroit.

ALEXANDER MARSHALL: You know, I lived in the city my whole life, but I think it's getting ready to take a toll. I think that things will definitely get worse before they get any better. There's so much debt. I think that an emergency manager really wouldn't do much right now.

KLINEFELTER: Governor Snyder says once Detroit is on firm financial footing, the city can then reinvest in services like police and fire, but with the city desperately needing to find savings, the short-term pain of deep cuts now appears very near at hand. For NPR News, I'm Quinn Klinefelter in Detroit. Transcript provided by NPR, Copyright NPR.