In Michigan, everybody’s well-being depends to some extent on Detroit not collapsing into economic chaos. It doesn’t matter what you think of the city. The healthier Detroit is, the more easy it becomes to attract business, jobs and people to the state.
So if you realize that, yesterday seemed like a pretty dismal day as city and state officials struggled to try and avoid an emergency manager. Last week, Governor Rick Snyder presented a proposed consent agreement to the city which was met by furious hostility.
The heart of the governor’s plan is turning most authority over to a nine-person financial review board. While the mayor and city council would have some say in the board’s makeup, it would essentially be controlled by the state.
The governor did say he’d welcome a counter-proposal from the city. Yesterday, the draft of a proposal was leaked to the media -- although, significantly, it hasn’t yet been officially presented to the governor and other state officials.
When I saw the outlines of the mayor’s proposal, I thought at first that it must be a bad joke. The plan, reportedly also backed by most of the council, calls on the state to pour new money into the city, and leave the mayor largely in control.
The mayor wants Lansing to give Detroit a $137 million financial package immediately, forgive the city’s debt, and allow the city to raise income and corporate taxes.
When I read that, I couldn’t decide whether that was the height of audaciousness, or whether Detroit’s leaders are living in fantasyland. The only thing it lacked was a demand that the state buy every little boy in Detroit a pony.
There is no way the governor and the legislature are going to pump more money into Detroit, especially if they have no control over how it is going to be spent. Raising corporate and income taxes in Detroit alone would also be impossibly stupid. It would send anyone still left in the city who has the ability to flee running for the exits.
While that was happening, Moody’s Investor Service further downgraded Detroit’s debt rating to something below junk bond status, and hinted it may downgrade the city further still, if that is even possible.
And if that weren’t enough, Ingham County Circuit Judge William Collette ruled that even if the city and state do manage to hammer out a consent agreement, they can’t approve it without his okay. That’s because of concerns about whether the state financial review team violated the Open Meetings Act. The judge scheduled a hearing eight days from now, which is after Governor Snyder’s deadline for getting a consent agreement done.
There are those who think I am too pessimistic, and that it is a good sign that the city and state are at least trying to find a consent agreement plan. They think the judge’s objections can be swiftly dealt with. Frankly, I hope they are right. But this I do know. As things now stand, the city will run out of money to pay its bills sometime before the end of April. And if Detroit is to have any chance of making it, a life support plan needs to be in place before then.
