From The New York Times

March 1, 2013

By Monica Davey

DETROIT — Over the fierce protests of this city’s elected leaders, the State of Michigan plans to send an emergency manager to repair the deeply troubled finances of Detroit, one of the largest cities ever to reach such a dire point or to face such a level of oversight.

“There is probably no city that is more financially challenged in the entire United States,” Gov. Rick Snyder said on Friday as he explained why he had deemed Detroit’s woes too fundamental, too lasting and too large to be solved by the city itself.

Mr. Snyder’s call for an emergency manager, who would wield sweeping powers to reshape the city, underscored a long, troubling arc for Detroit. Once the cradle of the American auto industry and the nation’s fourth most populous city, it is now less than half the size it was decades ago and has a public sector plagued by more than $14 billion in long-term liabilities and annual worries of cash shortfalls.

The notion set off a flurry of pointed and sometimes emotional reactions here, including an unavoidable racial and political component. Detroit is a mostly black city dominated by Democrats in a mostly white state where Republicans, including Mr. Snyder, control the capital.

At a time when many municipalities are struggling financially, five cities and three school districts in Michigan alone are already under supervision from a state-appointed emergency financial manager. But municipal finance experts pointed out that Detroit is on a different scale. “Detroit is a huge and prominent American city, so anything that happens with Detroit will set a much bigger precedent,” said Matt Fabian, a managing director at Municipal Market Advisors. “There isn’t a lot of precedent with the state taking control of a city this size.”

For decades, states have used a range of methods, including oversight boards and appointed receivers, to step in and stabilize cities that appeared to be headed toward bankruptcy or default. The methods — and the powers and roles of those charged with overseeing a troubled city — vary widely from state to state, as do opinions about whether they work. A financial control board helped New York City return from the edge of crisis in the 1970s, but such intense state involvement is more often needed in smaller cities.

For more than a year, Detroit leaders had raced to ward off an emergency manager. With a similar possibility looming last spring, city officials entered into a legal deal, giving the state some oversight as Detroit tried to cut spending and staff members and collect more tax revenue. It was not enough, said state officials, who re-examined the city’s books in recent weeks and said they found a pattern of overly optimistic revenue estimates, poor and conflicting record-keeping and endless borrowing to make up for shortfalls.

“There have been many good people that have had many plans, many attempts to turn this around — they haven’t worked,” Mr. Snyder said on Friday during a town hall meeting broadcast on local television, the start of a concerted state effort to sell the notion of an outside manager to city residents. “The way I view it, today is a day to call all hands on deck.”

While some Detroit residents saw state intervention as one more very public indication of a city crumbling, others hailed it as the first promising sign of real repair. The city’s business leaders lauded the plan, noting that Detroit’s private sector had experienced tangible signs of growth and reinvestment — including newly filled downtown offices and young entrepreneurs opening dress shops — even as the public sector had lagged.

“Bring it on,” Sandy K. Baruah, the chairman of the Detroit Regional Chamber of Commerce, said of state management. “This sends a positive message to business that Detroit is fixing its problems.”

But Detroit city officials, who have 10 days to seek reconsideration from the governor before a state board formally appoints a manager as early as this month, objected strenuously. Under a much-debated state law, an appointed manager would ultimately hold powers to cut city spending, change contracts with labor unions, merge or eliminate city departments, urge the sale of city assets and even, if all else failed, recommend bankruptcy proceedings. In an election year for mayor and the City Council, many candidates, incumbents and community leaders denounced the move as an affront to democracy and a state takeover, and called for legal action.

“For one individual to be able to wipe out the duties of our duly-elected officials, that’s more or less a dictatorship, and it’s against everything that America is supposed to be about,” said the Rev. Wendell Anthony, the president of the local N.A.A.C.P. “If you come into Detroit,” Mr. Anthony said, “you own Detroit. You own education. You own police and fire.”

Mayor Dave Bing, who has not said whether he would seek re-election, was more tempered than most in his critique, suggesting that while he opposed an emergency manager, there might be a way for the state and city to work together. “I will look at the impact of the governor’s decision as well as other options, to determine my next course of action,” he said.

Michigan’s emergency manager law — and the possibility that Detroit, the state’s largest city, might be affected by it — has been a matter of contention for several years. After Mr. Snyder became governor in 2010, he and the Republican-held Legislature approved changes to the state’s two-decade-old law, giving such managers more wide-reaching powers, including the ability to drop union contracts with cities. In November, voters rejected that new version of the law, but the Legislature quickly passed a third version, which also allows relatively broad powers to change the terms of labor contracts and which will take effect this month.

But many here wonder whether any emergency manager, under any version of the law, will be enough to solve Detroit’s woes, which are in some way a reflection of the city’s own story. Beyond the nagging budget questions and the mounting debt is a place that grew with the auto industry into a city of more than 1.8 million residents and 139 square miles, then shrank decade after decade even as the city’s boundaries and infrastructure did not. With a tax base of some among about 713,000 remaining residents, Detroiters complain of late buses, high crime and darkened streetlights.

Mary Williams Walsh contributed reporting from New York.