Saving Detroit: New Manager Targets ‘Greatest Turnaround’ in U.S. History

By Mark Guarino

March 14, 2013

From The Christian Science Monitor

The man slated to guide Detroit to fiscal solvency in the largest state takeover of a city in United States history described his new job Thursday as “the Olympics of restructuring.”

That could be an understatement.

Michigan Gov. Rick Snyder (R) has stepped in to appoint Kevyn Orr, a restructuring specialist who represented Chrysler during its 2009 bankruptcy, as emergency financial manager for the Motor City.

Mr. Orr comes to a city that is drowning under nearly $15 billion in long-term debt and undergoing major population loss. Moreover, the state’s decision to intervene has been fraught with racial undertones, and the Detroit City Council has made it clear that it wants the governor to butt out. Some of the more than 40 unions currently under contract with the city are expected to take legal action if they’re asked to take too large a cut.

Orr spoke to the difficulties ahead when he told reporters at his introduction Thursday: “If we can do this, I will have participated in the greatest turnaround in the history of this country and something I can tell my grandkids about. It is very inviting and exciting.”

Earlier this month, Governor Snyder declared the city is suffering a financial emergency. A state review found Detroit has been dealing with annual deficits since 2005, and that it has unsuccessfully sought to fix them through long-term borrowing.

While Mayor Dave Bing says he intends to cooperate with Snyder and Orr, the city council has opposed state intervention since last summer, when members launched a legal challenge to the consent agreement that gave the state a larger role in overseeing the city’s finances.

“Whoever is picked, they will make that person’s life is extremely difficult, professionally and personally,” says Ken Sikkema, a senior policy fellow at Public Sector Consultants, a public policy think tank in Lansing, Mich, and a former Republican majority leader in the state Senate.

That resentment has festered over decades. As the population of Detroit has dwindled – due to a suffering auto industry and other economic hardships – the city has become more isolated, both politically and racially, from the rest of the state.

Today, Detroit stands in stark contrast with the rest of Michigan: While Republicans control state politics, Detroit is Michigan’s largest Democratic stronghold. Its leadership and population are overwhelmingly black, also in contrast to the rest of the state.

“You’ve got the racial undertones, the union issues, the loss of political power, all of these things are intertwined; you can’t really sort them all out,” says Mr. Sikkema.

The time frame for the emergency financial manager to make a turnaround is 18 months, which “is not enough time” to make a full recovery, although certain things are achievable, says Eric Scorsone, an economist at Michigan State University in East Lansing, who is also on Mayor Bing’s restructuring team.

What can Orr do?

Business leaders say they are anxious for an emergency financial manager to address glaring inefficiencies in the city’s bureaucracy.

“The billing for [property] taxes has been sporadic at best,” says Sandy Baruah, president and CEO of the Detroit Regional Chamber of Commerce and a former US assistant secretary of Commerce under President George W. Bush. “Companies may be getting bills from the tax department that are legitimately owed, but it was news to them, or bills they haven’t received for years. This goes to a competency issue. ”

“The percentage of taxes owed but not collected by the city government, both by residents and companies, is phenomenally large,” he adds. “Just the competency and efficiency in tax collection would go a long way to resolving at least some of the financial challenges.”

To be sure, the city needs cash, since it is expected to have only about $3 million by the end of June. Immediate options include cutting payroll, cutting vendor contracts, and privatizing unessential services. The idea would be to make the city government do less, but more effectively.

“The emergency financial manager has to figure out what are core services and what are non-core services and how do we balance these things,” says Mr. Scorsone of the restructuring team.

“I’d be looking at where can I show some success in terms of reconciling some level of service to the people of Detroit,” such as more street lights, expedited garbage pickup, and additional police on the streets,” says public policy analyst Sikkema. “Something that effects people everyday and makes them say, ‘Wait a minute, life is better than it was.’ ”

Any plan could face opposition from the city’s union leadership, leading to delays.

Another option would be bankruptcy, which could be used as leverage against the unions if they refuse to concede to certain changes, Scorsone says.

On Thursday, Orr said “everything is on the table,” and his expertise is in bankruptcy.

“It’s too early to say bankruptcy is likely, it’s certainly a possibility. We’ll see over the next few months if the situation gets bogged down in lawsuits and nobody wants to agree to anything,” Scorsone says.

Perhaps the greatest challenge is time. With 18 months to steer the city toward a path of financial recovery, Orr needs to show his merit, especially after a year or more of legal wrangling and insider deadlock at city hall.

The problem, after all, was more than a few years in the making, said Mayor Bing Thursday. “The financial crisis didn’t start four years ago, it was out of neglect over the last 40 and 50 years, and people who were in key positions did not make the tough decisions.”

Jocelyn Benson Joins Michigan Campaign to Fix the Debt

From Fix the Debt Michigan
December 18, 2012

Prominent Democrat joins Business Owners, Local Elected Officials, Community Leaders Calling on Federal Lawmakers to Find Practical Solutions

December 18, 2012 (Lansing, Michigan): The Campaign to Fix the Debt – a national nonpartisan coalition of business leaders, elected officials, community leaders, academics and individual citizens is pleased to announce that Jocelyn Benson, Interim Dean, Wayne State University Law School and Director of the Michigan Center for Election Law, will co-chair the effort in Michigan.

Jocelyn Benson joins Campaign to Fix the Debt Michigan co-chairs Ken Sikkema, former Senate Majority Leader and Senior Policy Fellow at Public Sector Consultants, and Sandy K. Baruah, President and Chief Executive Officer of the Detroit Regional Chamber. Benson, Sikkema and Baruah are calling on policy makers in Washington to put aside political differences to forge a credible plan to stabilize and bring down our national debt.

“Jocelyn’s experience and background is a strong addition to non-partisan effort to come together and tackle a challenging problem,” said Campaign to Fix the Debt state co-chair Sandy K. Baruah, President and Chief Executive Officer of the Detroit Regional Chamber. “Resolving this issue will take a smart combination of spending restraint, revenue enhancements and a robustly growing economy. We must continue to urge President Obama and our leaders in Congress to work together to find resolution.”

“No other issue is as urgent or important to our country as addressing both the immediate and long-term debt problems the U.S. currently faces,” Jocelyn Benson, Campaign to Fix the Debt state co-chair, who is the President of the Military Spouses of Michigan and former Michigan Democratic Party Candidate for Secretary of State said. “In recent years the national debt has grown to unsustainable levels relative to the size of our economy, placing an untenable burden on many small businesses, veterans and military families.”

To date, the Campaign to Fix the Debt has attracted more than 300,000 grassroots supporters from across the county, including the active support from small businesses, volunteers and local officials in Michigan. The Campaign to Fix the Debt is committed to advocating for our elected leaders to avert the cliff while gradually putting our debt on a sustainable course by generating more tax revenues and making smart spending cuts to programs that aren’t working or aren’t necessary.

Through grassroots organizing, earned media activities and high-profile outreach, the Campaign to Fix the Debt is urging lawmakers to set aside political differences to formulate practical solutions to our nation’s debt problems.

Jocelyn Benson is the Interim Dean at Wayne State University Law School where she serves as the Associate Director of the Damon J. Keith Center for Civil Rights. She is the founder and Director of the Michigan Center for Election Law, and is a member of the national board of directors for iCivics, Inc., a non-profit created by retired U.S. Supreme Court Justice Sandra Day O’Connor to improve civics education throughout the country. She was asked to serve on the national board of directors of iCivics, Inc., a non-profit created by retired U.S. Supreme Court Justice Sandra Day O’Connor to improve civics education throughout the country. Benson, a military spouse, is also the current President of the Military Spouses of Michigan. In 2010 she was the Michigan Democratic Party’s candidate for Secretary of State. For more information, please visit www.jocelynbenson.com

For more information, and to sign the campaign’s Citizen’s Petition, please visit www.fixthedebt.org.

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