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Michigan ponders manager with unchecked power to fix troubled Detroit

- Associated Press - Sunday, December 4, 2011

DETROIT — The idea is extreme, even in a city accustomed to fighting for survival: Should the state of Michigan step in to run Detroit?

The governor has taken steps in that direction, proposing an unprecedented move that could give an appointed manager virtually unchecked power to gut union contracts, cut health insurance and slash services. But city leaders bristle at the notion.

"This is our city," Mayor Dave Bing said. "Detroit needs to be run by Detroiters."

If it happens, Detroit would be the largest American city ever taken over by a state. Michigan has seized control of smaller struggling cities, but until now Detroit was always off-limits.

That changed last week, when Gov. Rick Snyder's administration said it would begin a review of Detroit's precarious finances. If the Republican governor concludes that the city's economic situation constitutes an emergency, he could dispatch a manager who could push the mayor and city council to the sidelines.

It's not clear how everyday services such as trash pickup and bus service would be affected, but the fixer's mission would be clear: Do whatever it takes to stop the bleeding.

Mr. Bing, a Democrat, says Detroit doesn't need the help. He insists the city is reducing a $150 million budget deficit and easing cash-flow problems on its own.

"We know what needs to be done, and we stand ready to do it," an indignant Mr. Bing said.

The financial review starts Tuesday and may last up to 90 days, meaning a takeover could be under way by the end of February.

The same fate has befallen other cities.

Atlantic City agreed in 2010 to let New Jersey take over its finances in an arrangement that allowed the city to spread a $9.5 million deficit over five years, sparing homeowners and businesses a significant property tax increase.

In Pennsylvania, Gov. Tom Corbett, Republican, signed a law in October enabling a takeover of Harrisburg.

Managers already oversee the Michigan cities of Flint, Pontiac and Benton Harbor, as well as the Detroit public schools.

"It terms of a city, I think Detroit stands alone," said Michael LaFaive, director of fiscal policy at Michigan's Mackinac Center for Public Policy, a nonpartisan group that espouses free markets.

An emergency financial manager would have the power to privatize utility departments, as well as the bus system and other agencies. A manager also could sell off city-owned parking lots and even Belle Isle, Detroit's popular island park, Mr. LaFaive said.

In a 2001 report, Mr. LaFaive wrote about Detroit's burgeoning fiscal problems and recommended privatization, contracting out services and ways to generate revenue.

"I think they knew what the recommendations were, but their hands were tied a bit by recalcitrant employee unions," Mr. LaFaive said. "Those kinds of bold reforms would be difficult to get over with the City Council or voters, in general."

Last month, Mr. Bing declared the city government "broken" and said the public's checkbook would be short by $45 million next year unless Detroit starts saving money fast. In an attempt to ward off an emergency manager, he proposed laying off 1,000 employees — 9 percent of the workforce — and negotiating 10 percent pay cuts with unions.

"If Lansing believes our plan isn't strong enough, I'd like to hear their suggestions for what they can improve," the mayor said of the state government. He suggested the state help by supplying millions of dollars that he says the city was promised in a decade-old tax overhaul. Detroit also has sought help collecting its income tax.

"It's our hope that the mayor and City Council and labor can cut their own deal that works for the city," Michigan Treasurer Andy Dillon said Friday.

But even after a number of threats from the mayor, organized labor barely budged. Now that a state takeover looks more likely, adversaries have become partners.

"We're going to sit down and resolve these issues," said Al Garrett, president of the American Federation of State, County and Municipal Employees Council 25 in Michigan.

Detroit has struggled for years since the auto industry collapsed, leaving the city with a much-reduced tax base and a dwindling population of 713,000, down 25 percent in just the past decade.

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