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Michigan governor declares financial emergency in Detroit

March 01, 2013|By Michael Muskal
  • Michigan Gov. Rick Snyder announced he will appoint an emergency financial manager for the city of Detroit during a town hall meeting at Wayne State University. The city has 10 days to appeal Snyder's decision.
Michigan Gov. Rick Snyder announced he will appoint an emergency financial… (Bill Pugliano / Getty Images )

Detroit’s deteriorating fiscal picture is so dire that Michigan Gov. Rick Snyder on Friday declared a city financial emergency, paving the way for eventual state oversight and control.

The announcement comes after a state team last month reported on Detroit’s growing problems, including a $327-million budget deficit and more than $14 billion in long-term debt. The next step would be the appointment of a board and state emergency manager with broad powers to deal with the city’s sinking finances.

“There is probably no city that is more financially challenged in the entire United States. If you look at the quality of services for citizens it’s ranked among the worst. So we went from the top to the bottom over the last 50 or 60 years,” Snyder said at a televised town-hall-style meeting.

“It’s time to say we should stop going downhill,” Snyder said. “There have been many good people that have had many plans, many attempts to turn this around, they haven’t worked. The way I view it, today is a day to call all hands on deck.”

Snyder indicated that he had a candidate in mind to be the manager but gave no details.

City officials have 10 days to appeal Snyder’s declaration and a March 12 hearing has already been scheduled. When a manager is appointed, Detroit will become the largest city in the country to be currently under state financial control, a situation with political and racial overtones.

Like most urban areas, Detroit has had problems in recent decades, but the last recession has been especially unkind to Detroit and its once-solid manufacturing base. The city's population has spiraled from 1.8 million to around 700,000 people, dropping Detroit from a top five city to one near the bottom of the top 20 in terms of population. The automobile manufacturing industry, once the path to the middle class for an aspiring workforce, has continued to shrink and was bailed out with federal help.

As money has become tighter, the city has eliminated services to abandoned, or sparsely populated, areas, giving parts of Detroit a look and feel that rivals post-World War II Europe. The city has been effectively shrinking, cutting tax revenue, which has made the financial situation worse. Crime has grown.

Complicating the situation is the politics of ending local control. Detroit has a large African American population and is Democratic in a state where the governor is white and Republican.

Snyder insisted that the state cannot afford a big bailout for Detroit. The emergency manager would have the authority make planning decisions,  renegotiate labor contracts and even sell off some city assets.

Detroit Mayor Dave Bing, who took office in 2009, has warned of the state action in recent days and has noted that his city’s situation won’t dramatically change soon. But he said he was hoping for some improvement.

 “There are things Lansing can do to help to get us out of this situation faster than we can do it by ourselves,” he said this week.

A six-person team was appointed by Snyder to look at Detroit’s finances in December. It unanimously concluded in the report released in February that a “financial emergency exists in Detroit, and that no satisfactory plan is in place to address the city’s fiscal crisis,” the state said in a prepared statement.

 “The partnership between Detroit and the state has resulted in great things happening in the city, improved schools, a thriving Midtown, new businesses, and a revitalized riverfront,” Snyder said.

“But we can’t allow a continuing fiscal crisis to stand in the way of Detroit’s reinvention. Solving the financial problems will lay a solid foundation for future growth and lead to a thriving, vibrant Detroit,’ the governor said.

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