Wednesday, December 05, 2012

Emergency financial manager for Detroit called "All but inevitable"

Michigan Legislature - Photo by Frank Nemecek
The Detroit Free Press published a report on their website this afternoon, claiming that sources have told them that an emergency financial manager for the City of Detroit is "all but inevitable." Their full report is available on-line here.

Since I have been covering the City of Detroit's financial condition longer than either Mayor Dave Bing or Governor Rick Snyder have been in office, I wanted to make 2 quick comments about this matter.

First, I truly hope that the Michigan Legislature passes a replacement for the old Emergency Financial Manager Act before Governor Synder tries to appoint an emergency manager for the City of Detroit. Many have argued that he still has said authority under the old law (P.A. 72). They argue that since voters repealed P.A. 4, which repealed P.A. 72, then the original law must now be in force.

Those individuals are simply wrong. MCL 8.4 states:
Whenever a statute, or any part thereof shall be repealed by a subsequent statute, such statute, or any part thereof, so repealed, shall not be revived by the repeal of such subsequent repealing statute.
Repealing a repealing statue simply does not revive the original law, at least not in Michigan. If anyone wants to appoint an emergency financial manager anywhere in Michigan, the Michigan Legislature will have to first pass - and Governor Synder will have to sign - a new version of the emergency financial manager law. This presumably should be a lot like the old P.A. 72 that everyone was able to live with.

Second, and perhaps even more important, I should point out that the City of Detroit will almost certainly be in bankruptcy regardless of whether or not an emergency financial manager is appointed. The City of Detroit is billions of dollars in debt and losing residents (i.e., the people who pay the taxes that enable any government to function) at an alarming rate. More over, the rate at which Detroit is losing residents is accelerating; not slowing down.

All of this means that if Governor Snyder tries to appoint an emergency financial manager without a new version of the EFM law, we will likely see a protracted court fight as to its legitimacy. All of this will still see Michigan's largest city in a bankruptcy court in a matter months, regardless of how it turns out.