Bankruptcy Firmly Under State Control

Thursday June 18, 2013 Emergency Manager Kevyn Orr pushed through an Executive Order requesting Governor Rick Snyder to approve Detroit entering into municipal bankruptcy. The bankruptcy question has been looming for a while, but the State of Michigan wouldn't allow it to happen. Now the city is on the chart of Bankrupt Cities, Municipalities List found on the governing.com website. The State wouldn't allow Hamtramck to enter bankruptcy in 2000 or 2010. Could the intent of law simply not have been ready then? The quickening pace of churning laws has become dizzying for many. Step by step passages change to open up new ground, consume other, and reroute; many laws are narrowing in focus to provide an us and them slant of favoritism through the conditions applied.

This year Hamtramck had a choice as the first city going through the full power of Public Act 436 of 2012. They could choose from the options of: bankruptcy, consent agreement, emergency manager, or mediation -- their choice was emergency manager. Governor Snyder appointed Pontiac City Administrator Cathy Square as Emergency Manager of Hamtramck on June 26.

Detroit didn't have a choice, because the emergency manager was appointed before the effective date for PA436. Detroit was affected by Attorney General Bill Schuette's opinion that Public Act 72 of 1990 was resurrected since there was no replacement emergency manager law when Public Act 4 of 2010 was removed by referendum vote of the people on November 6, 2012. (Read additional legal discussion by Kurt Koehler, esq.) This resurrection of law flies in the face of MCL 8.4.1.

Whenever a statute, or any part thereof shall be repealed by a subsequent statute, such statute, or any part thereof, so repealed, shall not be revived by the repeal of such subsequent repealing statute.

Read prior blog posts to understand how this opinion needed to be contested but failed to be approached properly.

Reading through PA436 you'll find the State of Michigan has placed itself above the people of the city in negotiating the terms of bankruptcy stating (found on the 12 steps of a financial emergency on the State of Michigan website).

The Governor may place contingencies upon a local government, including the selection of an individual to act exclusively on behalf of the local government in any Chapter 9 proceedings.

As much as it would be great to see Emergency Manager Kevyn Orr "do the right thing", it really ends up being what the Governor wants. The "viceroy" is taking direction from his superior. 

Hamtramck Under The EM Knife

The State of Michigan has descended upon Hamtramck as its next target for Emergency Management through Public Act 436 of 2012. The step by step process is documented on the State Treasury page. At this point a hearing of the Emergency Financial Assistance Loan Board (ELB) is scheduled for June 11, 2013 at 10am in the Richard H Austin Building (Treasury), 430 W Allegan, Lansing, MI 48933. City executives can request a hearing in advance of the state scheduled meeting.

Hamtramck has previously declared a Financial Emergency with assistance from the State of Michigan under Public Act 72 of 1990. The date of that filing was December 2000. Hamtramck requested to file for bankruptcy in November 2010, but Governor Snyder denied that request deferring the city to a series of loans to assist it through tough times. According to Hamtramck City Manager Bill Cooper in 2010, receiving a loan would merely delay the city's financial problems. “We do not need an EFM (Emergency Financial Manager) to look for cost savings within our operations, which was done under the previous EFM, and has continued under my direction,” Cooper said in his letter.

Now Hamtramck faces new rules that will play out differently even under Chapter 9 bankruptcy since the passage of Public Act 436. Did the State prolong this decision to allow them to move into bankruptcy until they could get a law in place that would ensure the State of Michigan holds a controlling position.

Choices under the new law which are to be made by Governor Snyder with a recommendation from the ELB include: a consent agreement; an emergency manager; a neutral evaluation process; or
Chapter 9 bankruptcy. Even if the choice of Chapter 9 municipal bankruptcy managed by the Bankruptcy Court of the Eastern District US is selected, the following provision of Act 436 maintains State of Michigan control rather than allowing local officials direct interaction through the bankruptcy.

"The Governor may place contingencies upon a local government, including the selection of an individual to act exclusively on behalf of the local government in any Chapter 9 proceedings."

Hamtramck Under Financial Review (PA 436) by Michigan Treasury

April 17, 2013 - This afternoon we received notice that the City of Hamtramck will be under financial review per the conditions of Public Act 436, the new Emergency Manager Law.

We're providing a copy of the release from the Michigan Treasury received.

There has been quite a bit of Emergency Manager action around the state as attested to by this post over at Eclectabog. Topics within the post:

• Detroit Emergency Manager Orr issues Order putting himself in charge of the City
• Detroit Emergency Manager Orr’s former boss/company hired to fix Detroit
• Detroit Emergency Manager Orr moving quickly to privatize city services
• Detroit Emergency Manager Orr redefines role of Financial Advisory Board
• Unionized Detroit firefighters will have a new contract imposed on them July 1st
• Detroit Tigers’ opening day game was disrupted by EM protest on I-75
• Suit to rid Detroit of Emergency Manager tossed out of court
• Former Highland Park Emergency Manager Blackwell sees his day in court, gets sentenced to probation
• Pontiac Emergency Manager Schimmel planning to eliminate health insurance coverage for city retirees
• Former Detroit Public Schools superintendent sues DPS Emergency Manager after being fired
• Pontiac Mayor and City Council get their paychecks back while Flint Emergency Manager Kurtz ends pay for Mayor Dayne Walling and entire City Council
• Highland Parks Schools Emergency Manager rescinds diplomas for 18 students