Orr has said that he’s looking forward to filling his refrigerator with steaks and his pockets with cash as the newly crowned king of municipal restructuring. If his past comments still hold true, visions of a big ol’ yacht surely are floating on his horizon.
As for the city he leaves behind, its future is by no means certain as the struggle to keep our collective head above water — for the city as a whole as well as for vast numbers of the impoverished people living here — remains.
But this is a year-end retrospective, not an exercise in crystal-ball gazing. So with that in mind, here are three of the biggest emergency-management related stories of the past year.
Whacking Retirees
The foundation for what happened to City of Detroit retirees in bankruptcy court this year was laid in December 2013, when U.S. Bankruptcy Court Judge Steven Rhodes ruled that the protection of public pensions embedded in Michigan’s constitution could be discarded in a Chapter 9 bankruptcy.
According to Law360, a blog that focuses on legal issues: “That decision remains one of a growing trend of decisions (including one from Judge Christopher Klein in the Stockton, California, bankruptcy in late September) that suggest that municipalities can use bankruptcy proceedings to restructure and eliminate pension obligations, even if, as in Michigan and California, citizens’ pension rights are protected by state constitutional provisions.
“And by managing to get general public employee support for its proposed plan, and then by resolving essentially all other significant claims of plan opponents, Detroit may have successfully managed to avoid any federal appellate court test of Judge Rhodes’ decision. Assuming that decision is not challenged and remains undisturbed on appeal, it undoubtedly will be an important precedent for other municipalities that resort to Chapter 9 to attempt to restructure pension obligations.”
For Detroit’s retirees, the hit goes far beyond the 4.5 percent pension cut non-uniformed retirees are taking. Retired police officers and firefighters will see their annual cost of living adjustments (COLAs) reduced from 2.5 percent to 1 percent. General retirees will completely lose the annual increases they were relying on. So-called “clawbacks” of annuity retirement savings plans that employees voluntarily contributed to will mean losses totaling tens of thousands of dollars for some retirees.
Already in effect are drastic changes to retiree health care. Instead of participating in a plan where the city covered 80 percent of the costs, most retirees are instead receiving a monthly stipend of just $125, resulting in additional monthly costs of hundreds of dollars for many.
As part of the city’s plan of adjustment approved by Judge Rhodes, a fund has been established to help keep retirees who are 60 and older from falling below 140 percent of the federal poverty level, which is currently about $16,300 a year for individuals. The deadline for applying to that fund for assistance is Dec. 31.
Of course, for those who helped author the “solutions” dumped on retirees, the consequences have been radically different. Law firms and consultants working on the city’s “restructuring” had billed Detroit more than $150 million for their work. After local media began reporting on some of the charges — such as limo rides from Cleveland to Detroit for a Jones Day attorney working on the case — negotiation over some of the bills went behind closed doors in court-ordered mediation.
Water Woes
When the city, under the control of Emergency Manager Orr, began mass shutoffs of water to customers behind on their bills in the spring, the world quickly took notice.
As thousands of customers were losing access to a commodity they can’t live without, protestors began making their voices heard. About 20 people were arrested in two separate actions when they attempted to block crews working for a private contractor from shutting off water service. Activists in Canada sent a shipment of water across the border to help.
In July, more than 1,000 people from around the country marched down Woodward in a show of support for those fighting to keep water flowing to Detroit’s most vulnerable residents.
There was a temporary reprieve when a month-long moratorium on shutoffs was put into place at the end of July. During the interim, Orr tossed handling of the issue to Mayor Mike Duggan, who quickly cobbled together a 10-point plan with the promise that it would be easier for those behind on their bills to enroll in payment plans and avoid losing access to water. A fund with money from nonprofits and the private sector was established to help the very poor pay their bills.
Activists criticized the plan for being insufficient. Attempts to have Judge Rhodes extend the moratorium failed. And legal efforts to force the creation of true water affordability plan — efforts led by attorney Alice Jennings and assisted by lawyers from the ACLU of Michigan, the NAACP Legal Defense Fund and others — went nowhere.
A team of special rapporteurs affiliated with the United Nations came to town and issued a report condemning the shutoffs.
“It is contrary to human rights to disconnect water from people who simply do not have the means to pay their bills,” said Catarina de Albuquerque in October. “I heard testimonies from poor, African American residents of Detroit who were forced to make impossible choices – to pay the water bill or to pay their rent.”
In November, the Department of Water and Sewerage announced that, unlike years past, it would keep water shutoffs going throughout the winter months.
Based on average shutoff rates, more than 30,000 residential customers will have had their water disconnected at some point in 2014, with only about half of them coming up with the money to have service restored. The water department says that it doesn’t know how many of the homes without water are occupied.
The larger context of these shutoffs — with the department attempting to do what it can to clean up its bottom line — is related to the creation of a new regional water authority that will be in charge of distributing water to about 4 million customers throughout southeast Michigan.
The result of bankruptcy court-order mediation that took place behind closed doors, the Great Lakes Water Authority will supplant the current structure. Under the agreement — struck between the city, Wayne, Oakland and Macomb counties, and the state — Detroit’s water and wastewater treatment facilities and the piping systems serving suburban customers will be leased from the city and controlled by the new authority for the next 40 years.
In return, the city will receive $50 million a year in lease payments. Contrary to what has been widely reported, though, is the fact that about $13 million of that $50 million is actually money that originated within the city.
Although the new authority will place a 4 percent cap on annual increases for the next 10 years, that cap applies only to the wholesale rates being charged Detroit and other municipal customers. On top of that will be additional rate increases necessary to cover infrastructure costs within the city. Those costs are massive. During the bankruptcy proceedings, DWSD Director Sue McCormick testified that Detroit faces some $2 billion in water and sewer infrastructure needs over the next 10 years – costs that will be borne by the same Detroit rate payers who are struggling right now to keep up with their payments.
Emergency Failure
The implicit theory behind Michigan’s emergency manager law is that locally elected officials, for whatever reason, are sometimes unable to make the difficult choices necessary to remain financially solvent. If they can’t then it is the role of the state to step in and provide the leadership that will make the tough decisions needed to keeping struggling municipalities and schools districts from droning in red ink.
What’s missing in that analysis is the fact that the problem isn’t necessarily bad management on the part of local officials, but rather inherent structural problems to large they overwhelm whoever is in charge, not matter who vast their authority.
There is no clearer example of that than Detroit Public Schools, which has been under state control continuously since 2009 and, with the exception of a few years, has not had complete independence since 1999.
How’s that working out?
According to the most recent news reports, DPS is currently facing a deficit that’s topping $120 million.
The lesson here is that factors beyond the control of local officials — from the city’s population loss and falling tax revenues to cuts in state funding — as simply overwhelming, no matter who is in charge.
In other words, simply taking away the authority of a democratically elected school board isn’t a solution and having the state step in hasn’t worked.
Even Gov. Rick Snyder, as staunch a proponent of emergency management as there is, has been forced to concede that point.
“I don’t think this has been a very good exercise of how the emergency manager law should work, the case of Detroit Public Schools,” Snyder recently told the Detroit Free Press. “We’ve been there too long.”
Another of Snyder’s attempts at school reform — creation of Detroit’s Education Achievement Authority (EAA) — has achieved equally dismal results.
Created in 2011 with the stated purpose of turning around Michigan’s lowest performing schools, the EAA would not exist except for the fact that the DPS emergency manager entered into an “inter-local” agreement with Eastern Michigan University that provided a legal framework for the experimental school district to exist.
Instead of being governed by an elected board, it is overseen by a group of appointees put in place by EMU, the DPS emergency manager and the governor. In reality, however, because both the DPS emergency manager EMU regents are all gubernatorial appointees — the responsibility of all this falls squarely in the lap of Gov. Snyder.
And how has that worked out?
The EAA has been mired in controversy since it opened doors at 15 Detroit schools in the fall of 2012. Its first chancellor, John Covington, resigned abruptly after a scandal involving credit card spending erupted. Transparency has been a major issue, as have concerns about disciplinary practices and treatment of special education students.
In September, an investigation by the ACLU of Michigan found that the education software the EAA relied upon at focal point of its teaching program arrived in Detroit incomplete and badly flawed, and that for two years used the district’s teachers and students to discover the bugs and help develop a product that was deemed adequate for deployment to other districts on a broad scale.
Instead of creating successful schools that attract students, the EAA has seen enrollment drop by about one-third since opening its doors.
EMU Regent Jim Stapleton summed up the situation earlier this month when he issued a statement declaring, “When this District was formed, I was among its biggest supporters. I applauded then and, I applaud now, Governor Snyder’s commitment to public K-12 Education and, his willingness to make it a priority. That said, everything about the EAA since it was announced has been disappointing.”
Nonetheless, at their December meeting, Stapleton and five of his fellow regents voted to throw the EAA a lifeline by remaining part of the inter-local agreement for at least another year.
Think of it as failure without consequences.
Curt Guyette is an investigative reporter for the ACLU of Michigan. His work, which focuses on Michigan’s emergency management law and open government, is funded by a grant from the Ford Foundation. You can find more of his reporting at aclumich.org/democracywatch.org Contact him at 313.578.6834 or curtguyette@aclumich.org.
Special to the NNPA from The Michigan Citizen
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