Editorial: Emergency management law working for cities
Michigan will start the year with not one of its local communities under emergency management, with the emergence of Lincoln Park from state control last week. While Detroit Public Schools and other school districts, as well as Wayne County, still are operating under some form of state financial oversight, for the first time in 15 years no cities have emergency managers.
The emergency management law was designed to help local governments right their finances before they reach insolvency. It gives extraordinary powers to the manager to make decisions that are often beyond the capability of elected leaders.
Since the law gives almost dictatorial control to the manager, it has been criticized as an affront to democracy.
But as Lincoln Park shows, a brief period of emergency management can resolve longstanding issues and improve chances that a community will be able to provide adequate services to its residents.
In the Downriver suburb, a major obstacle to financial stability was labor contracts that provided pension and health care benefits to retirees that the city could no longer afford. Manager Brad Coulter, appointed by Gov. Rick Snyder, renegotiated those contracts to free up operating revenue.
What he did was painful for retirees, but necessary for taxpayers.
As with many Metro Detroit communities, Lincoln Park had made very generous and costly promises to its municipal employees, including allowing them to buy extra years of service to fatten their pensions.
Coulter ended that practice. He also terminated retiree health care and Medicare Part B reimbursements, and stopped employees from collecting cash payments for their unused sick days when they leave city government.
The moves greatly reduced Lincoln Park’s legacy costs. And yet 40 percent of the city’s budget will still be dedicated to active employee and retiree health care and pensions.
Coulter says the figure is sustainable as long as property values keep rising.
Essentially, Lincoln Park taxpayers, like so many in Metro Detroit, are paying a large share of their taxes to support a workforce that is no longer delivering services to residents. These retiree costs had to be addressed or the suburb would have faced bankruptcy.
That is the whole point of the EM law, which has now been used to stabilize 12 cities and five school districts. DPS remains under emergency management, and four managers have been unable to right the district’s finances. That’s why Snyder has proposed a legislative fix for DPS.
While Coulter is departing, the governor is appointing an oversight board to continue assisting Lincoln Park with its finances. That’s the standard practice with communities that emerge from emergency management.
It will be 20 years before Lincoln Park can declare its pension system out of danger — it’s funded at roughly 20 percent of obligations now — and another 10 before property values return to pre-2008 levels.
But because of Michigan’s emergency management law, Lincoln Park can see a future that is no longer marked by chronic fiscal crisis.