Friday, June 08, 2012
Detroit - Arranging The Deck Chairs On The Titanic
In case you haven't been paying attention, the city of Detroit, once a symbol of America's prosperity and manufacturing might, is about to go under.
The city is broke, after years of racial politics, mismanagement and cronyism between the Democrats who have run it for decades and the public employee unions. Unemployment and crime are well above the national average, and whole sections of the city have been abandoned and are now being bulldozed because the city can't afford street maintenance or to keep the streetlights on. There are homes that can be purchased for a few hundred dollars, with no takers.
The city's schools are largely dysfunctional,the city's credit rating is deep in junk bond territory down to the single B level and the last mayor, Kwame Kilpatrick, actually did jail time for corruption as the kingpin in what a federal prosecutor called a "pattern of extortion, bribery and fraud" by some of Detroit's most prominent officials.
Things are so bad that the city can't even afford to bury indigent and unclaimed bodies.
The State of Michigan finally stepped in after being rebuffed by city officials for months. Republican Governor Rick Snyder signed an historic consent agreement with Detroit Mayor Dave Bing, offering what amounts to an $80 million bail out of Detroit in exchange for the creation of a nine-member Financial Advisory Board to oversee the city's financial restructuring,with six members appointed by the Governor and two by the city council. The money was pointedly NOT given directly to the city, but put in an escrow account that could be drawn on after expenditures were approved by the committee.
Given Detroit's situation, you would think this would be a godsend, especially since the city's credit rating precludes it from borrowing money even at loan shark rates. But...you'd be wrong.
Krystal Crittendon, the City of Detroit's head attorney and corporations counsel has slapped a lawsuit on the consent decree, claiming it's illegal. Her reasoning? She claims the State of Michigan owes Detroit $224 million in revenue sharing plus more than $1 million in unpaid water bills, parking tickets and other debts. And according to the city's charter, Detroit can’t enter into contracts with entities in default to the city, so she claims the deal is null and void and needs to be revoked.
The state has denied those claims and has told the City of Detroit in no uncertain terms that if it proceeds with the suit, they can forget about the bail out and the consent decree. They will hold on to the $80 million due Detroit in revenue sharing that was used, essentially, as collateral for interim refinancing of bonds issued in March so Detroit would not run out of cash.
The city has already used $35 million of the $80 million, but will be unable to draw any more of the money if the lawsuit proceeds. And Detroit is scheduled to literally run out of money in a week, according to Jack Martin, the city’s new chief financial officer.
Mayor Bing commented that his frustration level was 'off the charts' and said, “If our city runs out of money, there is no bigger crisis that we would have in our city.”
The City Council (which still hasn't gotten around to appointing its two picks for the Financial Advisory Board) got solidly behind Crittendon, with Council President Charles Pugh and several other council members urging her to 'stand her ground.'
The back story on this is fairly interesting. What's actually happening is yet another episode of racial politics run rampant in Detroit.
Ever since Coleman "I don't know nothin' about no Krugerrands" Young took over as Mayor in 1972, the city has predominantly been run by black Democrats. who regard the city as their political fiefdom. The city council, predominantly if not totally composed of black Democrats has consistently opposed any attempts by the State of Michigan or the Feds to intervene on 'their' turf no matter how dismal a job they've done of running it.
Crittendon is being supported by the Detroit City Council because her law suit provides an alibi which could best be paraphrased as 'It's not our fault the city's bankrupt - it was whitey upstate who stole all the money we're entitled to.'
Whether the City of Detroit is actually owed the money or not - which the State of Michigan disputes - common sense would seem to dictate that this was just maybe not the time to bite the hand that feeds you, and Mayor Bing has said as much.
Ultimately,of course,it wasn't about the money, but about power and race.
What Crittenden and the Council are doing is daring Governor Snyder, a Republican (and white) governor to take the political flak involved in appointing an emergency manager for a black run city like Detroit to bring the Council and their union allies to heel.
Will he do it? Stay tuned.