Detroit and Democracy

On Sept. 25, 2014, Detroit’s city council and mayor voted on a brokered deal that would shift many of the powers assumed by Kevyn Orr, the emergency manager, back to those democratically elected.

The compromise, which left Orr in control of matters related to the city’s bankruptcy case, was prudent, and a surprise from a polity that isn’t known for responsibility. Moreover, the measure is likely to ensure that Detroit will exit Chapter 9 bankruptcy more swiftly than many of its peers which have decided to adjust their debts in federal bankruptcy court.

I’ve wrestled with displacement of democracy in fiscally distressed cities and towns in Michigan. The appointment of emergency managers, overseers selected by the state, who take control of the finances and day-to-day operations of cash-strapped municipalities has been contentious. The law to enable state control of municipalities has been existence since 1988, but the laws that allowed for such intervention have been expanded.

On July 29, 2014, Prof. Jason Stanley of Princeton University penned an op-ed in the New York Times titled “Detroit’s Drought of Democracy.” In the op-ed, Stanley denounces Gov. Rick Snyder’s decision to appoint an emergency manager to Detroit. He cited James Madison’s dissent to the idea that “unelected experts” should be appointed to “solve the problems raised by factions…” “Elections, however, can be problematic” said Stanely, “as people can make choices that are not in their own best interest.” However, remarked Stanley, “In a democracy, one cannot replace democratically elected officials in the interest of efficiency.”

The problem with Stanley op-ed, isn’t that it doesn’t present a philosophical conundrum, but that it misleads on how effective Orr has been.

He and others must contend with the fact that Orr’s tenure has been a success. To be sure, there are criticisms to be made, for example the decisions made by Lou Schimmel who served as the city of Pontiac’s emergency manager from 2011 to 2013. Schimmel has been widely criticized for his decision to sell the Pontiac Silverdome for less than many people think it was worth. More broadly, however, emergency managers, or whatever title they serve under in other states, have been successful in arresting freefall.

It’s uncomfortable and questionable to say the cleanliness of technocracy is preferred over the messiness of democracy.

However, those on the other side of the debate must ask themselves, and provide an answer for, “what else was the state of Michigan to do?” Detroit was allowed to decline for more than 60 years, partly due to the indifference of state officials, but also financial mismanagement by elected officials. At the time of Orr’s appointment, before the decision to file for Chapter 9 bankruptcy, the city had an annual deficit of $327 million.

How would city officials have filled that hole, and would they have had the wherewithal to file for bankruptcy once they realized it was too deep to fill?

Orr was appointed to take control of Detroit on March 14, 2013. His 18-month contract, enabled under Public Act 436 of 2012, expired this month, and therefore the city officials were able to take back control. However, they chose to retain Orr, a lawyer and bankruptcy specialist at Jones Day – a wise move when you consider Orr’s talents. He successfully led Chrysler in and out of Chapter 11 bankruptcy. Prior to that he served with the Federal Deposit Insurance Corporation, then the U.S. Justice Department. Suffice to say, Orr is qualified.

Other municipalities in Chapter 9 bankruptcy, which filed prior to Detroit, are still in federal bankruptcy court. Due to the infrequency of Chapter 9 bankruptcy filings, there isn’t a standard timeline for conclusion to the process. For the most part, the recent cases which have commenced have taken two or four years to conclude. Much of the delay has come from the complexities of the cases at hand, but also because rather than have a learned practitioner of bankruptcy law at the helm, these cities and towns have the same city council that entered them into such dire financial straits in the first place. Orr is set to have Detroit in and out of federal bankruptcy court in half the amount of time.

The restoration of democracy makes the situation less contentious, and should be celebrated, but the decision to retain Orr, who has shown himself to be more than a capable manager, is equally as important – and perhaps proof positive that in the end democracy does work itself out.

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