Can Michigan Right The Ship For Detroit?
MICHEL MARTIN, HOST:
This is TELL ME MORE from NPR News. I'm Michel Martin. Coming up, it's tax season and the unwelcome news is that it might be even more complicated and annoying to file than in years past. Columnist and tax attorney Kelly Phillips Erb, also known as The Tax Girl, will tell us why in just a few minutes. And we will also hear from financial journalist Helaine Olen who's written a provocative new book about why the American appetite for financial advice may be causing them more harm than good.
That's all coming up later this hour. But first we turn to the finances of a major American city - Detroit. Last week Michigan governor Rick Snyder formally declared that Detroit faces a financial emergency. That's the first step toward a state takeover of Detroit's finances. Let's listen to what the governor had to say.
(SOUNDBITE OF SPEECH)
GOVERNOR RICK SNYDER: Detroit can't wait any longer. We need solutions. We need to work together to solve these problem, all of us. So let's come together to say how do we address these financial issues? How do we address these service issues? And ultimately, how do we grow Detroit?
MARTIN: And you might not know this, but Detroit is not alone in this. There are state-appointed emergency managers in five other cities in Michigan. We wanted to know more, though, about what this latest development means for Detroit so we've called someone who's been following this story closely for some time now - Jerome Vaughn. He's the news director at member station WDET in Detroit. Jerome, thanks so much for joining us once again. Great to have you back with us.
JEROME VAUGHN, BYLINE: Glad to be with you.
MARTIN: Also with us for additional perspective is Robert Bobb. He served as the emergency financial manager of the Detroit public schools from 2009 to 2011. He's now the president and CEO of his own consulting firm The Robert Bobb Group. Robert Bobb, thank you so much for joining us once again.
ROBERT BOBB: Oh, thank you. I'm glad to be here.
MARTIN: So, Jerome Vaughn, can you give us some parameters of the crisis in Detroit? Was there some event in particular that triggered the governor's decision?
VAUGHN: Wow. That's - let me give you the short answer. This is a problem that has been building and building and building for about 50 years. Detroit had nearly two million residents back in 1950. We're down to about 700,000 residents. The residents who are here, a lot of them are unemployed or underemployed. That cuts down on the income tax base. We've gone through the foreclosure crisis that affects property taxes.
The city isn't collecting the property taxes as well as they should. We've gone through the Great Recession. The auto industry has suffered. And so that sets the broad parameters of what's going on here in Detroit. It's almost like the perfect storm.
MARTIN: What's been the reaction to the announcement that the governor does intend to appoint an emergency manager?
VAUGHN: It's been mixed, depending on who you talked to, what neighborhood you're in. There's a group who are in favor of this move. They see that the city needs help financially. The city needs help to bring more and better services to its residents. Often you hear people call the police department and they don't show up. So people are at that point and they want somebody - anybody - to come in and make things better.
There's another group that sees this emergency manager as someone with almost dictatorial power, someone who's going to come in and make unilateral decisions in many cases. And that circumvents democracy. And so you've got these two groups sort of arguing at each other right now.
MARTIN: Would it be fair to say, Jerome, that there are also some racial overtones to this, or undertones, maybe if we can put it that way, Detroit being a majority African-American city and one of the kind of power centers of Detroit; of African-American advancement, economic advancement, political advancement, and Rick Snyder being a white Republican?
VAUGHN: Almost always there's a racial component when you're talking about things of a political nature going on in Detroit. That's another part of this battle. White governor, out state, the rest of Michigan overwhelmingly white dealing with an African-American population here in Detroit. There are really questions about, you know, black home rule and how that's going to be affected. So, yes, that is another factor in this battle.
MARTIN: Robert Bobb, we're glad you're able to join us because you already had the experience in a limited way of being an emergency manager. You were brought in by a Democratic governor to work through similarly large financial problems facing the Detroit public schools. So the first thing I wanted to ask is what's your job as emergency manager? What are you expected to do?
BOBB: Well, your job, your first job, is actually to fix things. And there's a financial crisis, but also in the broader context you also have to weigh the decisions that you make on residents in the school district. The decisions that you make with respect to how children are educated.
MARTIN: So it's not just to balance the budget? It's also to try to continue to deliver whatever the service is?
BOBB: Yeah. I can tell you candidly, as I've had a chance to step back and look back on my years in Detroit, you definitely had a right-brain, left-brain conflict. On the one hand, you wanted to get in and do all the things that you have to do from a financial standpoint and then on the other hand, you have to look at how those things impact children, and particularly in the school district.
And I think in the cities when the governor, should he appoint - seems it's heading in that direction to appoint an emergency financial manager - I think that person, whomever he or she is, will have to know exactly what it is they're getting into before they step in the door.
MARTIN: Like what? What does that mean?
BOBB: Well, you know, you can read all of the documents. You can see - you can read all of the documents, all of the financial documents. You can hear the voices of people. But you have to have some reality in understanding exactly what it is you're going to be faced with. And one of the questions that, now that I've had a chance to look back, is you're going to deal with this issue of democracy.
Whether or not you as an emergency manager making so many unilateral decisions that, you know, having been former elected official and watched the mayor take over the school boards here in D.C. right after I was elected, I know how that felt. But at the end of the day, I know that, now that I look back on D.C. schools, one can say that it was not a bad decision; it was a good decision.
But I know how it felt at the time. And so I know how those elected officials must feel knowing that perhaps an emergency manager would come in; their powers - they were elected but their powers would go away.
MARTIN: If you're just joining us we're talking about the looming state takeover of the finances of the city of Detroit. I'm speaking with Robert Bobb. He's the former emergency financial manager for the Detroit public schools. Also with us is Jerome Vaughn from member station WDET. He's the news director there. Jerome, you know, to Mr. Bobb's point, you know, there are some who argue that it's an impossible job. That an emergency financial manager cannot fix these problems. Cannot fix these problems. Particularly give that you cited just all the structural issues that contributed to the crisis. Is that a - do people feel that there?
VAUGHN: Well, I think there are some folks who are trying to avoid a feeling of complete despair. They're really holding onto hope that this emergency manager can come in, make some changes, and not fix everything but, you know, get the ship sailing in the right direction. Because if things continue to go the way they are going now without a change of course, it means Chapter 9 bankruptcy and no one wants that.
The suburbs don't want that. The state doesn't want that. Because it'll affect everyone in terms of their bond ratings.
MARTIN: Mr. Bobb?
BOBB: I think that's a good point. I mean, I'm working on a case now of a city that's in Chapter 9 bankruptcy, and I can tell you that the Chapter 9 bankruptcy process is a very expensive process, both for the particular city that has filed Chapter 9 bankruptcy as well as for the capital markets that are fighting the bankruptcy.
And so I do believe that, you know, Detroit is one of the great American cities and I have a lot of confidence at the end of the day that the ship will be righted.
MARTIN: Are there decisions that one could make as an emergency financial manager that you simply could not make as an elected official because of all the stakeholders involved, because of your political supporters, you just couldn't afford to offend them. Can you give - is there some - is that part of the deal?
BOBB: Oh, yeah, absolutely. The legislation, as I understand it, would give the emergency manager considerable authority and power, the power to revise or resend labor agreements, which is a huge issue, in and of itself, the power to restructure the entire city government. In fact, this person would have the ultimate authority to do what is right to develop the type of plan that, at the end of the day, will lead to the city coming out of the financial emergency.
I don't think it's going to happen within a period of 18 months, but I do believe that, given all of the research, given all of the analysis which has been done by both Mayor Bing and his administration, as well as the governor's office and the Treasurer's Department and others; I think, when you consolidate all of those plans, I think they have a roadmap for getting things done.
I think the most difficult part for an emergency manager would be the - kind of the corrector, as it were - would be that this person would have the authority to actually implement it. For example, several months ago, a consent agreement was put - negotiated between the city and the governor's office. Well, when there is an emergency, there is a sense of urgency to get things done. And apparently, as I sought a governor's press conference, some of those things did not get done, although the mayor contends that some things were done.
And so it would be incumbent upon everyone to get in a room, close the door. You know, as you recall, when Quincy Jones brought everyone together for "We Are the World," he said, leave your ego at the door. This would be one case where everyone comes together and say, let's get this thing done.
MARTIN: Jerome Vaughn, what are the final steps here? What are the next steps here?
VAUGHN: Well, the mayor and city council are talking. They're trying to figure out if they want to appeal this decision. They have until March 11th to file an appeal with the governor. If they choose to do that, on March 12th, there will be a hearing where the governor will hear those concerns and then, shortly after, he'll make a decision.
Right now, it seems highly unlikely that the governor would do anything but appoint an emergency manager, given the state of finances.
MARTIN: Robert Bobb, we only have 30 seconds, but the final question I had for you is, is there something you would advise whoever is put into this role that you learned in your job, that you would pass on as advice?
BOBB: Be very tough. Make the decisions. Don't linger in making tough, difficult decisions. Understand that you're going to be criticized, heavily, and have the intestinal fortitude to take those criticisms.
MARTIN: Robert Bobb was the emergency financial manager of Detroit's public schools from 2009 to 2011. He's now president and CEO of the Robert Bobb Group. That's a consulting firm that specializes in public sector turnaround. He was kind enough to join us here in our Washington, D.C. studios. With us from Detroit, from member station WDET, is Jerome Vaughn. He is the news director there and he's with us from the studios there.
Thank you both so much for joining us.
BOBB: Thank you.
VAUGHN: Any time. Transcript provided by NPR, Copyright NPR.