Tenants at Will of the Legislature: an Exploratory Case Study of Michigan’S Emergency Manager Statutes

Tenants at Will of the Legislature: An Exploratory Case Study of Michigan’s Emergency Manager Statutes Matthew R. Jones Submitted to Yale Gordon College of Liberal Arts, University of Baltimore In partial fulfillment of the requirements for the degree of: Doctor of Public Administration February, 2016 1 ACKNOWLEDGEMENTS The completion of a doctoral degree is a culmination of lifelong educational pursuit. As such, it is not accomplished by the individual alone, but is a product of their life experience inclusive of the love and support of family and friends, as well as the direction from the academic scholars and professors. A large share of gratitude and acknowledgement goes to my dissertation committee: Dr. Lenneal Henderson, Dr. Ed Gibson and Dr. Lorenda Naylor, for dedicating their valuable time, and providing guidance during my scholarly journey. The expertise was instrumental and their teaching and scholarship was inspirational. To my parents, Robert and Annet, thank you for inspiring me, since childhood, with a love for reading and continuous learning. To my grandfather, Bert, and my brother Jeff, thank you for the support over the years. A special thank you to Samantha, for her love, support and understanding throughout my academic pursuits. 2 ABSTRACT Tenants at Will of the Legislature: An Exploratory Case Study of Michigan’s Emergency Manager Statutes Matthew R. Jones In July 2013, the city of Detroit filed for bankruptcy, representing the largest filing for municipal bankruptcy in the history of the United States. The public administrator behind the filing, Emergency Manager Kevyn Orr, was not a resident of Detroit, or the state of Michigan, and was never elected by residents of Detroit or Michigan to any public office. However, under Michigan law, Mr. Orr possessed the roles of both the executive and legislative branches of government for the city of Detroit. Orr was not the first emergency manager in Michigan, where an experiment in state intervention of local government financial emergencies has taken place since 1988. Unelected emergency managers have become a sole source of power in financially distressed cities across Michigan. The experiences and results of these emergency managers have important implications for the study of intergovernmental relations and public administration. This dissertation research project will present a qualitative, exploratory case study and theoretical inquiry that will examine how the actions of public institutions and key policy players account for the placement of emergency managers in local governments in Michigan, culminating in the state takeover of Detroit. The intergovernmental implications of the complete state takeover of local governments in financial emergency will be analyzed. The study will also seek to understand how the placement of an emergency manager in a financially distressed local government accounts for the larger socioeconomic causes for the local government’s financial crisis. The values of local government democracy are pitted against the values of local government fiscal sustainability. This presents a challenging question - in a local government financial emergency, who should rule? This case study is exploratory, with the objective to provide a foundation for future research in this emerging field of inquiry. 3 Table of Contents Chapter 1: Introduction…………………………………………………………….……5 Chapter 1: Introduction – Research Questions……………………………………...…...9 Chapter 2 - Literature Review and Background Information……………………….......10 Chapter 2 - Section 1: Public Administration Foundations………………………..........12 Chapter 2 – Section 2: Qualitative Research and Case Study……………………..........18 Chapter 2 – Section 3: Intergovernmental Relations……………………………….…...25 Chapter 2 – Section 4: Local Government Fiscal Stress..………………………............57 Chapter 2 – Section 5: Detroit’s Financial and Administrative Challenges...………......83 Chapter 3: Methodology………………………………………………………….…….109 Chapter 4: Results………………………………………………………………….…...118 Chapter 4 Part 1: The Emergency Manager Statutes of Michigan…………………......119 Chapter 4 Part 2: Detroit’s Financial Crisis and Emergency Manager………………....226 Chapter 4 Part 3: New York City’s Financial Crisis……………………………………272 Chapter 4: Part 4: Flint Water Emergency……………………………………………...293 Chapter 5: Discussion and Conclusion…………………………………………………304 References………………………………………………………………………………341 4 Chapter One: Introduction On July 18, 2013, the city of Detroit filed for bankruptcy, representing the largest filing for municipal bankruptcy in the history of the United States. The public administrator behind the filing, Emergency Manager (EM) Kevyn Orr, was not a resident of Detroit, or the state of Michigan, and was never elected by residents of Detroit or Michigan to any public office. However, under Michigan law, Mr. Orr possessed the roles of both the executive and legislative branches of government for the city of Detroit. Orr was not the first emergency manager in Michigan, where an experiment in state intervention of local government financial matters has taken place since 1988. Unelected emergency managers have become the sole source of power in financially distressed cities across Michigan. The experiences and results of these emergency managers have important implications for the study of public administration. This phenomenon presents a compelling case and a need for an exploratory case study to better understand the statutes, their implementation, and possible consequences in the intergovernmental system. Since 1988, a series of successive laws have been passed in Michigan relating to state intervention in local governments experiencing a financial crisis. These laws may be referred to as the “emergency manager statutes.” Under its current form, Public Act 436 of 2012 - The Local Government Stability and Choice Act - the law contains controversial provisions that provide broad powers to a state-appointed emergency manager that replaces the executive and legislative branches of any Michigan local government. The city of Detroit was appointed an emergency manager by the state of Michigan in March of 2013. Kevyn Orr, a bankruptcy lawyer and partner with the Jones 5 Day law firm, was appointed by Republican Governor Rick Snyder to serve as the emergency manager of Detroit (Michigan Executive Office Dept. of Treasury Contract for EM 2013). This occurred after a tumultuous period of public debate about how the city should resolve its financial crisis, the likes of which had not been seen in its long history. At the press conference announcing his appointment, Orr, a respected and experienced bankruptcy restructuring specialist, stated that his appointment would lead to “the Olympics of restructuring” (Davey 2013). The state’s appointment of an emergency manager in Detroit sparked protests and condemnation from many residents who viewed it as an intrusion upon the local democratic process. This was in response to the practice that an unelected emergency manager displaces many of the roles previously designated to elected local officials. The emergency manager is the unelected combination of a city administrative official and city council, and possesses unprecedented authority to operate on behalf of the state. Because of this authority, serious questions about local democracy have been raised and should be explored further. The emergency manager statutes of Michigan are complex policy issues, involving significant tension between the state and local governments. The statutes pit the values of local representative democracy against the values of government fiscal sustainability. Further controversy has resulted from the Michigan’s implementation of these statutes in predominately African American-majority municipalities, resulting in several protests over the disenfranchisement of a wide portion of African Americans in the state of Michigan. 6 In the modern administrative state described by public administration scholar Dwight Waldo, a central question is posed: “who should rule?” The dilemma stems from the concept that “democratic ideology and institutions grew up in association with a belief in an underlying harmony, a belief that things need not be managed but will run themselves” (Waldo 2007, 101). As the running of the federal, state and local governments became increasingly more difficult due to population growth, socioeconomic changes, and advances in commerce, technology and transportation, the idea of things running themselves no longer appeared feasible. As Waldo pointed out, the competing values of democracy and efficiency could coexist only as long as the politics- administration dichotomy was upheld. That dichotomy would be challenged, because as Waldo stated, “democracy is a way of life which must permeate the citizen’s work as well as his leisure hours” (14). Competing forces are constantly found in public administration – Who should be in control of the decisions? How should that control be exercised? Whose interests are to be served, and which values should be placed at the forefront? In the United States, we value democracy and the ability to elect our local representatives; additionally, we value, and expect, fiscal responsibility at all levels of the federal system, including our local government. In the case of the Michigan emergency manager statutes, the value of democratic elective rights for residents in urban areas must be reconciled with the value of local government fiscal accountability. This dissertation research study will

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