Gov. Snyder’s Emergency Manager Experiment — Five Years of Fear

Since 2011, Michigan municipalities and school districts have been operating under the cudgel of Gov. Snyder’s Emergency Manager Law, making reckless budgetary cuts and forming ill-thought public policy decisions based on the mere threat of emergency management. Here at Democracy Tree, we’ve forecast numerous disastrous outcomes from self-inflicted wounds among Michigan communities — the collateral damage from acting out of terror of state control.

It’s All About the Fear

Snyder’s enhanced Emergency Manager Law has been a train wreck — from the ongoing mismanagement of Detroit Public Schools, and its corrupt spinoff, the Education Achievement Authority, to the City of Flint suffering the ill-effects of irreversible lead poisoning at the hands of an unelected dictator — all with the governor’s blessing.

Although, currently only one municipality and three school districts are operating under emergency management, with a number of others in receivership or in a consent agreement, the law’s path of destruction remains devastating.

A Case Study: The Local Emergency Manager “Lite”

While the criminally negligent health crisis unfolds in Flint, other communities are suffering another kind of quiet desperation. Grand Traverse County finds itself in a $58 million hole, with a looming unfunded pension and healthcare crisis — fiscal issues that are not unique to the county. The Northern Michigan community is experiencing financial woes of great concern, yet they are not considered significant enough to trigger the Emergency Manager Law.

Deemed too affluent to meet the criteria for a heavy-handed fix from Lansing, the county instead has done what other local units of government have when faced with dire fiscal problems — they’ve appointed their own “emergency manager” of sorts, and empowered him to take the same kinds of draconian measures typical of a state-appointed manager.

The affluency argument is deeply flawed to begin with, because no matter how well a municipality thrives and grows, it cannot by law tap into increased property values by more than the general rate of inflation. Assessors are currently tied to a .3 percent cap on assessments, creating an implacable situation as described by Stephen Henderson, editor at the Detroit Free Press:

“Good for homeowners, in dollar-and-cents. But bad for cities, which are left out of whatever recovery is taking place.

That’s the worst kind of false economy. Cities exist to provide services to the people who live in them. Services should keep residents safe, at minimum. Ideally, services create the kind of place people want to live. And from a pragmatic standpoint, services protect homeowners’ investment. Bad services make people move. When that happens, revenue drops further, services get worse. And more people move, in an endless cycle of decline.”

Grand Traverse County hired Tom Menzel to put them back on track, with his first priority being a 2016 balanced budget. Menzel, locally known for his work as executive director at both the Bay Area Transportation Authority (BATA) and the National Cherry Festival, is perceived by many as a turn-around wizard. His public sector background, including service as mayor, treasurer, and alderman of the City of Rolling Hills — a Chicago suburb, along with his stint at BATA, should have more than sufficiently prepared him for this new challenge. Although in truth, he spent the bulk of his career in over a half-dozen private sector positions of power — and it is that experience which seems to be informing his current decision process.

The reality of his month-long county leadership role has been marred by a number of communication mis-steps and poorly executed budgetary plans. Menzel’s recent top-down decisions more closely mirror the corporate-based emergency managerial style of governance, and decidedly lack the brilliance of the kind of turn-around wizardry needed for the community.

Since assuming the county administrator position in mid-November, hardly a week has gone by without yet another above-the-fold story about the latest gaffe from Menzel in his zeal to trim expenses. This is not to imply that cuts are not necessary, they certainly are, but a scorched-earth approach may not be in the long-term interest of the county.

Menzel hit the ground running, announcing vast across the board budget cuts. A move that prompted Circuit Court Judge Philip Rodgers to go public, calling Menzel’s budget cuts “thoughtless”, noting that the court had not received any formal communication from the county regarding budgeting. Menzel apparently acted without possessing a rudimentary understanding of the complexity of judicial funding — costs and services are shared among several counties, and state-mandated services may have some degree of state funding, or not. Rodgers explained to the Record-Eagle:

“It’s the down and dirty and easy way to try to reduce the budget. It’s not the best way and I think Mr. Menzel would certainly admit that. He’s been around a long time.”

Just two weeks after taking office, Menzel eliminated the county GIS Department, laying-off two employees and transferring GIS functions to the Equalization Department, citing a $162,000 savings. GIS is responsible for organizing and updating mapping data for equalization and 911 services. The county is one of a handful in the state experiencing growth, therefore updating data remains a perpetual task. Many other counties are entering into interlocal agreements with surrounding counties because they share a central dispatch, have overlapping mapping information, and standardization is becoming increasingly important — a statewide concern. Grand Traverse County has historically functioned independently. This information should have been a consideration for any changes made to the system. GIS information not only impacts 911 accuracy, but is key to tax revenues — two areas that are a priority.

The following week, it was a shock for the Sheriff’s Department to learn that they had been assigned the duties of the unexpectedly disbanded Animal Control Department. In their rush to give the budget a haircut, county leaders neglected to mention the move to Sheriff Tom Bensley, who told the local paper that there seemed to be a lack of proper communication. Dismayed to have been excluded from the discussion, the Sheriff’s Department made it clear they will not assume these new responsibilities until they completely understand them, including the legal ramifications, and are assured they have adequate funding.

Two days later, it became evident that Menzel additionally did not fully consult the recent activity of the interim county administrator, Dean Bott, whom he replaced. In the process of rolling out his plan to eliminate the Soil Erosion Department, Menzel learned that the department had undergone a state DEQ audit last summer in the wake of multiple sediment plums flowing into Grand Traverse Bay from a commercial construction site. The audit, which makes recommendations on departmental functions, had been properly communicated to Bott at the time, but Menzel was unaware of its existence as he formulated plans to dissolve the department. Instead of admitting that the rushed atmosphere under which he took office had left vast gaps in his knowledge, Menzel blamed the lack of communication on a “dysfunctional culture.” Disbanding the department and rolling its responsibilities into other departments may have to be revisited in light of this “new” information.

As administrator, it behoves Menzel to properly consult with department heads prior to announcing sweeping changes, especially if those changes could result in irrevocable damage to the community. An occasional slip-up is to be expected, but this appears to be a pattern that can only further contribute to that “dysfunctional culture” he decries.

Decorum and protocol are part and parcel of effective public service.

When initially approached about the position last spring, Menzel cited among his goals to improve internal communications at the county. At that time, he offered his services for $1 per month, but he eventually agreed to an annual salary of $92,500 — clearly a sufficient sum for taxpayers to expect more of him.

The “Tough Choices” Game — How Lansing Steals Revenues

lost revenues

Source: Michigan Municipal League

Grand Traverse County officials, among all local leaders in Michigan, have heard the “tough choices” mantra ad nauseam since 2011 when Snyder took office. Prior to that time, state revenue sharing had already been on the decline — draining municipal and school coffers at an alarming rate, a trend that accelerated under the new governor as he made provisions for his massive corporate tax cuts. Snyder has shown little interest in reinvesting in local government — in fact, his policies exhibit a disdain for the practice. One of his first acts as governor was to create additional hoops for local leaders to jump through as a prerequisite to funding under his “Economic Vitality Incentive Program” — a failed scheme that was partially rolled-back in 2014.

Last year, the Michigan Municipal League reported that Lansing has diverted billions in revenues since 2003 — taking money away from statutory revenue sharing for local units of government to bolster other state spending priorities. Referring to the diversion of funds as a “heist”, the author of the report explained:

This data begs the question: did municipalities ignore their duty to manage or did someone else change the rules of the game and then throw a penalty flag at them? I see yellow flags all over the playing field.

The figures, based on Michigan Department of Treasury data, adjusted for inflation, found that an estimated $6.2 billion had been robbed from Michigan cities from 2003-14. Currently, the annual take is about $700 million.

Local officials are keenly aware of the impact. A Michigan Public Policy Survey conducted two years ago, as the economy was just beginning to show signs of recovery, found that only 43 percent of local leaders believed they would be able to maintain current services without improved funding, with 58 percent in favor of funding reform — a number that shot up to 77 percent for larger municipalities.

The local funding problem can only be effectively addressed at the state level. Lansing must stop pushing it back on broke cities and counties.

The reign of terror must end.

BONUS: In related news…

A couple of weeks ago, Democracy Tree reported on the “dark store” tax scam perpetrated by major retailers in Michigan — a plan designed to deprive local units of government and school districts of critical revenues. While just a piece of the budgetary puzzle, these stores have successfully demanded of the state tax tribunal that their taxes should be assessed at the lowest level found in shuttered structures. This scheme is emblematic of the excessively corporate-friendly culture that plagues the state’s budgetary process.

In Michigan, the biggest culprits are Target, Home Depot, Lowes, Wal-Mart, Meijer, and Menards — all of which have locations in Grand Traverse County — our above case study. Mid-sized retailers have since followed suit and applied for their own abatements. Accurate assessment of the scope of the statewide problem remains incomplete, as many counties lack complete data.

MTT Tax refunds

This is just one of many Lansing-backed schemes designed to enrich campaign contributors on the backs of local government and taxpayers — all while they blithely blame local leaders for fiscal malfeasance leading to debt crises. As we reported, lawmakers are sitting on proposals that could close at least this one tax loophole — it is doubtful the legislature will act, especially when they can continue to blame local leaders.

DSCN0444Amy Kerr Hardin

Public policy geeks — a couple days after this publication, the Diane Rehm Show had an excellent segment on 911 and GIS location issues. Listen to her show HERE.

 

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