EFM Law Facing Repeal

[Novine]

Update: The Michigan Supreme Court ruled on August 3, 2012 that the ballot proposal to repeal the EFM law is valid and must appear on the ballot.

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"A group seeking repeal of the state’s emergency manager law submitted this afternoon what they said were 226,000 petition signatures to force a referendum on the issue in November.

If a state elections panel verifies that 161,305 of the signatures are those of registered voters, the controversial statute enacted last year would be suspended until the vote...."

Detroit Free Press

Detroit News

[Flintoid]

I think we all knew this a month or two ago.

[One Shot]

Too bad this is really just an "US vs. THEM" [[black/white) issue and not really about getting things in order!

[313hero]

Too bad this is really just an "US vs. THEM" [[black/white) issue and not really about getting things in order!

NO IT'S NOT. Its a RIGHT to be an AMERICAN Issue. Its a RIGHT TO VOTE ISSUE. NOT Black Vs. White. Eventhough it only seems to be Black communities lossing their right to vote, govern etc. What if China told America we are going to appoint someone to run OUR country cause we so deep in debt. Would YOU let that Fly. Should it Fly??????????

[Packman41]

What if China told America we are going to appoint someone to run OUR country cause we so deep in debt. Would YOU let that Fly. Should it Fly??????????

Hmmm… that already happens every day in the real world.

During a bankruptcy [[particularly commercial real estate) the lender can take several routes. If the lender perceives the borrower is not part of the problem the loan failed, then they MAY allow a “debtor-in-procession.” This is where the owner maintains management of the property while they attempt to restructure their loan.

However, if the lender believes the borrower is part of the problem and contributing to losses, then they can ask the court for a court appointed receiver. Once a Receiver is named, then the borrower gives up control of the asset and the Receiver becomes responsible for the property. The borrower is still the owner, but no longer in control.

Sound familiar?

Maybe not a China/US thing, but this happens every day in Michigan.

[corktownyuppie]

NO IT'S NOT. Its a RIGHT to be an AMERICAN Issue. Its a RIGHT TO VOTE ISSUE. NOT Black Vs. White. Eventhough it only seems to be Black communities lossing their right to vote, govern etc. What if China told America we are going to appoint someone to run OUR country cause we so deep in debt. Would YOU let that Fly. Should it Fly??????????

China would not appoint someone to run OUR country because we were so deep in debt. They would appoint someone to run our country if we were so in debt to THEM and ALSO IF the way we were running our country caused them not to get paid.

This is the way the world works. If you lent $1,000 to a friend and you found out she was using to buy a 7-day cruise, you would eventually get pissed and say...ok, look, you owe me $1,000, and as long as you pay me back on schedule, I don't care what you do with the money.

But if you aren't paying me back on time and I find out you're using that money to do other less important things, then OF COURSE you're going to want to control her spending.

That's the way the business world works. It's the way the political world works. It's the way human nature works.

If you don't want the Chinese taking over, you have two choices: Pay them back on time or Don't borrow money from them.

[313hero]

LMAO too funny

[Hermod]

If you don't want the Chinese taking over, you have two choices: Pay them back on time or Don't borrow money from them.

One big difference with China as the lender and the US as the borrower. If the lender makes too big of a stink about it, the US just pays them off. The debt is denominated in dollars and the US owns the printing press. If the debt was denominated in euros or in gold, there might be a bigger problem.

[corktownyuppie]

One big difference with China as the lender and the US as the borrower. If the lender makes too big of a stink about it, the US just pays them off. The debt is denominated in dollars and the US owns the printing press. If the debt was denominated in euros or in gold, there might be a bigger problem.

I know what you mean by this. A few econ buddies of mine were toying around with the idea of what would happen if Detroit began running its own currency...like the Confederates did during the Civil War. We arrived at three conclusions:

[[1) We'd be able to pay all our debts, because they'd be denominated in Detroit Dollars. No EFM or bankruptcy necessary.

[[2) Detroiters would experience hyper-inflation because using the printing press to pay debt also results in deflating the Detroit Dollar.

[[3) All our expatriated pensioners who live out of the city and out of the state would be more likely to spend money back into the city. Much of our problem is that for ever $1.00 we spend on pensions and expenses, only a fraction actually ends up back into the local Detroit [[or even Michigan) economy.

So yeah, I see your point. That's why I'm not worried about the Chinese empire forcing me to choose my own bride Hyper-inflation, however...it's a possibility.

[ndavies]

If you mess up your finances bad enough, Your rights get taken away. It doesn't matter if you're a person, city, state or country. The minute you have to have someone come in and save you, You lose your right to decide on your future.

If I was the Governor, I would send one of the entities assigned an EFM through chapter 9 bankruptcy. The communities that are in trouble will be screaming for an EFM after they watch the fallout from a bankruptcy.

The choice is between a EFM appointed by the state and a receiver appointed by a federal judge. I personally think the EFM is the better route.

[313hero]

So if someone lends me $1000 and I cant/dont pay it back they should have the right to choose who in charge of my household??? they have the right to take away my wife and appoint me a new one??? they have those rights??? So If America Misses a payment to China they have the right to appoint us a new President. Is that what you guys are saying??? I hope yall dont truly believe that. Well seeing how yall treat KK yall probably do. WOW. Is that why we invading all of these other countries cause they owe us money??? or is because WE want EVERYBODY to be governed the way we are??? We want to spread "Freedom" buy actually taking away the freedoms of other Nations. In a Free world those countries should be "free" to have dictatorships. Hmmmmmmmmmmm

[townonenorth]

Municipal bankruptcies are not preferred to EFM or a consent agreement. Removing the other two options via petition will assure that a whole lot of stuff will be out of the hands of Detroiters. Get used to it.

[antongast]

Municipal bankruptcies are not preferred to EFM or a consent agreement. Removing the other two options via petition will assure that a whole lot of stuff will be out of the hands of Detroiters. Get used to it.

This isn't going to get rid of EFMs entirely. What it will do is roll back Snyder's expansion of the EFMs' powers and reinstate the previous EFM provision. From the Freep article linked at the top of the thread:

In a statement issued shortly after the petitions were submitted, Attorney General Bill Schuette said suspension of the 2011 law would revive an earlier emergency manager law which was repealed by the new statute. “Pending the outcome of the referendum vote in November…the previous state law governing emergency financial managers…will govern in the interim,” Schuette said.

[Wesley Mouch]

I find it funny that there's a rebellion against EFMs. The EFMs are actually a tool of the government to try and find a way of avoiding the real pain of bankruptcy.

It would frankly be much better for all of us if we just let the bankrupt municipalities go through bankruptcy. The deep pain involved might actually change municipal government for the better.

Under the EFM, there'll just be a little pain, and then mostly back to business.

I don't want to shield the corrupt [[Detroit) and greedy [[contractors and unions) and stupid [[Allen Park) from their bad financial decisions. Let them live with the results of raping their cities.

[Hermod]

So If America Misses a payment to China they have the right to appoint us a new President. Is that what you guys are saying???

China has a wee bit of a problem here. The loan is denominated in US dollars and the president owns the printing press. He can quickly print up a stack of billion dollar bills and pay off China. That is why China cannot pressure us because of our debt. Of course in any new borrowing, China would demand the debt be denominated in gold, Swiss Francs, or some other hard asset.

[Packman41]

No, you don't get it - you are hung up on the US/China thing.

Notice I said, "...particularly commercial real estate." It happens is business every day. It pays to understand the terms and conditions you agreed to when you signed that loan, mortgage or note.

You've never heard of a court appointed receiver??

Seriously???

[corktownyuppie]

This whole China-chooses-your-own wife thing is pretty hilarious.

Look, let's be simple about this.

Let's say you're a plumber for the City of Quahog. You get paid $1,000 per week. Quahog misses 3 consecutive paychecks. You're pissed. Not to mention, you're f-ing broke.

So then you find out that Quahog didn't pay you because they were too busy paying for the Mayor to go on 2-week vacations to Tahiti.

At some point, you're gonna say...LISTEN...you OWE me money for STUFF I ALREADY DID.

Since you don't like the EFM solution and don't like a court-appointed receiver making the decisions, what is your solution? How are you gonna make sure you get paid? And seriously, how would forcing the Mayor to marry your Chinese bride help you get paid any more?

[Kevgoblue]

Admittedly I'm not as informed of all the ins and outs of the EFM law as I would like to be. That being said......

I've never heard it mentioned, is there any type of long term fiduciary resposibility associated with appointing an EFM? So what happens after the EFM [[sent by our pro-business, outsourcing, charter loving Governor) comes in cancels contracts and sells off all desireable assets of the community in question? The municipality may have enough money from the selling of assets to sustain itself for another couple years, but what about after that? Does the state now assume responsiblity for paying that city's bills? Will they maintain the infrastructure in that city? Will they assure the retirees still get paid? Because more than likely the EFM's slash and burn policies to reduce the bills will render the city to be less desireable to future residents or businesses.

Or is this just a way to legally raid a sickly community? To allow the buzzards to come in for an easy meal and pick the last of the flesh from the dying carcass?

[corktownyuppie]

Admittedly I'm not as informed of all the ins and outs of the EFM law as I would like to be. That being said......

I've never heard it mentioned, is there any type of long term fiduciary resposibility associated with appointing an EFM? So what happens after the EFM [[sent by our pro-business, outsourcing, charter loving Governor) comes in cancels contracts and sells off all desireable assets of the community in question? The municipality may have enough money from the selling of assets to sustain itself for another couple years, but what about after that? Does the state now assume responsiblity for paying that city's bills? Will they maintain the infrastructure in that city? Will they assure the retirees still get paid? Because more than likely the EFM's slash and burn policies to reduce the bills will render the city to be less desireable to future residents or businesses.

Or is this just a way to legally raid a sickly community? To allow the buzzards to come in for an easy meal and pick the last of the flesh from the dying carcass?

From a business standpoint, understanding that it doesn't exactly follow when dealing with a municipality, the process of restructuring generally involves eliminating the shackles of mounting and accumulating debt while doing everything you can to stabilize and increase revenues.

So I don't think the city is going to default it's pensioners. But it does beg the question, why the didn't we stop offering the pension benefits to new hires 10-15 years ago like everyone else? At minimum, we need to stop that right now for the new hires because every year we keep it going is just making the problem worse.

The city needs to consolidate, consolidate, consolidate. Which policy do you think attracts more residents, one which charges 3.5% income tax but collects less than half of it? Or one which charges 1.25% income tax but collects all of it?

If you were running a company, would you rather have 6 sales reps costing $100,000 per year? Or 6 sales reps that you paid a $40,000 salary plus commissions that could get them to $100,000 per year? We have way too much excess capacity in our processes and not enough lean operation.

So at this point even if an EFM "sold everything" but then eliminated our debts, then that's f-ing awesome. It's so much easier to start all over with a blank slate and build from there, rather than walk into battle with an 90lb. elephant around your neck weighing you down.

[rb336]

If there were a way to appoint an EFM that wouldn't be giving the finger to the democratic process, I'd be more willing to accept it. If it came with actual state assistance to maintain vital services, it would be more palatable. When we see an EFM getting rid of a city's vital services, as was done in Pontiac, we can't see any benefit to the citizens of the city. When one is proposed for a city like Detroit which has a mountain of valuable assets, and when the past behavior of other EFMs is known, it seems like an invasion aimed at controlling those assets, especially when the suburban leaders are known to have been drooling over that idea for decades.

[7miledog]

Ok, I've got to chime in here. The current EFM statute actually provides GREATER authority to an EFM than a bankruptcy judge or trustee would have over a municipality in a Ch 9 proceeding. Case in point, a trustee in ch 9 cannot sell off city assets in order to satisfy municipal debt, an EFM can [[remember the Pontiac Silver Dome). The problem with Ch 9 is that there is a great deal of uncertainty over Ch 9 as there have been relatively few cases under it [[the largest I think was debt of ~$5B in AL, very recently), and there is additional potential fallout on the state and/or other local governments if the largest municipality in a state cannot fund its obligations.

The whole US-China thing is completely asinine. If the US cannot pay the portion of its debt owned to China [[currently $2T of the total national debt of ~14 or 15T), then the result would likely be a civil suit in US Court, diplomacy, or war. There is no provision for a foreign country to take over another in the event of a debt default, because, at the end of the day, who would enforce it? US Courts interpret US and international [[based on treaties, etc) law, and it is enforced by executive branch [[FBI, etc). The only judicial body that would enforce a default on Treasury debt would likely be a US Court, but you then get into a variety of other legal issues, such as governmental immunity, etc. It is all very hypothetical because it has never happened and likely never will. In the event we cannot pay with the money we have, we will print more [[unless of course, we have a political issue with the debt ceiling authority).

[Schoolcraft]

Since we're talking about paying our bills that we owe, we can start with the state paying the money it owes Detroit:

http://www.detroitnews.com/article/2...CS02/201040375

I believe the $220 million owed would cover the debt... After that, let's talk about the state and the city coming up with solutions together that attack the legacy debts and that doesn't usurp the democratic voting process.

[313WX]

Since we're talking about paying our bills that we owe, we can start with the state paying the money it owes Detroit:

http://www.detroitnews.com/article/2...CS02/201040375

I believe the $220 million owed would cover the debt... After that, let's talk about the state and the city coming up with solutions together that attack the legacy debts and that doesn't usurp the democratic voting process.

Detroit's debt is as much as $20 billion dollars.

That $220 million dollars would keep the city running for maybe 3-6 additional months.

[Zacha341]

Yep, the debt being higher than anticipated is no surprise really. Under the Kilpatrick admin it was hidden, attention diverted, audits left undone as the corruption reached critical mass. Chickens firmly home to roost now.

Detroit's debt is as much as $20 billion dollars.

That $220 million dollars would keep the city running for maybe 3-6 additional months.

[Novine]

The $20 billion doesn't mean much without some context. A big piece of that is Detroit Water and Sewer which means the debt is an obligation of the ratepayers in the city and suburbs, not the city. Much of that "debt" isn't debt at all but future obligations for pensions, etc. While there is a concern about paying those long-term, those have less of an impact on current payments. Also, it's not as is Detroit isn't paying off its current debts. Debt payments are a significant part of the city's budget and those payments will continue to be made even if the city runs out of money for other needs. It's not as if the city needs to come up with the money today to pay off that $20 billion.