State to Detroit: Drop consent suit or lose funds...

**Meddle** · June-10-12, 02:41 PM

Why wouldn't the shareholders do what they could to help the city stabilize and increase their stakes, like help bring businesses in and cut costs?

**corktownyuppie** · June-10-12, 03:23 PM

Oh, I think they likely would. I didn't say so explicitly, but I guess I just assumed that shareholders would never want to fail to act when the company is failing and they want to turn it around.

There's just a few things that are obstacles:

[[1) First bringing businesses in is not as simple as deciding to do so. Business owners are naturally risk-averse, and so in order to entice them you need to provide the city services that protect their investment. Right now the city can't afford to always do so.

[[2) Cutting costs almost always requires an up-front investment first. For example, a household might decide that paying for laundry service is too expensive and it would make more sense to do it themselves. But to do so requires the purchase of a washer/dryer. More expense up front, but much less over time.

Another example is that automating income tax collection and payroll services might allow us to shed costs. But doing so also requires an upfront cost of purchasing the software and training people to do it.

===

So in all these cases, the shareholders would likely have to pony up some capital [[or dilute their share value by doing another offering of shares to raise money). But they're not going to be willing to do either of these unless they control how that money is spent.

That's the biggest issue in Detroit politics. Detroit's leaders keep asking for more money. And, frankly, they'll need it to restructure the city. The people with money are reluctant to give it. And even those whom you can convince to do so will tell you that they want to oversee how it's spent to make sure it's not wasted. Detroit's citizens say that if outsiders control the budget, then you're killing democracy.

The people with the money responds, saying, well if you're not going to let us control the money, then we're not going to give it to you.

And round and round....

**Novine** · June-10-12, 04:06 PM

"Why wouldn't the shareholders do what they could to help the city stabilize and increase their stakes, like help bring businesses in and cut costs?"

Look at K-Mart. Lampert acquired the company for the real estate, not the retail business. If K-Mart fails as a retail business, the stockholders can still gain from the sale of the real estate. In fact, they would probably do better if the retail end went out of business. Most stockholders don't care about the long-term interest of publicly traded corporations. Why would they feel any different about Detroit?

**corktownyuppie** · June-10-12, 04:10 PM

Originally Posted by Novine

Most stockholders don't care about the long-term interest of publicly traded corporations. Why would they feel any different about Detroit?

I agreed with you up until this point. I'd say most stockholders care about the long-term interest of publicly traded corporations. Sure they don't get any media attention, and, yes, CNBC distracts us with prognostications about short-term movements in order to generate emotion and keep viewership high.

But the investment community on the whole cares very much about about long-term interest of publicly traded corporations.

**corktownyuppie** · June-10-12, 04:11 PM

Plus, the problem in Detroit isn't that people don't care about the city in the long run. It's that they care about the short-term at the expense of the long run.

**mam2009** · June-10-12, 04:47 PM

Originally Posted by Meddle

If the State can eliminate the Clowncil and get the city back on track sans corruption and mis-spending, I say go for it. Full speed ahead.

I sure hope the State will be better at running the City of Detroit than they have been at running DPS, Flint, Highland Park, Hamtramck...Shall I continue?

**mam2009** · June-10-12, 04:57 PM

Originally Posted by corktownyuppie

You've got to be kidding. The state was willing to step in and guarantee bonds that allowed the city access to cash when they were running out. This was only agreed to because the city entered the consent agreement. You don't want the consent agreement? Then the STATE WON'T LOAN YOU ANY MORE MONEY.

This has nothing to democracy. I'm sure Lansing would be THRILLED if the City said, we are suing you to void the consent agreement. We've also fixed our books so that we don't need you to co-sign our loans anymore.

The CITY guaranteed those bonds with revenue SHARING dollars that EVERY Michigan city receives from the State EVERY year. The state shares that money [[generated from the State sales tax) with all of its cities -- not just Detroit -- since it is generated from the sale of goods in those cities. [[And because Detroit is still the most populous city in the state, of course it receives a large portion because much is still purchased here by those who live and work here.) So yes, Detroit IS entitled to it just as ALL Michigan cities are entitled to it.

**corktownyuppie** · June-10-12, 05:44 PM

Originally Posted by mam2009

The CITY guaranteed those bonds with revenue SHARING dollars that EVERY Michigan city receives from the State EVERY year. The state shares that money [[generated from the State sales tax) with all of its cities -- not just Detroit -- since it is generated from the sale of goods in those cities. [[And because Detroit is still the most populous city in the state, of choose it receives a large portion because much is still purchased here by those who live and work here.) So yes, Detroit IS entitled to it just as ALL Michigan cities are entitled to it.

Look, I won't argue that Detroit is entitled to every dollar of that revenue sharing money. The key here is that while Detroit is entitled to it, it's not Detroit's money yet. And since those funds are still in the hands of the State, any lender is going to want to the state to sign off on it to collateralize the loan.

The state is unwilling to do so without a consent agreement. The lender is unwilling to make the loan based on the city's word alone.

The constant theme of all this is that if Detroit could qualify for loans by themselves, then they can do whatever they want. But since they can't [[or since we can't, as I live here), we're beholden to whoever has the money.

We might not like it. We might not think it's fair. But it has nothing to do with democracy.

**mam2009** · June-10-12, 05:47 PM

I find it ironic that Gary Brown & many others [[DYes posters, Stephen Henderson, etc.) who are very aware of the consrquences of not following the law are openly advocating that Detroit's Corporation Counsel [[who is BOUND BY THE LAW AND, THUS, BOUND BY THE ETHICAL STANDARDS OF THE STATE BAR) ignore the LEGAL REQUIREMENT to seek an opinion as to whether the consent agreement violates both State and local laws.

First the Governor & Treasurer extorted the Council into signing the hastily drawn up document that became the consent agreement by threatening to appoint an emergency manager. Then the process to approve the document was so flawed that the Law Department had less than a week to review it! Most of us take longer than that to mull over what color to paint the living room! Imagine what kind of decision you would make if someone said you would lose your house if you didn't choose a paint color by THEIR flawed deadline and if you never opened the curtains to see what the colors looked? Then imagine you are stuck with a color you don't like and your lawyer shows up to tell you that it was likely illegal for your extorter to offer you such a flawed ultimatum?

**corktownyuppie** · June-10-12, 05:49 PM

Originally Posted by mam2009

I find it ironic that Gary Brown & many others [[DYes posters, Stephen Henderson, etc.) who are very aware of the consrquences of not following the law are openly advocating that Detroit's Corporation Counsel [[who is BOUND BY THE LAW AND, THUS, BOUND BY THE ETHICAL STANDARDS OF THE STATE BAR) ignore the LEGAL REQUIREMENT to seek an opinion as to whether the consent agreement violates both State and local laws.

First the Governor & Treasurer extorted the Council into signing the hastily drawn up document that became the consent agreement by threatening to appoint an emergency manager. The process to approve the document was so flawed that the Law Department had less than a week to review it! Most of us take longer than that to mull over what color to paint the living room! Imagine what kind of decision you would make if someone said you would lose your house if you didn't choose a paint color by THEIR flawed deadline and if you never opened the curtains to see what the colors looked? Then imagine you are stuck with a color you don't like and your lawyer shows up to tell that it was likely illegal for your extorter to offer you such a flawed ultimatum?

You raise good points. Would it have made more sense [[or does it make more sense now) for the governor to simply send in an EM? I always thought that we were all trying to avoid that?

**townonenorth** · June-10-12, 05:50 PM

Originally Posted by mam2009

I sure hope the State will be better at running the City of Detroit than they have been at running DPS, Flint, Highland Park, Hamtramck...Shall I continue?

Yes, please do, and please note which city has an EM appointed under the new act. Or bankruptcy. There's a reason that these entities really failed, and it's that the former EM law was weak and ineffectual. New one, maybe not so much. I haven't heard much about Benton Harbor in the news, or Flint. Why is that?

**Scottathew** · June-10-12, 05:55 PM

mam2009,

I don't find it ironic that Detroit is bankrupt and fighting the best way out of it.

If the consent agreement is invalid then Detroit is left with two choices:

1) Municipal Bankruptcy
2) Emergency Financial Manager

Union folks should be ill thinking about option one, and the thought of pension obligations being modified, reduced, eliminated.

Detroit ignored its financial issues, shoved its fingers in its ears, and said "LAA-LAA-LAA, I can't hear you!". The state came in, and is trying to do the more desirable form of help, the kind that leaves the council and mayor in place with more power.

However, the council wants to fight this option, and leave the state with no choice but a full takeover.

**coracle** · June-10-12, 05:56 PM

Originally Posted by mam2009

I sure hope the State will be better at running the City of Detroit than they have been at running DPS, Flint, Highland Park, Hamtramck...Shall I continue?

Why should the State have to step in to these incompetently run organizations and take their eye of the rest of the State population? You can be sure that everyone of them will put every obstacle possible in their way to insure the State cannot succeed and highlight what a pile of dummies they really are. Yes continue.....

**mam2009** · June-10-12, 05:58 PM

I find it ironic that Gary Brown & many others [[DYes posters, Stephen Henderson, etc.) who are very aware of the consequences of not following the law are openly advocating that Detroit's Corporation Counsel [[who is BOUND BY THE LAW AND, THUS, BOUND BY THE ETHICAL STANDARDS OF THE STATE BAR) ignore the LEGAL REQUIREMENT to seek an opinion as to whether the consent agreement violates both State and local laws.

First the Governor & Treasurer extorted the Council into signing the hastily drawn up document that became the consent agreement by threatening to appoint an emergency manager. Then the process to approve the document was so flawed that the Law Department had less than a week to review it! Most of us take longer than that to mull over what color to paint the living room! Imagine what kind of decision you would make if someone said you would lose your house if you didn't choose a paint color by THEIR flawed deadline and if you never opened the curtains to see what the colors looked like? Then imagine you are stuck with a color you don't like and your lawyer shows up to tell that it was likely illegal for your extorter to offer you such a flawed ultimatum?

**mam2009** · June-10-12, 06:06 PM

In response to corktown yuppie's post #60 [[replying with my beta-tested smartphone is not quite the same as using my laptop)...

It would have made sense for the process to allow adequate time for the consenting parties to perform due diligence with its legal counsel.

**313WX** · June-10-12, 06:21 PM

Originally Posted by corktownyuppie

You raise good points. Would it have made more sense [[or does it make more sense now) for the governor to simply send in an EM? I always thought that we were all trying to avoid that?

It would have avoided the legal barreirs.

But the problem is, some would argue that it wasn't effective enough, especially given how urgent Detroit's fiscal crisis supposedly is.

So other than bankruptcy, what other legal options do we have to urgently address Detroit's financial problems?

Keep in mind as well, th EFM was drafted specifically for Detroit [[as state officials knew Detroit's shit would hit th fan soon). Benton Harbor and Flint were test runs.

And I'm giving Snyder the benefit of the doubt and assuming he knew the legality of the measures he's implementing on Detroit were questionable at best [[as he has a Law and Business degree fom a top 10 Public University). I understand he simply wants to get rid of its corruption and get the books balanced as quickly as possible. I understand he doesn't want his other constituents in Michigan to suffer from a Detroit bankruptcy. I understand he doesn't want to be responsible for anything that may accelerate Detroit's death. But he's not overseeing a business where all he has to do is tell his employees to walk and they'll run, he's running a governmnt divided into several different levels that must all work in snyc with each other.

As for Crittendon, she' doing what she's appointd to do, look out for the LeGAL interest of her client [[the city). There's no reason to demonize her because she's questioning the legality of what the stat is doing. Some will argue that if she's an appointed official, she can't file a lawsuit without the consent of elected city officials. Well, the blame there goes to the idiots who drafted the city charter [[protected by the Home
Rule Cities Act) and decided to give an appointed official more power than the individual who appointed her.

**mam2009** · June-10-12, 06:32 PM

It is highly hypocritical for Gary Brown, who was fired for blowing the whistle on government officials who ignored the law & misused City resources, to advocate for the removal of Krystal Crittendon. Lawyers from the City's law department were disciplined for their role in that whole debacle for obeying the directive of the mayor rather than obeying the law. Gary, Stephen, Nolan, DYes posters, etc. are all well aware of the importance of obeying the law. And I bet all of that mess is still very fresh in Ms. Crittendon's memory [[since she worked in that Law Department at the time). So, I'm guessing that the threat of her removal is not even enough to deter her from obeying the law. Shame on all you hypocrites.

**mam2009** · June-10-12, 06:50 PM

Originally Posted by 48091

mam2009,

I don't find it ironic that Detroit is bankrupt and fighting the best way out of it.

Says who? The Free Press & Detroit News editorial writers? How can an illegal document offer the best option? Edsel Ford could've left Detroit $1.3 billion in his will, but if the will isn't legally valid, what good is it?

**Meddle** · June-10-12, 06:52 PM

mam2009, I don't understand why you seem determined to defend the Good-Old-Boy system that dragged the city into the sewer. They ALL need to go. Full clean sweep. Clowncil, all Department heads and everyone else even remotely involved. Many of them should be in jail.

So, whatever it takes should be done. Eliminate the problem by whatever means necessary.

Maybe even bring the Feds in with RICO. If Detroit isn't a continuing criminal enterprise, I don't know what is.

**townonenorth** · June-10-12, 07:04 PM

Originally Posted by mam2009

It is highly hypocritical for Gary Brown, who was fired for blowing the whistle on government officials who ignored the law & misused City resources, to advocate for the removal of Krystal Crittendon. Lawyers from the City's law department were disciplined for their role in that whole debacle for obeying the directive of the mayor rather than obeying the law. Gary, Stephen, Nolan, DYes posters, etc. are all well aware of the importance of obeying the law. And I bet all of that mess is still very fresh in Ms. Crittendon's memory [[since she worked in that Law Department at the time). So, I'm guessing that the threat of her removal is not even enough to deter her from obeying the law. Shame on all you hypocrites.

It's bullshit. All of this was planned from the get go. Look at all the pronouncements from Joann Watson's mouth, exactly mirroring the SAME argument in her lawsuit. Exactly the same. So one can generally infer that Joann planned this, as her goodbye gift to the city. To say that the Corporation Counsel didn't know anything about this, is just hoping that people that are paying attention are stupid. How could she NOT be appraised of this? Did Joann Watson block her view from the back row? Blinded by her brilliance?

**mam2009** · June-10-12, 07:18 PM

Originally Posted by Meddle

mam2009, I don't understand why you seem determined to defend the Good-Old-Boy system that dragged the city into the sewer. They ALL need to go. Full clean sweep. Clowncil, all Department heads and everyone else even remotely involved. Many of them should be in jail.

So, whatever it takes should be done. Eliminate the problem by whatever means necessary.

Maybe even bring the Feds in with RICO. If Detroit isn't a continuing criminal enterprise, I don't know what is.

The only system I'm defending is the LEGAL SYSTEM. If we all start arbitrarily picking and choosing which laws to follow, anarchy will follow. I favor a consent agreement -- one that is legal and that has a high probability of success & sustainability.

**skyl4rk** · June-10-12, 07:20 PM

I think Crittendon is being paid by the state to block the consent agreement. They know if the state can appoint an EM, the state will be able to sell Detroit's jewels to corporations and dissolve the city. Jewels like the Water Authority, transit, electric plant and the Sewer Plant, plus all the property that the City now owns, including the streets. It will all be sold to corporations who will raise the prices and make lots of money. They will give away City-owned land for free to big business so they can make profits off of it. They will bring all kinds of people into Detroit, who will take away the best places from current Detroiters. They will bring in police who violate the rights of criminals. It will be a disaster.

**townonenorth** · June-10-12, 07:37 PM

Originally Posted by skyl4rk

I think Crittendon is being paid by the state to block the consent agreement. They know if the state can appoint an EM, the state will be able to sell Detroit's jewels to corporations and dissolve the city. Jewels like the Water Authority, transit, electric plant and the Sewer Plant, plus all the property that the City now owns, including the streets. It will all be sold to corporations who will raise the prices and make lots of money. They will give away City-owned land for free to big business so they can make profits off of it. They will bring all kinds of people into Detroit, who will take away the best places from current Detroiters. They will bring in police who violate the rights of criminals. It will be a disaster.

In a nutshell, the bolded and underlined statement, as a mindset, is what is wrong with Detroit. LOL

Water and Sewer are in debt up to their eyeballs.
Transit is falling apart by the day.
Electric? A jewel?

All the property the city owns, is worthless in the current political scheme.

**313WX** · June-10-12, 07:39 PM

Originally Posted by skyl4rk

They will bring in police who violate the rights of criminals.

Well not so much criminals, more so innocent Detroiters.

**mam2009** · June-10-12, 07:42 PM

Originally Posted by corktownyuppie

Look, I won't argue that Detroit is entitled to every dollar of that revenue sharing money. The key here is that while Detroit is entitled to it, it's not Detroit's money yet. And since those funds are still in the hands of the State, any lender is going to want to the state to sign off on it to collateralize the loan.

The state is unwilling to do so without a consent agreement. The lender is unwilling to make the loan based on the city's word alone.

The constant theme of all this is that if Detroit could qualify for loans by themselves, then they can do whatever they want. But since they can't [[or since we can't, as I live here), we're beholden to whoever has the money.

We might not like it. We might not think it's fair. But it has nothing to do with democracy.

Someone can correct me FACTUALLY on this, but I believe that the State is both constitutionally & statutorily bound to give that revenue sharing money to Detroit as long as that revenue is in the State's coffers which is the only reason why any bondholders are willing to take the risk of lending us their money. Hopefully, an expert on municipal bonding can weigh in. I don't mean to split hairs. My point was just that this isnt Detroit welfare or some special Detroit-only favor. Since the Govermor didn't think it wise to GIVE Detroit any direct financial assistance, the State encouraged the City to go to the bond market AGAIN to BORROW ITS WAY OUT OF DEBT. I thought that's what got us here in the first place, Mr. Governor? Hmmm...