BALLOT BOX: Without Public Act 4, fixing problems will take much longer

By John R. Axe

On Nov. 6, the voters will be presented with six statewide propositions, five of which are proposed amendments to the Michigan Constitution and one, "Proposal 1" which is a referendum on whether Public Act No. 4 of 2011(the Emergency Manager Law) should remain in effect. Public Act No. 4 ("ACT 4") took effect on March 16, 2011, and granted extensive new powers to emergency financial managers who at that time were managing the cities of Highland Park, Ecorse, Pontiac and Benton Harbor and the Detroit Public School District. Act 4 provided the power to emergency financial managers to correct financial problems in cities or school districts nearing insolvency in the most effective manner and to return them to control of the electorate in the shortest possible time.

Old emergency financial manager law

Under the former law (Public Act No. 72 of 1990) ("ACT 72"), emergency financial managers had limited powers to correct problems in cities or school districts, which had neared insolvency. Under ACT 72, the manager could attempt to solve financial problems by renegotiating existing union contracts or in the alternative, simply laying off large numbers of public employees, most of whom were policemen and firemen. During the course of these activities, the unions would invariably stall the process and if layoffs were finally ordered because new contracts could not be negotiated, the unions would sue and stretch the process out over many years. In addition, under ACT 72 no city property could be sold without the approval of the existing city council and mayor even if such a sale would result in a substantial solution to the financial crisis. For instance, it took from the year 2000 to the year 2006 for the former manager of Hamtramck to finally balance the budget, reduce the employee levels, and return the city to its elected council and mayor.

Advantages of Act 4

The principal difference between ACT 4 and ACT 72 is the time it will take to solve the troubled community's financial problems.

A single manager was in office in Hamtramck for nearly 6 years. He finally solved the problem after endless union negotiations and court proceedings, which dragged on for 5 years.

The same person was appointed manager in Pontiac in September of 2011. Pontiac had already had two other managers starting in March of 2009 when, at that time, the city had 715 employees. Today through cooperative agreements with Oakland County, Waterford Township and privatization of city services, the City of Pontiac has 38 employees excluding 34 court employees. The ability granted to a manager by ACT 4 to revise labor agreements either to permit outsourcing which in the case of Pontiac simply involved transferring some of the existing union employees either to Oakland County or to Waterford Township (where they are in different unions doing the same job but at huge savings in cost) is essential to the success of an emergency manager.

One year under Act 4

Louis Schimmel, who is the manager in Pontiac, has accomplished the following in just over one year under Act 4:

(1) Sale of Excess City Property and Capacity:

A. $55,000,000 proceeds from the sale of excess capacity in the sewer and water systems.

B. Over $700,000 from the sale of vacant or unused real estate including parking lots.

(2) Contracting Out:

Police, Fire, DPW, Water and Sewer Systems, as well as the Library, Housing Commission, Retirement Board, HUD Federal Programs Administration, Vital Records Administration, assessing and property tax appeals, trash pickup, and cemetery management, legal services, insurance administration, income tax administration, IT services and Controller and Budget Administration.

Total Annual Savings: $19,000,000

(3) Health Care Insurance Reform:

The City went from 87 different plans (mostly required by union contracts) to one plan and required a 20 percent copay on the premiums by both active employees and retired employees, saving a total of $7,000,000 annually.

(4) Litigation Settlement and Court Budget Reduction:

A. Settled Tax Appeals with savings of $11,000,000.

B. District Court budget reduced by $1,000,000.


If ACT 4 is not reinstated, the managers in Pontiac and everywhere else will lose their power to revise city ordinances, charter provisions and union labor contracts, all of which were essential in the accomplishments outlined above. If Act 4 is not retained, the real losers are the citizens of Pontiac, Flint, Highland Park, Ecorse, Benton Harbor, and the citizens in the school districts of the City of Detroit, Muskegon Heights, and Highland Park where the managers without the expanded powers will take much longer to fix the problem.

I urge you to vote "Yes" on Proposal 1.


John R. Axe of the law firm Axe & Ecklund is a graduate of the University of Michigan (B.A., 1960) and Harvard Law School (L.L.B., 1963). In addition to his experience as a practicing bond attorney and financial consultant in municipal issues, Axe is a co-author of "Michigan Municipal Law," a two-volume work published in 1981 by the Institute of Continuing Legal Education for the University of Michigan.

Published: Wed, Oct 31, 2012