Guest view of Paul Jordan: Why you should vote 'No' on Proposal 1

MLive/Flint Journal opinion By MLive/Flint Journal opinion
on October 28, 2012 at 9:19 AM, updated October 28, 2012 at 9:19 PM
SK CMH KIDS.jpgPaul G. Jordan

The following is a guest view by Paul G. Jordan: 

On Nov. 6, Michigan voters will decide whether the financial interests of banks and bondholders should be allowed to override local democracy. 

Public Act 4 (PA-4) -- the "emergency manager" law that pits those interests against the rights of voters and those they've elected to office -- will be on the ballot. When voters get to Proposal 1, they should vote "No" to repeal it and restore local voting rights.

Those defending the draconian emergency manager law sometimes concede that emergency managers diminish local control, but they claim that bankruptcy is the only alternative and that it would be far worse. 

The question is: Worse for whom?

Those who like the emergency manager approach -- like the Mackinac Center -- don't like the prospect of bankruptcy for a simple reason: Municipal bankruptcy under federal law requires real sacrifices from bondholders and bankers -- not just residents and workers.

Unlike emergency managers, bankruptcy courts have the power to bring creditors to the table. That can lessen cuts in services like police and fire departments, and public transportation. But compromise and sacrifice by creditors is something the emergency manager law was explicitly designed to prevent.

Here's what PA-4 says: 

"Sec.18. (1) The emergency manager shall develop and may amend a written financial and operating plan for the local government [which…] shall provide for all of the following:

(a) Conducting all aspects of the operations of the local government within the resources available according to the emergency manager's revenue estimate.

(b) The payment in full of the scheduled debt service requirements on all bonds, notes, and municipal securities of the local government and all other uncontested legal obligations."

In other words, the emergency manager law is devised so that any sacrifices made to address the fiscal crisis of a city or school district are borne by the employees, taxpayers and residents. The debt holders are paid in full.

That's a serious problem. Debt and Wall Street misdeeds helped create the financial crisis in the first place. In Detroit, for example -- contrary to popular perception -- interest payments alone exceed annual payments for employee pensions. And over a billion dollars of the city's long-term debt is held in problematic financial instruments that were irresponsibly promoted to municipalities during the height of the boom.

Another important difference: bankruptcy law requires that local elected officials be engaged in the restructuring process. That's completely opposite from the emergency manager law, which transfers all power from elected officials to the emergency manager.

Make no mistake, a bankruptcy judge is a powerful figure. But look at private-sector companies that have gone through bankruptcy. You see a process designed to protect the interests of all stakeholders in making the new company successful. By contrast, emergency managers create new divisions that make it even harder for local governments to succeed over the long term.

Whether either process is sufficient to address the underlying causes of local fiscal crisis is a fair question. Based on the limited record so far, every Michigan city or school district that has had any form of emergency management is either still engaged in the process many years later or has emerged from it only to fall back into crisis a few years later. 

The Emergency Manager law so far hasn't produced any success in the way of long-term viability. In fact, the Detroit Public Schools, now on their second emergency manager, are in worse shape than they have ever been. 

On the other hand, some local government bankruptcies such as Orange County in California appear to be successful years after bankruptcy.

What can't be contested under any standard is that PA 4 concentrates sacrifice and pain on residents and those who serve the public interest. The law not only subverts the will of the governed, but does so based on the financial interests of the wealthy. 

Our cities need solutions that respect all parties, and share sacrifice among all. In November, Michigan voters need to restore local democracy by voting "No" on Proposal 1.

Paul G. Jordan is a Flint resident that is a plaintiff in the lawsuit to overturn PA 4, as well as a supporter of the referendum effort opposing it.