Can Detroit be Saved?

Story first appeared in The New York Times.

DETROIT — Other cities and towns have teetered at the edge of financial disaster lately, but Detroit, the capital of America’s auto industry and once the nation’s fourth-largest city, has just become the most striking test case for a key question: Can a city that has fallen so far be saved?

A giant plot of land — 139 square miles — with only half the residents it once had, Detroit has watched in recent years as tax revenues have slipped too low to support its costs, its debts have swelled to a stunning $12 billion, and, this spring, its money nearly ran out. Now, after months of wrangling over how and when and whether the State of Michigan should intervene to stem the hemorrhaging finances, officials here said that a historic deal, approved Wednesday, granting the state oversight powers puts Detroit on a path to recovery at last.

The deal, which creates an advisory board to oversee financial decisions, spared the city from fates that many viewed as far worse: a complete takeover by a state-appointed manager, bankruptcy or default. But Detroit’s problems are far from over, and the new deal by no means assures success.

The financial woes of this city, now dependent on a tax base of just 713,000 residents (amounting to what is now only the 18th most populous city in the nation) are huge and fundamental — too sizable, some critics say, to be solved by monitors. Oversight agreements tried in other places have taken many years in some cases, and results have been mixed.

And, unlike full state takeovers that some cities have unhappily undergone, these sorts of deals require a high degree of political compromise and getting along, those who have worked on them elsewhere say. Detroit is still bitterly polarized over whether state involvement is needed at all.

Around Detroit, residents tell of a city where streetlights fail, buses run late and no one can be sure when the police will turn up. While some business owners and young entrepreneurs tell of a renaissance of private industry in the city, the poor level of municipal services has created a deep-down pessimism about the notion that things will change now.

States have long used a range of methods to step in when municipalities have fallen into trouble, and some have worked. In the 1970s, a financial control board helped pull New York City from the edge. But the powers — and results — of such boards and appointed receivers vary widely, and some experts expressed doubt that Michigan’s oversight of Detroit would go far enough.

Under a so-called consent agreement, approved reluctantly this week by divided Detroit leaders, a nine-member financial advisory board will be appointed to guide the city, which will be required to report any budget shortfalls swiftly and to hire a program management director to help oversee reforms. The agreement also will reopen union contract talks, and permit sharp cuts.  It also considers the possibility of privatizing some city services and consolidating departments — powers that union leaders, who had been negotiating separate concessions with city leaders in recent months, object to furiously. And the deal cleared the way for refinancing of debt to solve the city’s imminent cash crisis.

Though many residents objected to the agreement as a seizure of city control, the Governor could have chosen a more sweeping step under Michigan law and called for an emergency manager to take over many of the powers of the local officials, as well as the ability to throw out existing labor contracts. Detroit leaders loudly opposed that plan, as the Governor, who has been widely criticized over his use elsewhere in the state of the emergency manager law, which is now the target of a repeal effort.

The political pressure not to send in an emergency manager grew intense in months of debate here. Some saw the question through a prism of race, arguing that it would amount to a white takeover of the state’s largest city, where 82 percent of residents are black. Others called it a union-busting maneuver by Lansing, the Republican-held capital.

But the governor’s spokeswoman, said that the Governor had always preferred some alternative to a full takeover.

Yet some critics wondered whether the city might be too far gone for anything short of the powers of an emergency manager, whether an advisory board would be willing to go far enough to fundamentally change the city.

Those who have worked within such oversight arrangements in other states offer a mixed picture of how well they work, in part because much rests in the individual details of the troubled city’s supervision deal and how much (or little) power an oversight body is granted. John F. Street, the former mayor of Philadelphia, said an oversight board there that began in the 1990s mostly proved to be useful.

The  managing director of an independent advisory firm, Public Financial Management, who works on such arrangements in states like Pennsylvania, said that the boards were rarely instant fixes, and can take years for cities to emerge from. They also require a high level of collaboration and consensus-building, he said, under sometimes tense political conditions. In the case of Detroit, feelings seemed  to have reached a boil for some already — even before the new board has been named.

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Detroit Negotiating with Unions

Story first appeared in The Detroit News.

Detroit-- The latest plan to keep Detroit from an emergency manager unveiled Thursday includes tough new terms for city employee unions that labor leaders vowed to fight.  This has piqued the interest of Dearborn Labor and Employment Lawyers in the area.

The City Council on Thursday got a first look at a proposed financial agreement crafted by state officials. The plan calls for negotiating or imposing tough new union contracts by July 16, but includes no new money requested by the Mayor to help the city restructure its finances.

Reaction was swift from union leaders, who said the proposal is more about politics than saving money. The chief negotiator for AFSCME Council 25, said their coalition of 30 unions have brokered significant savings with the mayor. Those agreements have yet to be approved by the City Council, and sources have said state officials don't think the concessions go far enough.  Without proper Union provisions, a Dearborn Labor and Employment Lawyer may be called in to review the facts.

The goal would be to build off a single template for all unions, including police and fire. The contracts would call for:

Promotions based on merit, not seniority, for some positions.

Restricted bumping rights and permission to outsource.

Alter work rules to support the city's financial restructuring.

Defined contribution retirement health care benefit for new hires. This opens up the possibility for addition of Home Healthcare Supplies to the template.

Consolidated departments to achieve cost savings.

An earlier version of the proposal union officials obtained Thursday included a provision to ban unions from suing or filing grievances over terms of the contract. That phrasing was removed from later versions. Union leaders said that provision would have devastated their representation of employees.  Local Dearborn Labor and Employment Lawyers are gearing up for proper defense and representation of factory employees.

A State Treasury Department spokesman defended the proposals.

A report this week from the state financial review team overseeing Detroit's finances indicated city officials have overstated potential savings from the earlier negotiated union concessions.

City officials said the proposed adjustments would save $102 million for fiscal year 2012 and $258 million in fiscal year 2013, states the review team's report.

The Chief Negotiator said the savings the mayor and the coalition of 30 unions negotiated are real and the severe proposal put forth Thursday isn't necessary. He said the city spent $2.1 million to verify the savings with a third party, Ernst & Young.

The Michigan Governor to date has shied away from battling with unions, despite pushes from Republicans nationwide over cost-cutting measures some call anti-labor. Indiana in January became the first manufacturing state to adopt so-called right-to-work laws, joining 22 states that allow employees at unionized businesses to opt out of paying dues.  Indianapolis Labor and Employment Lawyers followed the legislation process closely.

Ohio and Wisconsin have passed legislation limiting collective bargaining. Arizona is considering legislation to require annual approval by workers to deduct union dues from paychecks. And Utah is considering a bill to limit collective bargaining for wages and benefits.

Ballot fights are looming over right-to-work initiatives in several states, including Michigan. Unions in Michigan also are pushing several ballot initiatives for November, including one that would put collective bargaining rights for home health providers in the state constitution.

Michigan Economy Up After Mild Winter

Story first appeared in The Detroit News.

Bolstered by the mild winter and continuing weakness in housing, the auto rebound is spreading to other parts of the Michigan economy, boosting economic conditions to their best level in six years.

According to a new Comerica Bank estimate of the state economy, the recovery is starting to reach beyond Detroit's Big Three. That trend also is reflected in the February jobs report released Wednesday, which showed that during the past 12 months the state added as many jobs in business and professional services as it did in manufacturing.

Another piece of encouraging economic news released Thursday was the state's announcement that personal income in Michigan grew at the strongest rate since 2000, just before Michigan entered its decade-long "one-state recession."

Comerica's index measures nonfarm payrolls, exports, sales tax revenues, hotel occupancy rates, continuing claims for unemployment insurance, building permits and motor vehicle production.

All seven of those improved in January, sending the index up 7 points, to a level of 98, the highest since January 2006.

Despite potential threats, including higher gas prices and defense spending cuts, Dye sees the economy emerging from its halting recovery to a stronger expansion.

While the economy got a bit of a boost from the mild winter, which kept home heating and other bills down and left more money in consumers' pockets, there's more to the current improvement than warmer temperatures and short snowfalls.

With auto sales recently topping an annualized rate of 15million vehicles, consumers seem to be unleashing some of the pent-up demand they've been holding in since 2007. The auto industry also benefits from the lack of any significant improvement in the housing market. With home values down and still dropping in most of the country, consumers aren't shopping for new homes.

Experts see rising gas prices as a threat to auto sales for the Detroit carmakers, now that they're offering more fuel-efficient models. The experts added that they see gas prices easing and dropping to $3.60 to $3.70 a gallon by summer.

And while higher gas prices may trim some pickup and SUV sales, car sales won't be lost to the foreign nameplates as in past periods of increased fuel prices.

Detroit's Financial Agreement A Major Focus

Story first appeared in the Detroit Free Press.

If the months-long review of Detroit's finances was just a pretense to "take over" the city, Monday could have been the day the shroud dropped and everyone's true intentions were known.

The financial review team had a deadline, after which it could have simply recommended an all-powerful emergency manager, and the Michigan government could have spent the rest of this week figuring out who he wanted in the job.

But the review team continued to push a negotiated agreement with city leaders instead -- and that, for now, must be the prime focus of everyone involved.

Get an agreement worked out. Get it in place. And start fixing a city so dysfunctional that even its wild over-spending has not been able to maintain the most basic services.

The review team says it has a 10-day window for an agreement to still take shape. Shame on everyone involved if they do not do what is necessary to meet that deadline.

It's doable, though, if everyone fixates on real solutions to Detroit's problems, rather than posturing over power and control.

Detroit's path forward has three steps: balance the budget, shore up service delivery, and grow.

For his end of it, the state government needs to make sure the state lives up to its obligation to invest in cities, all of which have seen steep declines over the past decade. He should also be focused on big-picture municipal finance questions -- such as how to help shoulder the crushing burden of existing pension and retiree health care costs, and reform of the way cities finance themselves through taxes.

He cannot help Detroit without committing at least some new resources; and he should be thinking of Detroit as just one of dozens of cities that are, or are about to, face the same financial issues.

For their part, city leaders need to be realistic about what a consent agreement with the state means. If there were any real possibility that the mayor or council could make the necessary radical changes in Detroit, the city wouldn't be in the shape it's in. So wrestling with the governor over who should control the city's finances is asking for unearned faith.

It is worth noting that in the past, Detroit has entered into agreements with the federal government to fix issues in the water department and the police department. Neither task was dispatched quickly. The governor is right to insist, in this instance, that the state have the power to force the financial fixes that city leaders have avoided.

City officials should be more focused on their input into the plans for better service delivery, and the growth that will be necessary to ensure Detroit does not continue to struggle financially.

Time is short, but things seem headed in the right direction, at least for now.

If everyone focuses on making Detroit better for Detroiters -- who suffer each day from the city's current mismanagement -- a reasonable solution is still well within reach.

Michigan-Based Solar Panel Manufacturer Pulled from Stock Market

Story first appeared in The Detroit News on March 14th, 2012.

The stock of Energy Conversion Devices. Inc., the bankrupt Auburn Hills-based solar panel manufacturer, was pulled from the Nasdaq Stock Market on Feb. 24, according to a filing on Wednesday.  The company primarily makes, sells and installs thin-film flexible solar products and systems to the building and rooftop markets.  These panels are useful in the construction of Solar Carports and solar roof structures.

Energy Conversion filed for bankruptcy protection Feb. 14, when its stock price closed at 29 cents a share from $1.46 the day before. Nasdaq told the company Feb. 15 that it no longer qualified for listing on the stock exchange, according to the company's filing with the U.S. Securities and Exchange Commission.

When the company did not appeal the decision, the stock was suspended from the exchange Feb. 24, when Energy Conversion Device's stock closed at 16 cents a share. The delisting will become official 10 days after the Nasdaq files the paperwork, according to another filing made Wednesday with the SEC.

The company's stock — now traded on the over-the-counter "Pink Sheets" under the symbol ENERQ — closed Wednesday at nine cents a share.

The Auburn Hills-based firm said in May that it would lay off 300 workers, including 115 in Michigan, as it restructured amid cutbacks in government solar incentives overseas and after posting a large quarterly loss.

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22 New Michigan Casinos Planned

First appeared in Detroit Free Press

Private investors and Indian tribes are proposing 22 new casinos across lower Michigan, and metro Detroit is clearly among the targets of the gambling gold rush.

Hopefuls are wagering -- against long odds -- on plans that could make them millions of dollars while also nearly doubling the number of casinos in the state. Six organizations want in on the game -- two investor groups separately seeking state constitutional amendments and four tribes trying to expand off-reservation gambling.

The proposals overlap, calling for four casinos in Romulus and two more in Detroit, home to the state's only non-tribal casinos. The groups also want casinos in Macomb and Oakland counties and two in Port Huron.

"It's like fantasy land," said Michigan State University law professor Matthew Fletcher, who specializes in tribal law. "I really don't expect people are willing to have that many more casinos in lower Michigan."

Confidential documents reviewed by the Free Press reveal details.

Leading one effort is Michigan First, which would amend the state constitution and usher in the largest gambling expansion since Detroit's casinos were approved in the 1990s.

In secret pitches to potential investors and government officials, Michigan First organizers propose a new casino in Detroit, one each in Wayne, Oakland and Macomb counties, and four more outstate, documents show. In Macomb County, the group would build a $300-million casino projected to rake in $85 million a year in profit for its owners once initial building costs are paid off.

A competing proposal by a separate group called Michigan Is Yours is also on the table, as are pitches from four tribes hoping to expand gambling through off-reservation casinos such as one proposed a few blocks from the state Capitol in Lansing.

Gov. Rick Snyder, Detroit's casinos and Mayor Dave Bing oppose casino expansion. So do major outstate Indian tribes.

Despite those challenges, investors and other tribes want to cash in, lured by the record $1.4 billion in revenues Detroit's casinos posted in 2011 and what supporters view as untapped markets in cities across the Lower Peninsula.

The fight may be costly. Michigan First tells potential investors that before one brick can be laid it will have to raise nearly $50 million to collect enough signatures for its campaign and then woo voter support for a November constitutional amendment to allow non-tribal casinos in Michigan First's designated cities: four in the Detroit area and one each in Grand Rapids, Lansing, Cadillac and the Flint-Bay City-Saginaw area.

Michigan First says in the documents that it has lined up support from former Michigan House Speaker Rick Johnson, a Republican from the Cadillac area, and Mitch Irwin, a Democrat who was the state's management and budget director under former Gov. Jennifer Granholm.

Irwin confirmed his involvement but declined to discuss details in the documents or specifics about the group's proposal, saying more would be revealed in mid-March.

"We're not ready to announce anything publicly right now," Irwin told the Free Press.

Irwin said the effort is attracting enormous interest among community leaders and private investors.

Others associated with the Michigan First effort, including Johnson, did not return phone calls seeking comment.

Opposition's viewpoint

James Nye, a spokesman for a coalition of tribes and Detroit casinos preparing to fight the Michigan First effort, said his group is ready to raise $50 million to stop the new casinos. The group, Protect MI Vote, says casino expansion would circumvent state voters' approval in 2004 of a constitutional amendment requiring both statewide approval of non-tribal casino expansion and approval of local voters where a casino would locate.

Nye's group represents the MGM Grand Detroit and Greektown casinos and two tribes: the Saginaw Chippewa, which own Soaring Eagle in Mt. Pleasant, and the Nottawaseppi Huron Band, which owns FireKeepers Casino near Battle Creek. Nye said Michigan First wants to write its eight casinos into the state constitution, exempting them from the strict Michigan regulatory oversight required for the existing Detroit casinos.

"They are really unbelievably brazen with their plan to sell off pieces of our constitution to their investors," Nye said. "Worst of all, there is no transparency," he said, adding that it remains possible for any amendment that goes before voters to not include the names of the casino owners.

Other casino efforts

Separately, a high-profile effort to build a glitzy $245-million Kewadin Lansing Casino, just blocks from the state Capitol, kicked off in January. It would be built by the Sault Ste. Marie Tribe of Chippewa Indians in partnership with the city, and would be the state's 26th casino.

Other efforts range from the small Upper Peninsula Hannahville Indian Community's interest in building a casino in Romulus to larger efforts by the two investor groups. One of the investor groups, Michigan Is Yours, has tapped former Detroit Lions great Billy Sims as a backer and aims to build privately owned casinos in Detroit, Romulus, Port Huron, Grand Rapids, Lansing, Saginaw and Benton Harbor.

"Detroit was meant to be the first city, not the only city," Sims told the Free Press.

How much is too much?

Lansing Mayor Virg Bernero said he's not sure, but it's time that cities outside Detroit get a crack at the jobs and economic development potential of casinos, instead of seeing the money flow to other parts of the state.

"That's our money they're luring away," Bernero said. "I want that money reinvested here. Lansing will get a casino. The only question is when and where. I want it downtown as soon as possible."

But Michigan First and Michigan Is Yours also each want a casino in Lansing -- that would make three -- and the overlap among the competing plans highlights serious questions: Can Michigan's casino market handle a slew of new casinos, and if so, how many?

In southeast Michigan, gamblers already can easily drive to casinos in Detroit and Windsor. There will be one more option when the Hollywood Casino Toledo opens in Ohio in late May.

Adding casinos in Detroit and its immediate suburbs and Port Huron would saturate the market, said Frank Fantini, editor and publisher of Fantini's Gaming & Lodging Reports. He said putting so many casinos in metro Detroit would be "extreme, because you're not dealing with a destination market."

Michigan now has 22 tribal casinos in addition to Detroit's three, and analyst Jake Miklojcik said it's not likely that government officials would permit the number to double -- or that banks would finance so many new casinos.

He said, however, the Michigan market has room for more casinos, perhaps a 20% expansion.

The American Gaming Association ranks Detroit the nation's fifth biggest casino market. And it's a lucrative industry statewide, employing about 19,800 people last year in Detroit and tribal casinos, by the state's estimate.

Detroit's casinos in 2010 paid nearly $100 million to the state's school aid fund and nearly $164 million in Detroit wagering taxes, according to the Michigan Gaming Control Board. Tribal casinos paid more than $61 million in taxes to the state and local governments in 2010.

"For any one community, it could be a nice shot in the arm" to open a casino, Miklojcik said. "Could Flint have a successful casino? Yes. Would it rely on pulling from other casinos? Probably."

Nye said that risk is too great.

"In Michigan, we are in a mature casino gaming market," Nye said. "The pie is not going to grow any larger, so instead, everyone will get a smaller piece of the pie, and in that scenario, you would have a dramatic shift of jobs and revenue from certain areas of the state to another, but without any net economic gain for the state."