Detroit Consent Agreement: 10 Things To Know

Michigan Gov. Rick Snyder and the state Treasury Department on Tuesday circulated a draft of a proposed consent agreement between the state and the city of Detroit that proponents say would help solve the city's fiscal woes. The governor says accepting a consent agreement is the only way Detroit can avoid an emergency manager.

The consent agreement is allowed under Public Act 4, Michigan's emergency manager law, which allows the governor to review cash-strapped municipalities and school districts and decide whether state intervention is needed.

A Snyder-appointed financial review team examined Detroit's books to come up with a consent agreement that affords broad powers to Mayor Dave Bing and state Treasurer Andy Dillon -- and weakens City Council and the city's public employee unions. The consent agreement would also grant city officials, and a new Financial Advisory Board, many of the same powers as an emergency manager.

Detroit's financial review team met Tuesday to discuss the draft, but has not yet decided whether to recommend it.

Here are 10 highlights of the plan. Read the whole thing here.

10. Financial Advisory Board will hold all the power.

Instead of one emergency manager, the consent agreement would bring in nine.

It establishes a nine-member "Financial Advisory Board" made up of appointees from the governor, Treasurer, mayor and City Council. This board will have all control over the city's finances and not a dime can be spent without its approval.

The board has absolute power over the city's budget and the implementation of the "recovery plan" partially laid out in the agreement. The document lists "potential initial actions" the city could take to reduce its deficit, including cutting staff, outsourcing departments and selling city assets.

The mayor and City Council are not allowed to develop their own budgets or budget proposals without the consent of the Financial Advisory Board.

Treasurer Andy Dillon, one of the Review Board's appointed members, will also have the power to unilaterally veto some of its decisions.

9. Financial Advisory Board salaries alone will cost Detroiters $200,000

The consent agreement declares compensation for Financial Advisory Board members will be $25,000 each, excluding the Treasurer.

The salary and expenses incurred by board members will be reimbursed by the state Treasury Department, but then billed to the City of Detroit. The city will also pay for any staff or other expenses needed for the board to operate.

The board member salaries come to about the same price as the average single emergency manager: $200,000 total. (Pontiac Emergency Manager Lou Schimmel makes $105,000; Detroit Public Schools Emergency Manager Roy Roberts makes $280,000.) Though appointed by the governor, emergency managers are paid by the municipal bodies they run, not the state, and it appears the Financial Advisory Board would operate in the same way.

8. Bing gets emergency manager powers.

Some have said a consent agreement with the state would make Detroit Mayor Dave Bing a de facto emergency manager, but the agreement pretty much makes him emergency manager de jure.

Section 2.5 is titled "Grant of Emergency Manager Authority" and "grants the Mayor the powers prescribed for emergency managers in Section 19 [of Public Act 4]."

One exception: Bing will not have the power to break collective bargaining or other contracts. Neither does the Financial Advisory Board.

7. City Council loses almost all its power.

City Council gets to appoint one member to the all-powerful Financial Advisory Board, but that's about the extent of the legislative body's role under the agreement. Council does have the right, along with the mayor, to appoint three more members of the Financial Advisory Board, but they must be chosen from a list pre-approved by Gov. Snyder.

Council can continue to meet and pass laws, but it cannot do anything to violate the consent agreement (see below) and will have no power over budgeting.

6. Detroit's budget process could look more like the state of Michigan's.

It seems Snyder is pleased with his own success balancing the state budget and wants to bring some of his measures directly to the city. The consent agreement recommends the Financial Advisory Board consider modifying the city's corporate tax. It also mandates the city prepare a second-year planning budget.

Snyder overhauled Michigan's business tax last year. Bing has said he would like to raise Detroit's corporate tax to 1.9 percent from 1 percent.

5. Cash influx still possible from revenue sharing and state loans.

It does not lay out any specifics about requesting loans or additional revenue from the state of Michigan, but the agreement does allow for the consideration of "the City's ability to obtain additional financing pursuant to the Emergency Municipal Loan Act."

It also claims the state will maintain its existing revenue-sharing agreements with the city -- though that means little for the $220 million the mayor and City Council have said Michigan owes Detroit under past agreements.

4. The agreement could eliminate bargaining between the city and its unions entirely.

While the consent agreement does not invoke the section of Public Act 4 that allows an emergency manager to abrogate collective bargaining agreements, it does contain a clause eliminating the city's "duty to bargain":

5.3 Duty to Bargain. Consistent with Section 14a(10) of Public Act 4, it is the
Treasurer's determination that the duty of the City to bargain pursuant to Section 15 of Public Act 336 of 1947, the Public Employment Relations Act, shall cease beginning 30 days after the
effective date of this Agreement.

The Public Employment Relations Act established collective bargaining for public employees in Michigan and Section 15 appears to be the portion that says both sides -- employee and employer -- must bargain in good faith, through union and government representatives. The consent agreement appears to exempt the city from having to negotiate with unions under state law.

3. Consent agreement renders itself bullet- (and lawsuit-)proof.

City Council, city employees and city unions are not allowed to challenge the consent agreement -- or even Public Act 4 -- at all, lest they risk placing the city under an emergency manager, entering it into Chapter 9 bankruptcy, or losing its state revenue sharing:

Any (a) action by the City or the City Council (or any department, agency or other entity organized within, or officer, agent, representative or employee acting on behalf of, the City and the City Council) or its unions to contest, through legal proceedings or otherwise, the constitutionality, validity or enforceability of Public Act 4, this Agreement or the powers and/or jurisdiction of the Financial Advisory Board [...] may, among other things, (x) be considered sufficient cause by the Financial Advisory Board to recommend (i) the immediate appointment of an emergency manager pursuant to Section 15 of Public Act 4 or any other applicable law, any provisions of Sections 15(2) and 15(3) of Public Act 4 to the contrary notwithstanding, and (ii) the commencement of proceedings under chapter 9 of title 11 of the United States Code pursuant to Section 23 of Public Act 4 or any other applicable law and/or (y) result in the suspension of (i) discretionary state revenue sharing initiatives and agreements between the State and the City pursuant to Public Act 140 and/or (ii) other financial initiatives and agreements between the State and the City, in each case to the extent permitted by law.

2. Even "acts of God" can't temper the agreement's strength.

A compliance clause insists the consent agreement must be carried out no matter what:

8.1 The obligations of the City as expressed and agreed to herein are not subject to release or discharge due to any contingencies, including, but not limited to, clerical errors,
computer failures, late mailings or the failure to comply with reporting due dates or other
scheduled due dates due to adverse weather, acts of God, acts of third parties or compliance with court orders.

Neither hell nor high water (nor any pesky court orders) could buy Detroit time to complete its obligations under the agreement.

1. Authority of the consent agreement could be indefinite.

The agreement would remain in effect until the city has met its financial solvency benchmarks for three full years. The Financial Advisory Board can extend the term of the agreement "in its sole discretion (subject only to the approval of the Governor), notwithstanding the existence of Financial Stability."

And it will remain in effect regardless of what happens to Public Act 4 -- which faces a repeal effort.