ASHEVILLE, N.C. — A lot of work needs to be done in Detroit, but the city has a great deal of potential, Michigan Treasurer Andy Dillon told colleagues on Monday.
"There are a lot of people coming into the city and there's a lot of opportunity," he said at a panel on fiscally distressed communities at the National Association of State Treasurers annual conference here.
Detroit, which became the most populous city to file for Chapter 9 bankruptcy in July, is a large municipality geographically and there are a lot of vacant structures that have to be demolished, Dillon said. He noted that Emergency Manager Kevyn Orr's ten-year plan calls for an investment of $1 billion, and he said it's important to improve residents' quality of life in addition to Detroit's balance sheets.
Dillon also defended state intervention into Detroit's finances. He said that when state officials went in to review Detroit, they discovered that the city's operations were more broken than they had thought. Findings included that there were 48 unions and 65 full-time employees who processed payroll for the police department by paper-and-pencil. Another issue that state officials found was with Detroit's pension program and how it distributed returns exceeding 8%.
"I get local control But we oftentimes see that the rules are so set up against anyone's ability to manage the problem that the state has to step in," Dillon said. He added that local governments are state subsidiaries and that he believes the state is ultimately responsible for ensuring that local governments have controls in place.
Standard &Poor's rates 145 credits in Michigan, and only two of them are non-investment grade. In addition to discussing Detroit, Dillon described state services and laws that are used to assist fiscally distressed local governments.
North Carolina Deputy State Treasurer Vance Holloman also spoke at the session and described how the Tar Heel state monitors the finances of local governments. The state's local government commission: reviews, approves and conducts sales of all proposed bond issues of local governments; enforces budget and fiscal control laws; and, if necessary, assumes the role of a local governing board in all fiscal matters.
Generally, the commission has served more as an advisor than as a regulator for localities. There have only been five times when the commission has taken control of a local government's finances since the commission was formed in the 1930s.
Holloman said that one of the things the state has learned is that being proactive with monitoring local governments has been positive. He said it's been helpful for local governments to send audits to the commission, because the commission will review them and issue letters to the localities expressing any concerns. The state will especially ask for financial information regularly from about 30 to 40 units of government that are considered to be troubled.
Holloman also said that in the cases where the commission has gone in and assumed control of a locality's finances, he's learned that "there's more to this than dollars and cents" and that there's a human element to the problems. It's important for the state to explain to citizens what it is doing and why it is taking certain actions. States have to work with local officials who best know citizens' needs, he said.
And it's also important for states to know how to get in and how to get out of controlling a local government's finances. After states "put out the fire," they have to figure out how to rebuild and return control to the municipality, Holloman said.
