CHICAGO — One of Michigan’s top bond firms has launched a program to help fiscally stressed local governments navigate a slew of new laws crafted by Gov. Rick Snyder and passed by the Legislature this year.

Miller, Canfield, Paddock and Stone PLC started the Sustainable Government Initiative to help local units grapple with the myriad of new measures that are part of Public Act 4, the state’s controversial new emergency management law, as well as related legislation. 

The program comes at a time when municipalities and school districts across Michigan face record levels of fiscal stress tied to a lifeless housing market and chronic state aid cuts.

Public Act 4 increases the state’s power to intervene in and take over fiscally stressed local governments. That provision has sparked the most controversy, but the legislation features a number of less draconian measures that could prove popular to local governments, said Amanda Van Dusen, head of the firm’s public law group and one of 40 attorneys that make up the new group.

“There has been so much talk about bankruptcy and focus on the emergency managers, we felt it was important to acquaint and equip local governments with the full range of tools, and making sure that everyone was aware of the continuum of options that are provided for local government restructuring,” she said.

One measure that is sparking particular interest is the consent agreement provision, under which local officials remain in charge but are given new powers by the state to try to resolve financial problems.

Public Act 4 allows two types of consent agreements, one that would have the local government craft the agreement and one that would have the state impose it.

The ability to terminate active labor contracts — a new power of the emergency manager that is among the most divisive — would not be allowed under a consent agreement.

Several local governments, including Detroit, are eying the tool as a way to boost local power without a state takeover. Two governments so far have asked for consent agreements, but the state treasurer has deferred both as it continues to assemble the review teams that will work on the consent decrees, Van Dusen said.

Most fiscal years for local governments begin July 1, so they are just now finalizing budgets, she noted.

“Depending on what kind of budgets get adopted, you may see a ramping up of [consent agreements] this fall,” Van Dusen said. The new law’s emphasis alone on receivership or consent decrees may boost the local unit’s negotiating power, she added.

“It’s the whole package that creates these possibilities, not just one of these tools,” she said.

Other new measures include requiring local units to compete for state aid by implementing a series of best practices, such as requiring employees to pay for 20%  of their health care benefits and sharing services.

“If locals look at these tools and develop a strategy to go with them, they can generate additional revenue and achieve cost savings,” Van Dusen said.

Lawyers from Miller Canfield’s employment and labor, litigation, employee benefits and pensions, and bankruptcy and real estate groups are also part of the program.

The firm has been heavily involved in fiscally stressed local governments for years. It represents three of the state’s four emergency managers and helped write much of Public Act 4.

The firm also acts as bond counsel for issuers that want to enter the bond market but are hindered by the spectre of bankruptcy, largely by crafting a bond structure that features an intercept trigger that attorneys hope will help protect bondholders in the event of Chapter 9.

The cities of Detroit and Ecorse have both used the structure to tap the market, and the firm is working with Detroit Public Schools on a similar model.

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