Will Scottville Need an Emergency Financial Manager?

[XLFD]

Proposal one on the state ballot can be confusing.  It is a veto referendum on the Emergency Manager Law which has allowed state government to appoint Emergency Financial Managers (EFMs) to assist in bringing a local government unit who exhibits 'Fiscal Stress' indicators back into a degree of solvency.

The general idea is to utilize some professional official with allegiance to the State, unelected by the local people and unappointed by the local government, to come in and resolve the problems using powers that generally override the local charters and codes and supersede the powers granted by the local electors to their elected officials. 

Sounds a lot like the concept of a City Manager, something most citizens in Michigan (68% of the cities) have to deal with.  Including the City of Scottville.  Here is the full law, which is lengthy.  Recently the State compiled, using 2010 fiscal data, the Fiscal Indicator Scores for 270 cities.  The following cities scored 5 or higher (to the left of the map) or already had financial emergencies declared.

You will notice a red cross in the middle of Mason County, and you will find the name of Scottville in the list with a score of 7.  Effectively, according to the fiscal indicators, Scottville is tied for fifth in the state as having the most fiscal stress.  It is tied for third among the cities that do not have EFMs already, only behind Highland Park and Standish.

Is this a statistical anomaly for 2010?  Not quite, the following chart shows that Scottville has went from a low fiscal stress city back in 2006 (1) to stressful in 2008 (5), and then has been at seven for the last two years for which statistics are available.  

You may wonder about the basis of these scores.  Here is the methodology model:

Each of the calculations below goes into determining the total Fiscal Stress Indicator Score for a city:

1. Population Decline: If population over a two year period is estimated/reported to have declined, city gets one point.

2. Real Taxable Value Growth: If the taxable property value of the city declined (as adjusted for inflation) over a two year period, the city gets one point.

3. Large Real Taxable Value Decrease: If the real taxable value of the city declined by a factor of -0.04 or more over a two year period, city gets an additional point.

4. General Fund Expenditures as a Percentage of Taxable Value: When current year general fund expenses of the city are divided by the current year taxable value, if the result is less than 0.05, then the city gets one point.

5. General Fund Operating Deficit: When current year general expenditures are subtracted from general fund revenues and then divided by general fund revenues, if the result is less than -0.01 the city gets one point.

6. Prior General Fund Operating Deficits: Calculates indicator 5 for two previous years in the city, and city gets one point for each year that the result is less than -0.01 (Maximum is 2 points, divided into indicator 6a and 6b.)

7. Size of General Fund Balance: When current year general fund balance is calculated as percentage of general fund revenues, if the result is less than 0.13, then the city gets one point.

8. Fund Deficits in current or previous year: If a fund deficit is found in a major fund in the current or previous year, city gets one point.

9. General Long Term Debt as a Percentage of Taxable Value: When the current general long term debt in the city is divided by its current taxable value, if the result is less than 0.06, then the city gets one point.

Maximum Points: 10

All cities with EFMs have been granted these officials when their scores have been at seven or less, Flint was appointed theirs before 2006 before this data was compiled.  Inkster is being considered for intervention even though they have scored 3 or under in three of the last four years.

If Proposal One is passed (i.e. the EFM law is affirmed) we may very likely see some intervention in the near future if the City of Scottville does not get its act in order.  With a bunch of 'fluff' programs like the Scottville DDA, the Scottville Main Street Program, that divert tax money from the already overburdened taxpayers of Scottville (who have the biggest tax rates in this area) to unnecessary largesse for business owners, this is not going to change without a major change of philosophy.

If Proposal One does not pass, Scottville will likely continue down a self-destructive path of overtaxation and underservicing the Scottville citizens without any help from the state except through grants for making second floor apartments, which solves absolutely nothing.

But let us not forget, you must identify a problem in order to resolve it most efficiently, and the problem has yet to be identified by the managers of Scottville, just by the State agencies who may have to step in to get Scottville set aright once again.  Most data for this article was gleaned from the following:

http://michiganpolicy.com/index.php?option=com_content&view=art...

[Dave]

I'm not totally against the idea of a emergency financial manager but would definitely depend on the situation. If a town, city or village has exhausted on a local level all its options in attempting to fix the financial problems and is not able to make the changes needed, bringing in someone (assuming they are experienced in fixing fiscal situations) might be what is needed to turn things around. I'd only say that the state would have to be certain as possible before sending someone.

[XLFD]

If the State has solid guidelines for installing a EFM, I think having the 'threat' of losing local sovereignty by the State exercising this power is a positive force for getting things in order.  As it is right now, the State has came in with EFMs in arbitrary situations, which could indicate political motivations by State officers. 

The State's health does depend on the solvency of its cities, poorly managed cities do drag the whole State down, and I think they should have some ability to determine the strength of its city-constituency and assist cities when they appear broken, perhaps even by overruling local charters and ordinances.  The fear of losing power may just cause the local governments to really work on the problems, so I think the State should give at least two years advance warning before attempting to install an Emergency Financial Manager, during which time the City's financial records should be immediately available to the State.

[Willy]

I don't like the idea of an EFM unless the people want one. Folks should fix their own problems and if those problems have been caused by mismanagement then the voters should elect new representatives. I don't like taking power away from locals.

[XLFD]

I don't like losing out on the concept of Home Rule Cities myself, but as we see here in Scottville, the State deems it being in a fiscal crisis since 2008, but that message hasn't even dawned on the local citizenry, and Scottville's leaders (when you read the COLDNews) routinely tout the vitality of the community in spite of all the factors going against it of recent.  Bad leaders and local legislators have their own way of staying in power by using the power of their office or by changing the rules (like what may happen here in Ludington with our local proposal). 

And how do you democratically get rid of a City Manager if the City Council doesn't want to?  Eighty percent (12) of the cities in fiscal crisis have City Managers already (68% of MI cities have the City manager form of local government), people specially trained to run a city, whereas only one (7%) of those 15 cities has a strong mayor form (23% of MI cities in total for that form).   Outlawing the counter-democratic City Manager style of government in Michigan would be my first instinct, but that won't ever happen. 

I do think an EFM controlled by State agencies, would be more effective than a City manager controlled by a City Council who allows the city to become fiscally stressed, in handling the hard problems that need to be handled.