Municipal Democracy–in and out of Municipal Bankruptcy

June 2, 2015
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Parting Can Be Such Sweet Sorrow. After filing its plan of debt adjustment with the U.S. Bankruptcy Court some 30 minutes before the May 30th deadline imposed by U.S. Bankruptcy Judge Meredith Jury, San Bernardino’s Mayor and Council returned to other regular, but related, business yesterday: in this instance: A requested contract amendment that would have given City Manager Allen Parker six months’ salary if he’s terminated without cause — instead of the current agreement with no severance pay — was rejected, 4-2, yesterday, with the vote coming on a motion to table the amendment. The rejection means there will be no change to Mr. Parker’s contract. Under which he or the city can end his employment with 60 days’ notice—a departure under which he would be eligible for compensation for any unused leave time, but no severance. Under the proposed change, the manager would have been entitled to severance pay of $110,988. The motion came without explanation under the agenda item. Moreover, because the vote came on a motion to table, there was no discussion of arguments for or against. During public discussion prior to the vote, two citizens spoke in opposition to what they said would be an unfair sweetening of Mr. Parker’s contract, stating that Mr. Parker knew the job was at-will when he accepted it, and other jobs which the city has proposed to eliminate as part of its plan of debt adjustment do not seek six-month severance packages, or, as one of the two put it to Council: “I thought we were bankrupt. I thought we couldn’t afford more police officers. I thought we couldn’t afford (a non-outsourced) Fire Department…And yet, (you ask for this) after you file a plan that tells virtually every city employee your job is on the line — how many parks and rec employees, how many Code employees, got six months’ severance for being fired without cause?” As we have noted before, the vast differences in respective state laws which authorize municipalities to file for federal chapter 9 municipal bankruptcy are exceptionally diverse—with some, such as in Rhode Island or Michigan, providing for state appointment of a receiver or emergency manager—entitled to assume complete authority and rendering the elected municipal leaders to be preempted of any authority—but in others, such as California and Alabama—the elected leaders retain complete responsibility not only for the continued operation and provisions of essential public services, but also for the severe challenge of putting together a plan of debt adjustment. It is almost as if that creates two full time responsibilities for a manager—and, in Mr. Parker’s case, that exceptional challenge has been even more trying, as he survived an attempted force-out last December, when Mayor Carey Davis requested his resignation, but, in the wake of Mr. Parker’s refusal and a closed-door City Council performance evaluation, was permitted to remain. There was discussion at the time by Council that Mr. Parker should remain until the city’s exit plan from municipal bankruptcy was filed with U.S. Bankruptcy Judge Meredith Jury, at which point the City Council should adopt clear performance standards for both the Manager and other key members of the city staff.

Back to Federal Judicial Reliance. U.S. District Judge Sean Cox yesterday convened a closed-door meeting with elected leaders of the Detroit metropolitan region with regard to the regional water authority—in effect, the final remaining unresolved issue from Detroit’s municipal bankruptcy—but this on an issue of sharing with significant consequences for elected officials and water ratepayers across Metro Detroit. Part of the snag appears to be from a leak from the Detroit News with regard to the city of Highland Park’s unpaid water bills—an issue that has damned up, so to speak, negotiations between suburban, city, and state leaders with regard to the creation of the Great Lakes Water Authority as provided for from Detroit’s federally approved plan of debt adjustment—and it comes less than two weeks before the deadline for the authority to sign an agreement with the Detroit Water and Sewerage Department to lease its system. Unsurprisingly, Judge Cox has ordered that no details of yesterday’s session be discussed publicly, although Detroit Mayor Mike Duggan reported it was positive. Further, there were indications that the potential dissolution of the City of Highland Park (a fiscally distressed city of about 12,000 in Wayne County whose residents have an annual income of less than $20,000—compared to a statewide average of $46,000.) After years of not collecting water bills from residents, Highland Park owes the Detroit Water and Sewerage Department about $25.6 million. Efforts to reach the agreement appear to have triggered the need for judicial intervention—but even those efforts have encountered challenges. For instance, Meanwhile, Macomb County Executive Mark Hackel was not invited to the meeting: he continue his criticism of Judge Cox’s gag order and what he claims is a lack of information from the Detroit Water and Sewerage Department about the proposed lease agreement, adding that Brian Baker, Macomb County’s representative on the Great Lakes Water Authority board and the city budget director in Sterling Heights, was not invited to the meeting either. The County Executive is rankled about the ‘behind closed doors’ nature of the discussions, noting: “Being ordered into court under a gag order has been a contention of mine since Day One…The authority is a legal entity. It’s supposed to be talking. It’s supposed to be a public body that meets under the requirements of the Public Meetings Act, but we’re having these meetings behind closed doors.” The federally mediated negotiations have followed in the wake of Mayor Duggan’s proposal last September of the proposed authority after it was molded in discussions between the Motor City and Macomb, Oakland, and Wayne counties in the wake of Detroit’s exit from its 18 months in municipal bankruptcy. Under the proposed sharing arrangement, the three counties agreed to a 40-year, $50 million annual lease of the region’s water and sewerage system. The Detroit Water and Sewerage Department would provide maintenance and service to customers in the city, while the authority will serve about 3 million in the suburbs—with governance provided by a six-member board, composed of two representatives from Detroit, one from each of the three counties, and one appointed by the governor. In the absence of progress, Judge Cox last February ordered officials to hold confidential talks about the authority after county executives criticized the validity of the information the city provided on the water department.

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