Might There Be a Presidential Campaign Issue or Debate about the Nation’s Cities?

eBlog, 9/06/16

In this morning’s eBlog, we consider the open letter from the Mayor and City Council President of Atlantic City to the city’s citizens about the fate of this great and historic American city. Then we consider a countervailing perspective.  Following, we listen as GOP candidate Donald Trump visits Detroit, where he reported he intends to develop a national municipal policy. Finally, we look at a new, discouraging report on chronic absenteeism, something which must be addressed if there is to be a long-term recovery in Detroit.    

The Fate of a Great American City. In an open letter this morning, Atlantic City Mayor Donald Guardian and City Council President Marty Small wrote:

This week’s City Council meeting will determine the fate of Atlantic City and the Atlantic City Municipal Utilities Authority (ACMUA) for years to come.

The question is: Why should City Council vote for the upcoming pieces of legislation surrounding the ACMUA before Sept. 15? The answer is simple: If City Council does not pass these pieces of legislation, the city will default on the terms of the loan agreement with the state, ultimately resulting in the city shutting down and in liquidation of the ACMUA.

Passage of the legislation is absolutely critical in ensuring that the city maintains its sovereignty and the ACMUA remains under local control. To be clear, the legislation does not dissolve the ACMUA and any argument to the contrary is false.

Failure by the city to adhere to the terms of the loan agreement would result in a default. Once there is a default, the state could, and most likely would, demand that the city immediately repay all monies advanced to the city. If the city weren’t able to repay the advanced monies on demand (which it could not), the city’s failure to repay would result in a “payment” default. Under the terms of the loan agreement, the state could only reach the ACMUA if there were a payment default.

In the event of a default, the state could take the following actions: 1) Stop all loan advances to the city; 2) Require that the city deliver each item of collateral on demand; and 3) withhold state aid. Any of these actions by the state would absolutely devastate the city of Atlantic City and essentially destroy its sovereignty.

Furthermore, in the event of a “payment” default, and only a payment default, the state could demand immediate production of the collateral resources outlined in the loan agreement, which include Atlantic City Alliance (ACA) monies of $60 million, Investment Alternate Tax (IAT) monies of between $13 million and $18 million, or any state aid received to date, or in the worst case scenario monetize the MUA to recover the outstanding payments if the above sources were insufficient.

Pursuant to the loan agreement, the city may borrow up to $73 million. The city anticipates paying that $73 million back through the ACA and IAT monies. Therefore, the state will never reach the ACMUA as the city’s other sources of collateral should more than cover the loan.

Unfortunately, the ACA and IAT monies will not be released until after the city submits its budget plan in November. A default that led to a payment default now would directly contradict the efforts of everyone who has defended the city’s sovereignty and right to home rule.

These potential defaults are absolutely preventable. Dissolution of the ACMUA is preventable. Loss of the city’s sovereignty is preventable. Again, the legislation does not dissolve the ACMUA.

We are asking that City Council put aside any differences or disagreements and come together for the future of Atlantic City.

In an editorial yesterday, The Press of Atlantic City, wrote:

Three months ago, in spring, state politicians finally reached a compromise on the rescue and reorganization of Atlantic City government. It gave city officials five months to produce a responsible five-year financial plan that would balance the city budget starting next year.

The city has lots of revenue, reassured now by casino payments in lieu of taxes that are part of the rescue. Officials just need to reduce municipal spending in line with that revenue.

As summer ends, we see little sign that is happening. Instead, city officials have floated a bunch of desperate, implausible grabs for money from elsewhere.

These have shared some characteristics. They’re not possible under existing law. Legislators won’t change the laws to make them possible. They’d actually damage the city if they were somehow allowed to happen. And they have nothing to do with reducing city spending to a responsible level.

First came a proposal for a major new income tax on everyone who works in the city. That could never get the votes of a majority of state legislators, nor the signature of the governor, and it would be fiercely opposed by those who work in or have a business in the city.

This was accompanied by a proposal to slap a $10 surcharge on the existing room taxes paid by all staying in the city.

Despite the near certainty that state officials would never approve this for an already well-funded city, the Meet AC marketers had to strongly condemn the proposal and point out how it would sabotage the city’s growing convention business.

About a week ago, City Council unanimously voted to hold a referendum on providing school vouchers to city parents. Perhaps they’ve forgotten that the governor’s half-hearted push to allow school vouchers went nowhere in 2013. They are illegal and will remain so for the foreseeable future. The city referendum is not just nonbinding, it’s nonsense.

The referendum will include another proposal also absurd for a bankrupt city: tax credits for those who home school their children. Four states allow some form of tax credits for homeschooling, but not New Jersey.

And since Atlantic City’s problem is that it is spending too much money, new spending on tax credits hardly seems like part of a responsible financial plan.

Then there’s the anguish of city officials over possibly having to change their top priority in running local government to something other than providing jobs to people.

As last month ended, the city proposed a budget that imagines – with no reason to do so – that the state and its taxpayers will not only keep giving Atlantic City extra aid money, but will increase that gift by $24 million.

The rescue and reorganization law technically gives city officials another two months to develop the five-year, balanced-budget plan.

But if no progress on that plan is evident by early October, the state should finish preparations to take over the city’s finances come November.

Atlantic City’s instability has dragged out for far too many months already. This all should have been settled and work started on a sound fiscal future last winter. Let’s have no more delays.

Municipalities & November’s Election. With Fall upon us, Republican Donald Trump intends to unveil a new plan to attract employers to cities like Detroit with high unemployment rates, as well as travel to Flint; it appears his sudden focus on distressed cities might lead to his announcement of a proposed federal policy (it was Richard Nixon, after all, who was the originator not only of General Revenue Sharing, but also the Advisory Commission on Intergovernmental Relations.) Mr. Trump this weekend said his appeal for support from African-Americans in Detroit was tied to the cornerstone of his outsider bid for the White House: a complete overhaul of international trade agreements, agreements which he blames for gutting inner cities: “That’s a big part of what I’m doing in terms of outreach,” he said in an interview with The Detroit News., adding he intends to detail plans in the next three to four weeks to create “enterprise zones” to give business tax incentives to relocate to cities like Detroit that he says “are suffering greatly: No jobs, tremendous crime, bad education, and we’re going to take care of the African-American population, which has really been mistreated…They’ve been promised so much, Hispanics have been promised so much – and nothing ever happens.” Candidate Trump added that he intends to tour of Flint “at some point,” explaining: “I think it’s a horror show that it was allowed to happen and, to be honest with you, it should have never, ever been allowed to happen…I will be visiting Flint. This is a situation that would have never happened if I were president.”

New Math? A new report from the Attendance Works and the Everyone Graduates Center at the Johns Hopkins University School of Education on chronic school absenteeism (“Preventing Missed Opportunity: Taking Collective Action to Confront Chronic Absence.”) has reported that half of the country’s chronically absent children are in just in 4 percent of the nation’s public school districts — including Detroit, where more than half the children in the Detroit Public Schools system are chronically absent. The report noted that Detroit is one of the cities, along with Philadelphia, Baltimore, Milwaukee, and Cleveland. The report defines chronic absence as something which occurs when a child misses so many days of school — whether the absences are excused, unexcused, or due to suspensions. The report finds that such absenteeism negatively impacts academic achievement, finding that in DPS nearly 58% of students are chronically absent, compared to a national rate of about 13%, with researcher Robert Balfanz reporting that Detroit is the only city of 25 major cities to have a higher rate of chronic absenteeism in elementary school than in high school. Hedy Chang, another researcher and executive director of Attendance Works, added: “Chronic absence is really a proven early indicator of academic risk, starting as early as preschool and kindergarten…By middle and high school, it is a sure-fire predictor of kids being on the path to drop out.” DPS’s interim superintendent, Alycia Meriweather, has said the district is planning to crack down on chronic absenteeism through better tracking of student data. 

Among other findings:

  • Chronic absence at varying levels impacts 89% of school districts in the U.S.
  • Half of the chronically absent students nationwide are in just 4% of school districts and 12% of schools
  • Some of the places with the largest numbers of chronically absent students are affluent, suburban districts known for academic achievement, such as the Washington, D.C., suburbs of Montgomery County, Md. and Fairfax County, Va. 
  • Districts serving disadvantaged urban neighborhoods with high rates of poverty typically have both high rates and large numbers of chronically absent students. In these places, researchers said, chronic absence “reflects a web of structural challenges,” such as the lack of adequate affordable housing and the absence of well-resourced schools. These places are also highly segregated communities of color, researchers said.  
  • Many poor, small rural school districts have extremely high rates of chronic absenteeism. 

The new report came as the Detroit Federation of Teachers last night reached a tentative agreement with the Detroit Public School District, with details to be provided about the tentative contract at a special meeting today, the first day of the school year for the 46,000-student district now formally known as the Detroit Public Schools Community District. The deal, which covers more than 2,900 teachers and paraprofessionals, must be ratified in a vote by union members. School-by-school voting is to begin later this week. The contract must also be approved by the Financial Review Commission, which was established during Detroit’s bankruptcy to oversee the finances of the city as well as its school district.

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