The End of State Usurpation of Local Elected Authority? Uneasy shelter from the Fiscal and Physical Storms?

August 31, 2018

Good Morning! In this morning’s eBlog, we consider the end of the State of Michigan to usurp local authority via the appointment of an Emergency Manager, the safety of school drinking water has become an issue in Detroit—especially after Flint, and we consider the extraordinary revisions in the projected Hurricane Maria death toll in Puerto Rica—and the White House response.

Protecting a City’s Children. Detroit Public School Superintendent Nikolai P. Vitti has directed turning off drinking water across the district’s 106 schools  in the wake of after discovering higher-than-acceptable levels of copper and lead in some facilities, with Superintendent Vitti noting his decision came out of caution “until a deeper and broader analysis can be conducted to determine the long-term solutions for all schools.” he said in a statement. Test results found elevated levels of lead or copper in 16 out of 24 schools which were recently tested. Supt. Vitti stated: “Although we have no evidence that there are elevated levels of copper or lead in our other schools where we are awaiting test results, out of an abundance of caution and concern for the safety of our students and employees.” His actions, no doubt affected by fiscal and water contamination in Flint, came even as Detroit officials and the Great Lakes Water Authority sought to assure residents that water provided by the authority is safe to drink: they pointed to the city’s aging infrastructure as the problem.  Superintendent Vitti said he will be creating a task force to determine the cause of the elevated levels and solutions, noting he had initiated water testing of all 106 school buildings last spring to ensure the safety of students and employees. Water at 18 schools had been previously shut off. He added: “This was not required by federal, state, or city law or mandate: This testing, unlike previous testing, evaluated all water sources from sinks to drinking fountains.” The District does not plan to test students: a spokesperson for the school system noted: “Dr. Vitti said…he has no evidence at all that children have been impacted from a health standpoint.”

Fiscal & Physical Challenges: Earlier this summer, Supt. Vitti released details from a facilities review which had determined the school district would need to spend $500 million now to fix the deteriorating conditions of its schools—an effort for the system projected to cost as much as $1.4 billion if there is a failure to act swiftly, with the Administrator pointing to the failure by former state-appointed emergency managers to make the right investments in facilities while the system was preempted of authority and state-appointed emergency managers from 2009 to 2016 failed to make the right investments, sending what Dr. Vitti described as “the message to students, parents and employees that we really don’t care about public education in Detroit, that we allow for second-class citizenry in Detroit.” The remarks raised anew questions with regard to Michigan’s governance by means of gubernatorially chosen Emergency Managers.  

Superindent Vitti said he had notified Mayor Mike Duggan of his decision to shut off the drinking water, and a spokesperson, John Roach, noted: Mayor is “fully supportive” of the approach Supt. Vitti has taken, adding: “We will be supporting Dr. Vitti in an advisory capacity through the health department and the DWSD (Detroit Water and Sewerage Department) has offered to partner with the district on any follow-up testing that needs to be done.” At the same time, the Great Lakes Water Authority issued a statement in an effort to assure “residents and customers of GLWA’s regional system that they are not affected by the lead and copper issues,” noting: “Aging school infrastructure (i.e. plumbing) is the reason for the precautionary measure of providing bottled water,” adding water treated by the authority meets and surpasses all federal and state regulations, albeit adding: “A task force will be formed consisting of engineering and water quality experts” to will help the district “understand the cause and identify solutions.” (Initial results this past week showed elevated levels of copper, lead or both at one or more water sources in 16 of 24 school buildings, according to the statement. Water bottles will be provided at the schools until water coolers arrive. The district also found water-quality issues in some schools in 2016.)

The incident in Detroit raises a host of fiscal and governance issues—especially in the wake of the tragedy in upstate Flint—with, in both cases, the state’s history of appointing Emergency Managers to preempt the authority of local elected leaders. In the case of DPS, Dr. Vitti has contacted the Mayor, the Governor, and a task force of engineers and water experts to understand the cause and possible solutions; Superintendent Nikolai P. Vitti opted to close the water taps out of caution “until a deeper and broader analysis can be conducted to determine the long-term solutions for all schools,” with the decision coming just days before the school district’s 106 schools are scheduled to open next Tuesday. (Water bottles will be provided at the schools until water coolers arrive.) Water officials have blamed aging infrastructure as the cause of the public safety threat. Now Dr. Vitti has asked Mike Duggan and Gov. Rick Snyder to convene a task force of engineers and water experts to determine the cause of the elevated lead and copper levels, and to propose solutions. 

Importantly, it seems the public safety risk is limited to Detroit’s public schools: water officials released a statement Wednesday assuring residents and customers of the Great Lakes Water Authority and the Detroit Water and Sewerage Department that they are not affected by the lead and copper issues at the school district, noting: “Aging school infrastructure (i.e. plumbing) is the reason for the precautionary measure of providing bottled water…The water at GLWA’s treatment plants is tested hourly, and DWSD has no lead service lines connected to any DPSCD building. The drinking water is of unquestionable quality.”

Nevertheless, the threat to public safety—combined with the heartbreaking, long-term threats to Flint’s children from that city’s public water contamination—could add further challenges to Detroit’s recovery from the nation’s largest-ever chapter 9 municipal bankruptcy: a critical part of the city’s plan of debt adjustment was to address its vast amassment of abandoned houses by enticing young families with children to move from the suburbs back into the city—an effort which had to rely on a perception of the quality and safety of its public schools. Now, for a system itself recovering from bankruptcy, DPS faces a bill of at least $500 million to repair its buildings: approximately 25% of the system’s school buildings are in unsatisfactory condition and another 20%are in poor condition, according to the report. The district noted nearly $223 million of high-priority repairs involving elevators and lifts, energy supply, heating and cooling systems, sprinklers, standpipes, electrical service and distribution, lighting, wiring, communications, security system, local area networking, public address and intercoms, emergency lights and plumbing fixtures.

Mayor Duggan’s office and the Detroit Health Department Wednesday issued a joint statement supporting “the approach Dr. Vitti has taken to test all water sources within DPS schools and to provide bottled water until the district can implement a plan to ensure that all water is safe for use,” noting: “We will be supporting Dr. Vitti in an advisory capacity through the health department and the DWSD has offered to partner with the district on any follow-up testing that needs to be done. We also will be reaching out to our charter operators in the coming days to work with them on a possible similar testing strategy to the voluntary one Dr. Vitti has implemented.”

Restoring Municipal Authority. Mayhap it is ironic that Michigan’s relatively rare authority for the Governor to appoint an emergency manager to preempt local elected authority reflects the uneven results of the program—a program I well remember from meeting with Kevyn Orr, whom Gov. Rick Snyder had appointed as Emergency Manager  (EM) to preempt all governing authority of Detroit’s Mayor and Council, at the Governor’s office in Detroit on the first day the city entered the largest municipal bankruptcy in U.S. history—and after the grievous failure of a previous gubernatorially-appointed Emergency Manager to help the Motor City. The very concept of state authority to appoint a quasi dictator and to preempt any authority of local leaders elected by the citizens, after all, feels un-American.

Yet, from that very first moment, Mr. Orr had acted to ensure there was no disruption in 9-1-1 responses—and that every traffic and street light worked. Unlike the experience under an Emergency Manager in Flint, Mr. Orr was intently focused on getting Detroit back on its fiscal and physical feet—and restoring elected leadership to today’s grieving city.

Now, as of this week, Michigan no longer has any local government under a state appointed emergency manager—and observers are under the impression the state program to preempt local authority may be quietly laid to rest. It has, after all, been a program of preemption of local democracy with untoward results: while it proved invaluable in Detroit, it has proven fiscally and physically grievous in Flint, where it has been blamed for contributing to Flint’s water contamination crisis. Indeed, two of Flint’s former EMs have been criminally charged in connection with the crisis. Their failures—at a cost of human lives, appears to have put the future of state pre-emption of local governing authority—may well make state officials leery of stepping in to usurp control a local government, even as some municipal market participants and others see state oversight programs as a positive credit feature. The last municipality in Michigan to be put under a state-imposed emergency manager was Lincoln Park—an imposition which ended three years ago. Michigan Treasury spokesperson Ron Leix noted: “Each situation that led to the financial emergency is unique, so I can’t give a broad-brush assessment about how the law will be used in the future…For the first time in 18 years, no Michigan municipality or school district is under state financial oversight through an emergency manager. This is really about the hard work our local units of government have achieved to identify problems and bring together the resources needed to problem-solve challenging financial conditions.”

In Michigan, the emergency manager program was authorized twenty-eight years ago, granting the governor authority to appoint a manager with extensive powers over a troubled municipality or school district. By 2012, Michigan voters repealed the emergency manager program in a referendum; notwithstanding, one month later Gov. Snyder and legislators re-adopted a similar intervention program—under which local governments could opt among three new options in addition to the appointment of an emergency manager who reports directly to the Governor: chapter 9 municipal bankruptcy, mediation, or a consent agreement between the state and the city to permit local elected officials to balance their budget on their own. (In Michigan, municipalities which exit emergency management remain under the oversight of a receivership transition advisory board while executive powers are slowly restored to elected mayors and city councils.)

The state intervention/takeover program had mixed success, according to Michigan State University economist Eric Scorsone, who noted: “In some cases it’s worked well, like Allen Park where the situation was pretty clear-cut and the solution was pretty clear as to what needed to be done.” (Allen Park regained full local control of its operations and finances in February of 2017 after nearly four years of state oversight. Last June, S&P Global Ratings upgraded the city to investment-grade BBB-plus from junk-level BB, crediting strong budgetary performance and financial flexibility more than 12 months after exiting state oversight. But the appointment, in Flint, of emergency managers demonstrated the obverse: the small city had four emergency managers: Ed Kurtz, Mike Brown, Darnell Earley, and Gerald Ambrose—where the latter two today are confronted by charges of criminal wrongdoing stemming from the lead contamination crisis and ensuing Legionnaire’s disease outbreak that claimed 12 lives. It was the gubernatorially appointed Mr. Earley who oversaw the decision to change Flint’s water source to the Flint River in April 2014 as the city awaited completion of a new pipeline—a decision with fatal human and fiscal consequences. Indeed, two years ago, Gov. Snyder named a task force to investigate the Flint crisis and review the Emergency Manager law—a review which recommended the Governor consider alternatives to the current approach that would engage local elected officials. (No action has been taken to change the law.)

Because only a minority of states have authorized chapter 9 municipal bankruptcy, there is no uniform state role with regard to city or county severe fiscal distress and bankruptcy. Jane Ridley, senior director in the U.S. public finance government group at S&P Global Ratings and sector lead for local governments, has noted that state oversight is considered as part of the rating agency’s local GO criteria: “We do think that having a state that has oversight, especially if it’s a proven mechanism, can be very helpful for struggling entities…If they ended oversight entirely it would likely have an impact on the institutional framework scores and their sub scores.” A Moody’s analyst, Andrew Van Dyck Dobos, noted: “While an EM is in most cases is a last option, the ability for it to implement some policies and procedures is going to be typically viewed, at least at the onset, as a credit positive.”

Ending Shelter from the Storm. U.S. District Judge Timothy Hillman yesterday ruled that temporary housing given to hundreds of Puerto Ricans displaced by Hurricane Maria will end next month, meaning Puerto Ricans will be forced to check out of temporary housing provided by Federal Emergency Management Agency (FEMA) as part of the agency’s Transitional Sheltering Assistance (TSA) program. Judge Hillman, in his decision, wrote: I strongly recommend the parties get together to find temporary housing, or other assistance to the Plaintiffs and other members of the class prior to that date,” with his decision coming the same week Puerto Rico updated its official death toll from Maria to 2,975, a vast increase from the original count of 64. Judge Hillman’s decision also comes about two months after a national civil-rights group filed a lawsuit which had sought a restraining order to block FEMA from ending the program. The group, LatinoJustice, argued in the suit that it would lead to families’ evictions. It also came as, two days ago, President Trump met with reporters to respond to questions with regard to the mounting death toll—a session in which the President told the reporters: “I think we did a fantastic job in Puerto Rico.” Some 1,744 Puerto Rican adults and children were in the FEMA program when the lawsuit was filed. U.S. District Judge Leo T. Sorokin temporarily extended the program to the end of last July, and subsequently extended it until today—and then, once more, to September 14th.

Now, the White House is responding to a new estimate which increases the number by about 33% more to 2,975 after an independent study. White House spokeswoman Sarah Huckabee Sanders claimed in a statement that the back-to-back hurricanes which hit last year prompted “the largest domestic disaster response mission in history.” She added that President Donald Trump “remains proud of all of the work the Federal family undertook to help our fellow citizens in Puerto Rico.” She also says the federal government “will continue to be supportive” of Gov. Ricardo Rossello’s accountability efforts and says “the American people, including those grieving the loss of a loved one, deserve no less.” The new estimate of 2,975 dead in the six months after Maria devastated the island in September 2017 was made by researchers with the Milken Institute School of Public Health at George Washington University. It was released Tuesday.

A British Chapter 9 Municipal Bankruptcy?

August 29, 2018

Good Morning! In this morning’s eBlog, we consider a potential fiscal threat to the U.S. Virgin Islands, before considering the fiscal challenge to a municipality across the pond: Northamptonshire County, England.

A U.S. Virgin Islands taxpayer has brought a proposed class action against the U.S. Virgin Islands government, saying it hasn’t paid nearly 20,000 income tax refunds totaling $37 million for the 2016 tax year and the government owes $97 million in refunds since 2007. The complaint filed by Jennifer Duncan, a U.S. citizen who operated a business in the territory in 2016 and pays taxes there, also alleged that the government of the territory set aside no money in 2017 to pay income tax refunds despite a significant deficit in the refund account. The suit alleges that as of March, the U.S. Virgin Islands government had estimated that 19,653 income tax returns claiming refunds had not been paid and claims the territory’s government is using the money as a “bridge fund” to cover budget shortfalls.

A Fiscally Appealing Chapter 9 case? Councilors in Northamptonshire County, England, a county of over a quarter of a million residents, is in severe fiscal distress; now it appears supportive of plans to replace the county’s eight existing councils with two unitary ones in the wake of a government inspector’s recommendation—an action which will trigger a second vote before such a fiscal plan would come into operation in 2020, with the Council voting 31-14—effectively forwarding the quasi chapter 9 municipal bankruptcy plan to all eight of the county’s authorities for a vote on the plan, which comes after the Council, which faces a funding shortfall of about $82 million, issued two notices banning all new spending this year. Conservative Council leader Matt Golby reported the vote would help to give the county an “opportunity to reset,” noting: “There is lots to celebrate about Northamptonshire: Our residents deserve the best we can offer. We need to instill from day one the best practice in all of our scrutiny and functions.” The new, unitary authority would cover Daventry, Northampton, and South Northamptonshire. Labour Councilor Mick Scrimshaw noted: “This is clearly a proposal put forward by government to abolish the political embarrassment of this Council.” The local governmental action came against a seething backdrop of residents, whistling and booing, and swarming the County Hall, shouting: “Criminals!” and holding up banners that read: “Tory councilors wanted for crimes against people in Northamptonshire.”

The residents of what began as an ancient borough before, in 1835, under the Municipal Corporations Act of 1835, paving the way for an elected Council, are reacting to the quasi-municipal bankruptcy, which has forced the local government to halt all but the minimum services required by law: the Council has already voted to close libraries and stop repairing roads.

Last February, the County became the first, in two decades, to, effectively, run out of money—albeit, it could be that Northamptonshire is a fiscal omen for other cities—many of which are sharply cutting essential services. (The municipality, one of the largest towns in the United Kingdom, with a population over 200,000, was granted its first charter by King Richard I in 1189; its first Mayor was appointed (not elected) by King John in 1215. Northampton was unsuccessful in its application for unitary status in 1996, and recognition as a city in 2000. The city, about 60 miles from London, and one of the largest towns in the United Kingdom, with a current population of over 200,000, dates its founding to its first town charter, granted by King Richard I in 1189; King John appointed its first Mayor.

Councils are Britain’s fundamental unit of local government, dealing with an array of basic needs: trash collection, public transport, libraries, town planning, and care for children and other vulnerable people, among other things. They levy a tax on homes and charge fees for some services. They also collect a nationally set tax on commercial real estate, and keep an increasing share of it. But, for years they received most of their funding from the central government.

The crisis in Northamptonshire is complicated and partly self-inflicted. It has roots in the austerity policies and cost cutting that the Conservative-led national government imposed a decade ago in response to the global financial crisis. The Tories in London argued that austerity was the responsible solution to balance public accounts and encourage future growth. Now some Conservatives, especially at the local level, are openly defying what has been a pillar of the party’s ideology.

Funding from London for local governments has fallen 60 percent since 2010, with reductions expected to total $21 billion by 2020, the Local Government Association has calculated. In response, nearly every council in Britain has cut or outsourced services, sold off assets and tried a host of budget gimmicks, experts in local finance say.

One in 10 of the larger councils that have obligations to care for children and elderly people—about 35 councils in all—are in danger of exhausting their reserves within the next three years, according to the National Audit Office. Rob Whiteman, chief executive of the Chartered Institute of Public Finance and Accountancy, notes: “There’s a slow-moving domino effect.”

Northamptonshire was the first flashing red light. East Sussex County Council, run by Conservatives, recently announced it would reduce services to the “legal minimum.” The Conservative-led county council in Somerset warned it might be facing bankruptcy. This month, two families won a case against Bristol City Council to block plans to reduce funding of special education needs and disability services.

The Northamptonshire Council, having run through its rainy-day funds, now has enough money to pay only for mandatory services for the elderly and children. Unable by law to run a deficit, the council voted in February to shut down 21 of the county’s 36 libraries, remove bus subsidies and suspend road repairs. (A court recently blocked the decision to close the libraries.) At the meeting earlier this month, some councilors seemed resigned to the angry public response.

“I am happy to apologize,” said Richard Auger, a Tory councilor. “I think mistakes were made,” he added. “It’s a situation we’re responsible for.” The crisis is a political embarrassment for Conservatives, who are already divided into warring camps over Brexit. The former leader of the Northamptonshire council, Heather Smith, has resigned from her position, and from the Conservative Party. Investigators sent from London blamed her and other councilors for mishandling local finances, even as she blamed London for impossible mandates and a refusal to consider higher taxes. Sounding increasingly like their Labour opponents, some Conservative councilors in Northamptonshire are now talking about stopping the outsourcing of public services and demanding tax increases—or, as recently elected Conservative Councilor John Elkins put it: “I was a believer that we had to save money, but there had to be other ways than to slash and burn: How did we get to where we are? What the hell has been going on?”

Some describe this as the Graph of Doom, referencing, from 5 years ago, a power point shown to the Northamptonshire Council depicting an unavoidable contradiction: a sharp, rising public demand for local services contrasted against a sharp cutback in revenue from the national government (think post General Revenue Sharing), as part of the austerity program led by Conservatives in London. Ms. Smith described it thusly: “It was showing how we were all heading towards this cliff edge,” referring to a shortfall of $175 million that needed to be addressed by 2020. A committed Tory, Ms. Smith initially embraced the calls for austerity, as did many in reliably Conservative Northamptonshire, noting: “Being a Conservative-run Council, everybody accepted that the country had been overspending and that it was time to scale all of that back…At the time we will be spending millions on transformation we will be cutting frontline services. We should not be making a decision today. We need the detail.”

The fiscal pain, moreover, appears to be contagious: This week, all of the Councils in the county will have similar meetings, prior to submitting a plan for reorganization to James Brokenshire, the Minister responsible for local government. (Legally, only one Council needs to vote to back the plan for it to go to the Secretary of State for approval.)  

Reorganizing Governance. For its part, according to a report requested by the government, the Northamptonshire County Council should simply be abolished: the report, requested by Local Government Secretary Sajid Javid, recommends: Any “a new start” which is “best achieved by the creation of two new unitary councils,” in this case, this being a report which appeared to trigger the resignation of  Council Leader Heather Smith, while Northampton North Parliament Member Michael Ellis called the management of the authority a “national scandal.” He added he had been “appalled” by the report. KPMG , in its audit, warned the Council would have to re-work its FY2019 budget to make £40m worth of cuts. Max Caller, who led the government investigation, said Northamptonshire should have two new unitary authorities by 2020, one covering Daventry, Northampton, and South Northamptonshire; and the other covering Corby, East Northamptonshire, Kettering, and Wellingborough—meaning the County Council would cease to exist. Mr. Caller added that “living within budget constraints is not part of the culture” of the Council, noting it had not responded “well, or in many cases even react, to external and internal criticism,” noting that individual Councilors “appear to have been denied answers” to legitimate questions.

But he was also critical of the Council’s proposed Next Generation Model, under which the County would outsource all services and create four new bodies for: child protection, care of vulnerable adults, providing health and well-being services, and improving the county.

Intergovernmental Challenges. Deputy leader Matthew Golby, who is performing the functions of Council Leader prior to any formal appointment, said the authority accepted the findings the inspector has found with regard to “what he believes to be significant failings at the Council,” adding that while the report says the authority is “in no worse position than any other Council,” Northamptonshire’s leadership “would argue the sector as a whole does face significant financial challenges;” the leaders of Northamptonshire’s district and borough Councils issued a joint statement saying they “acknowledge the enormity of the situation,” but “do not believe a unitary model is the only way forward.”

Northamptonshire County Council’s financial crisis timeline: Funding from the central government for local governments has dropped 60% since 2010, reminiscent of the challenge confronting cities, counties, and states after Congress voted to end the General Revenue Sharing program during the Reagan Administration. According to the Local Government Association, those cuts are projected to total $21 billion by 2020. In response, nearly every Council in Britain has cut or outsourced services, sold off assets, and tried a host of budget gimmicks. Nevertheless, one in 10 of the larger Councils which have obligations to care for children and elderly people—about 35 Councils in all—are in danger of exhausting their reserves within the next three years, according to the National Audit Office—or, as Rob Whiteman, CEO of the Chartered Institute of Public Finance and Accountancy, put it: “There’s a slow-moving domino effect,” meaning that Northamptonshire was likely just the first flashing red light. In nearby East Sussex County Council, run by Conservatives, the County recently announced it would reduce services to the “legal minimum,” while the Conservative-led county council in Somerset warned it might be facing bankruptcy.

The fiscal situation means the Northamptonshire Council, having run through its rainy-day funds, now has enough funding to finance only for mandatory services for the elderly and children. Barred by national law from running a deficit, the Council, last February, voted to shut down 21 of the county’s 36 libraries, remove bus subsidies and suspend road repairs. (A court recently blocked the decision to close the libraries.)

A Fiscal Cliff Foretold? The virtual chapter 9 municipal bankruptcy was anticipated by some, in what some deem the Graph of Doom, referring to a staff power point shown to the Northamptonshire Council five years ago, which depicted an unavoidable contradiction: a sharp, rising public demand for local services contrasting with a sharp cutback in funding from the national government, as part of the austerity program led by Conservatives in London—or, as Senior Counselor at the time Ms. Smith noted: “It was showing how we were all heading towards this cliff edge,” a fiscal precipice of $175 million that needed to be addressed by 2020. A committed Tory, Ms. Smith initially embraced the calls for austerity, as did many in reliably Conservative Northamptonshire—or, as she put it: “Being a Conservative-run Council, everybody accepted that the country had been overspending and that it was time to scale all of that back.” The problem, however, was how. The Council needed to find huge savings, but it also had limited revenue sources. Raising taxes was ruled out: deemed ideologically unpalatable while the Conservatives were making austerity-related cutbacks. Eric Pickles, the government minister who oversaw local government financing between 2010 and 2015, said it was a “moral duty” for the Tories to keep local taxes low, noting: “Some Conservative Councils had a big fight over it, and said, ‘No, we’re not doing it,’ ” Ms. Smith said. Indeed, before declaring bankruptcy, Northamptonshire took the desperate step of selling and leasing back a $70 million headquarters building it opened in October.

Last February, the Council recognized the depth of its fiscal plight and issued a formal notification of de facto municipal bankruptcy. In response, Conservative leaders in London dispatched government inspectors—inspectors who, last March, issued a damning report: Max Caller, the chief inspector who wrote the report, said that the County Council’s troubles were self-inflicted and that the Next Gen approach did not have any “documented underpinning” that set out how it was expected to deliver savings. In an interview, Inspector Caller noted: “The things that they did were unwise: You could say that they didn’t want to face up to the challenges of austerity, but all the other councils have.” According to his findings, Northamptonshire overspent by $130 million over three years, but took no steps to rein in expenditures—or, as he put it: “Everything has been a waste of money…You can’t go year after year holding down taxation rates at local level and taking the money away and expecting the same level of service. That’s not possible.”

This year, the British government announced some new financial aid for councils, including about $200 million for adult social services. Nevertheless, according to some experts, local Councils are still confronted by a $4 billion funding hole. In response, according to an annual government survey of Council leaders, an overwhelming majority of county councils across England plan to raise council tax, their levy on homes, and 5.99% this year— the maximum the central government will allow. Many have also said they would like to raise business rates, a move the central government is still rejecting.

Prior to declaring municipal bankruptcy, Northamptonshire had taken the desperate step of selling and leasing back a $70 million headquarters building it opened in October—a step which drew withering public ridicule—and instead of helping, appeared to prompt the arrival of national government inspectors. According to officials, Northamptonshire’s fiscal plight was clear from the moment the national government began to pull back on grants to local authorities. What appeared to stun local elected leaders was that a Conservative national government would allow a local government to slide into bankruptcy, or, as former Councilor Smith put it: “I honestly believed that the government would not let us sink because we were a Conservative authority…But I was wrong. They were quite happy to just throw us out and annihilate us, really.”

Last month, the Northamptonshire Council issued a §114 notice which banned any new expenditure of public money, a critical step as the jurisdiction seeks to achieve $90 million in budget savings this year; the Council voted to shut down most of the county’s libraries, after, in recent years, closing local centers for children and sharply reduced educational funding. The fiscal action that appeared to most shake the public was the vote to shut down the libraries. Conservative Councilor Sam Rumens noted: “I couldn’t face the libraries being cut.”

Puerto Rico’s Fiscal & Governing Twilight Zone

August 28, 2018

Good Morning! In this morning’s eBlog, we consider the shaky promise of PROMESA for the U.S. territory of Puerto Rico, an entity somewhat in Rod Serling’s Twilight Zone between a state and a municipality.

A Fiscally Appealing Chapter 9 case? U.S. Representatives Raul Grijalva (D-Az.) and Nydia Velasquez (D-N.Y.) yesterday warned the U.S. First Circuit Court of Appeals that House Natural Resources Committee Chairman Rob Bishop’s (R-Utah) interpretation of the PROMESA statute to be legislation intended to offer special protections to creditors or limit the restructuring of the debt through the judicial route was erroneous, arguing, in an amicus brief in the case brought by AMBAC against Puerto Rico and the PROMESA Oversight Board that “the purpose of PROMESA was not to grant to the creditors of Puerto Rico, including the bondholders, special protections that other municipal creditors do not have, nor to avoid losses to those creditors.” In addition, they argued for rejection of the interpretation that the Congressional statute for the restructuring of the public debt of Puerto Rico by judicial means had been established as the last resort of the Promesa law. Ranking Member Rep. Raul Grijalva (D.-Az.) indicated that the statute simply requires Puerto Rico to make “good faith efforts to achieve a consensus restructuring with creditors” prior to filing a petition through the courts. The two Members noted: “Neither the legislative record, nor the legal text supports an interpretation of PROMESA that gives creditors greater rights than those of a traditional reorganization at the expense of debtors’ rights.”

Municipal Bankruptcies Are Complicated Affairs. Really.

August 17, 2018

Good Morning! In this morning’s eBlog, we consider a rejection of an appeal challenging Jefferson County’s approved plan of debt adjustment from its chapter 9 municipal bankruptcy, and the recurring governance challenge in the U.S. territory of Puerto Rico whether the elected Governor and Legislature—or a federal Judge, or a Control Board ought to be making vital governing decisions.

Please note, there will be a temporary respite for eGnus and eBlog readers before publications resume the last week of this month.

A Fiscally Appealing Chapter 9 case? The U.S. Eleventh Court of Appeals has dismissed a challenge to Jefferson County’s chapter 9 municipal bankruptcy plan of debt adjustment, holding (please see Andrew Bennett et al v. Jefferson County, No. 15-11690, 11th U.S. Circuit Court of Appeals, August 16, 2018), holding that the U.S. District Court had erred when  it dismissed Jefferson County’s appeal, holding that the Chapter 9 case brought by a group of ratepayers of Jefferson County’s sewer system could be brought due to the concept of “equitable mootness,” a doctrine the court wrote which, until yesterday, “we have not been asked to apply in a chapter 9 municipal bankruptcy case,” with the court adding: “Municipal bankruptcy proceedings are usually complicated affairs, and the chapter 9 proceeding for Jefferson County, Alabama, involving about $3.2 billion in total sewer-related debt—has proved no different.”

Under the terms of the decision, the County would cut over $100 million in general fund expenditures, and the creditors will write off a significant amount of outstanding debt—over the course of the next four decades, the County is directed to implement a series of single-digit sewer rate increases—totaling about 365%–an amount which the court noted was “not far off of the national increase in inflation in the previous 40 years.” The court, in effect, with its decision, rejected the assertion by County ratepayers that their plan “validated corrupt government activity.”

The court also reviewed, de novo, the lower court’s conclusion that the doctrine of equitable mootness applied to this case—at that lower court, Jefferson County had argued the doctrine of equitable mootness applied and barred the ratepayers’ appeal from the U.S. bankruptcy court. The court here agreed, explaining why said doctrine could apply in a municipal bankruptcy case. (Essentially, the doctrine, the court explained, the courts may, under certain circumstances, reject bankruptcy appeals if the underlying rulings which would have gone into effect would have been “extremely burdensome.” The court went on to decide that some of the principles “will weigh more heavily in chapter 9 municipal bankruptcy cases “precisely because of how many people may be affected,” unlike in a chapter 11 bankruptcy, noting previous chapter 9 municipal bankruptcies we have written about in Stockton and Vallejo, where the district courts’ reasoning involved the implications that “municipalities and their bankruptcies implicate issues of sovereignty; whereas corporations or individuals and their bankruptcies do not—and that, accordingly, it is important for us to tread carefully where self-governance is concerned.” The court further noted: “In addition, it is not at all clear in which direction the ratepayers’ federalism arguments will cut from one chapter 9 bankruptcy to the next. Given the interests of the municipality and those of its residents (among others), there is a countervailing argument that a court ought to be more solicitous to the municipality that has obtained confirmation of its plan….”

Finally, the court recognized that “given the centrality of the constitutional rights to the fabric of the republic, there is a fair argument to be made that we should allow some leniency when a party which has allowed a bankruptcy plan to go into effect asserts,” adding, with regard to federalism concerns, “it will be appropriate to note them when deciding whether the doctrine should bar an appeal in a particular bankruptcy case,” which, is, as the court noted: “precisely what we did.”

 Jefferson County Commissioner David Carrington, a previous State & Local Leader of the Week, who led the county’s negotiations during its municipal bankruptcy case, said County leaders are pleased with the ruling, noting: “We were always confident in our Chapter 9 plan of adjustment,” but wincing that the years of litigation had come at great expense to county taxpayers running into “hundreds of thousands of dollars in frivolous litigation fees that could have been used for capital improvements to the sewer system.” (The County had filed its plan of debt adjustment in November of 2011—a plan subsequently approved by the court five years ago. Nevertheless, as the dean of chapter 9 municipal bankruptcy, Jim Spiotto, noted, the case had become one of the longest municipal bankruptcy cases in U.S. history.

Another Appeal. Meanwhile, south of Jefferson County, Puerto Rico Governor Ricardo Rosselló confirmed yesterday that the executive branch will also appeal the decision of Judge Laura Taylor Swain, the judge assigned by the federal court to deal with the quasi chapter 9 municipal bankruptcy of Puerto Rico—a decision in which it was determined that the PROMESA Oversight Board has the authority to impose its certified fiscal plan and budget, with the Governor stating: “It has become very clear what is the unworthy colonial situation in Puerto Rico, where some courts have decided that in some aspects of the budget the hands are tied to the Legislative Assembly and somewhat to the executive to make determinations, so of course we are going to appeal,” with his comments coming in the wake of Judge Swain’s dismissal, earlier this month, of nine of the allegations presented in the suit of the Financial Advisory Authority and Fiscal Agency (Aafaf), as well as all the allegations of the lawsuit filed by the Puerto Rico Legislature—and the legislative leadership, where the respective leaders, Thomas Rivera Schatz and Carlos “Johnny” Méndez, already filed an information motion before the court notifying it they would attend the First Circuit of Appeals of Boston—albeit, Governor Rosselló, noted, he would not provide them with the power to “make executive decisions with the vehicle of the executive order.”

Colocar el Interruptor. Nearly a year after Hurricane Maria plunged Puerto Rico into physical and fiscal darkness, NPR’s Adrian Florida reports: “Now nearly 11 months after Hurricane Maria plunged Puerto Rico into darkness, officials there say they are done restoring the island’s power: no more lanterns, and no more “candles.” PREPA has announced its work restoring power to the island is done: it took almost a year, tens of thousands of new poles, thousands of miles of wire, and help from two federal agencies. She described it as a “restoration plagued by scandal and delays. It cost some $3 billion. And now that it’s done, experts agree the power grid is just as fragile as before the hurricane. This morning, Jose Ortiz, the fifth CEO to head the power utility since the storm, was offering a reality check on local radio station WKAQ. Some homes still don’t have power because they’re damaged

Municipal Government Reorganization to Achieve Cost Savings & Greater Efficiency

August 14, 2018

Good Morning! In this morning’s eBlog, we consider the perennial challenge of governmental reorganization: how does a government achieve that to reduce costs, but achieve greater efficiency?

Governmental Reorganization in Puerto Rico. Puerto Rico Governor Ricardo Rosselló Nevares yesterday announced his pocket veto of the proposed Department of Labor and Human Resources reorganization plan, advising he will submit this plan again in the next session, noting: “Several changes introduced prevent us from achieving the necessary savings with consolidation, and we understand that they limit the executive powers to effectively implement the reorganization.” The Governor added: “As always, we will work with the Legislative Assembly to reach the consensus that will allow us to go forward with this consolidation.” Almost simultaneously, the Governor signed into law the proposed reorganization project of the Board of Education, which will create a new Board of Post-Secondary institutions, stating: “With this new reorganization, we will be able to have a more efficient process to encourage accreditation by private entities of recognized trajectory. This allows us a government structure in line with our fiscal reality, which responds to current needs while contributing to a better quality of life.” The goal is to achieve an outsourcing of the licensing process, where projections indicate very substantial fiscal savings for the government. Secretary is outsourced and the intervention of the State is eliminated in a task that is not specific to the Government and that costs millions of dollars to the Treasury. Current Puerto Rico Secretary of State Luis Rivera Marín added that “with this measure, Puerto Rico adopts the model followed by 47 states which do not require licensing processes to private institutions, since they work in an outsourced manner with accreditations by recognized non-governmental organizations,” adding: “However, a registration process will be required before the Department of State with compliance with basic criteria of educational facilities and programs.” Indeed, the measure mandates that post-secondary institutions, including universities and technical programs, will be required to apply to the Board of Postsecondary Institutions in order to operate or continue to operate. That mandate will not apply to K-12, albeit those institutions will have the obligation to register with the Department of State and certify that they meet the necessary requirements, such as having adequate facilities, possessing the corresponding permits, have teaching staff, and the competency to teach the requisite subjects. Church schools will continue to be governed by the registration of Law 33-2017 so as not to interfere with the constitutional right of religious freedom. (Puerto Rico’s Article II Sections 16d of its Constitution affirms the right of employees to choose their occupation, to have a reasonable minimum salary, a regular workday not exceeding eight hours, and to receive additional compensation for work in excess of this daily limit.)  

The Governor is projecting this consolidation project will achieve, in its first year, savings in excess of $5 million in its first year, and as much as $40 million over the next five  years, with said consolidations achieved via Law 122 of 2017, known as the New Government Law—enacted to seek greater efficiency in the consolidation of agencies. Indeed, consolidations by the Department of Public Security appear to have achieved more than $25 million in savings in the first year, leading the Governor to note: “We have completed the legislative process related to seven reorganizations, which impact on 30 government agencies. In the seven reorganizations approved by the Legislature, savings of over $30 million in the first year and close to $ 250 million in five years are estimated.”

Popping the Cork in Corktown?

August 14, 2018

Good Morning! In this morning’s eBlog, we consider some of the fiscal and physical challenges and changes to one of Detroit’s oldest neighborhoods, Corktown, before venturing to the warm Caribbean waters to witness incipient signs of fiscal and physical revival in Puerto Rico.

Motor City Revitalization. The City of Detroit, first settled in 1701 by French colonists, was the first European settlement above tidewater in North America, founded as a New France fur trading post, before becoming, by 1920, a world-class industrial powerhouse and the fourth-largest U.S. city. One might describe it as a unique municipal center of nations, as the first Europeans to settle there were French traders and colonists from the colony of La Loisiane, today’s New Orleans—traders who were forced to vie with the powerful Five Nations of the League of the Iroquois—setting the stage for what became the Beaver Wars in the 17th century. The greater Detroit metropolitan region of those times flourished as a center of the nation’s fur trade, so that the Crown’s administration of New France offered free land to colonists as a means to attract families to the region—a perennial challenge, and one of the city’s greatest fiscal challenges today. It was in late 1760 that Fort Detroit was surrendered to the British, in the wake of the fall of Quebec—so that control not just of the Detroit region, but of all French territory east of the Mississippi River, was formally transferred to England via the 1763 Treaty of Paris. By 1760, a British census counted 2,000 hardy souls in the city in the wake of the Seven Years’ War—a head count which, as would happen in this century, dropped 30% by 1773, a decade after the English had reserved the territory, under the Royal Proclamation Act of 1763 for the Indians—land eleven years later transferred to Quebec. In a census taken during the American Revolution, Detroit’s population had soared to 2,144, making the city the third-largest city in the Province of Quebec.

Today, Corktown is the oldest surviving neighborhood in Detroit, with the neighborhood named for its early Irish immigrants, who by the early 1850s, made up half of the residents of the 8th Ward (which contained Corktown), but it is a part of the city which has been reduced in size over the years by dint of numerous urban renewal projects, the construction of light industrial facilities, and the construction of the Lodge Freeway. What remains of the residential section is listed on the National Register of Historic Places. It is a neighborhood slated for change in this time of radical changes wrought by the emergence of the self-driving car era—so the Ford Motor Co.’s plans to renovate the historic Michigan Central Depot has raised apprehensions with regard to the potential impact such a large-scale project could have on the area and surrounding neighborhoods with regard to affordability and diversity—enough of a concern that Detroit’s leaders and officials have commenced what is to be a yearlong process to gather feedback from the community regarding the future of the neighborhood. That municipal effort is coming in tandem with a separate effort by Ford to collect input on its proposed plans to revitalize its iconic 100-plus-year-old historic building.

Officials with the city and Ford say they are committed to working with the community as they navigate their plans. The company, on June 20th, had announced its intentions to purchase the abandoned Michigan Central Station, a hulk of a building just blocks from where Kevyn Orr had his office on his first day as the City’s Emergency Manager charged with taking Detroit into the nation’s largest ever chapter 9 municipal bankruptcy—and fashioning a plan of adjustment to be approved by the U.S. Bankruptcy Court. That 18-story building, which starred as a set piece for the flick Batman v. Superman, has been described as representing a “deep, complex wound…a physical reminder of what the city was, and what it many thought it would never be again.”

Simultaneously, the city is seeking to create a strategic framework for the Greater Corktown neighborhood to address the area’s potential for growth, even as it seeks to preserve its heritage and integrity, officials say—a framework which is to detail both a short-term implementation plans and long-term goals for the neighborhood’s development: Detroit’s Planning and Development Department expects, before the month is out, an RFP for a consultant to conduct a series of community meetings in Greater Corktown, with said selection to be announced by the end of next month: the study itself is projected to lead to a recommendations of a final framework in a year.

Not Self-Driving. The city’s plans for Greater Corktown, just one of the city neighborhoods in various stages of planning, was in the planning stage prior to Ford’s depot announcement, creating some governing challenges, or, as John Sivills, the project manager with Detroit’s Planning and Development Department, put it: “The Ford announcement certainly does add a great sense of urgency to it so we can have a plan in place rather than tail-wagging-dog scenario.” That is, as he added: “That the city can have a plan in place such as bring in Ford and provide for inclusionary growth.” Similarly, his colleague, Steve Lewis, central design director for Planning and Development, noted that Detroit’s plan will craft “a vision for the future of the neighborhood that either by optics or by reality is not seen as being dictated by Ford.” Their study is expected to address challenges and opportunities for a number of issues, including zoning, landscape, historic preservation, and housing development.

Will They Drive in Tandem or Self-Drive? Ford is planning to create a 1.2 million-square-foot campus with its anchor at the Michigan Central Depot, with plans to occupy the depot by 2022: the project will include the Grand Hall, which will be open to the public, along with retail space: the 18-story tower will have office space as well as residential space on the top two floors. In addition, Ford intends to develop other buildings on the campus, including the former Detroit Public Schools Book Depository, where Ford plans to house its autonomous vehicle business on the Corktown campus. Ford is, at the same time, seeking community engagement for its Corktown expansion, with the company asserting: “Detroit and Corktown, North Corktown, there’s opportunity and so much potential, and they’re already doing such amazing work that Ford can really just be a platform to shed a light on the work that they’re doing…Maybe help them scale.”

Indeed, scale, as in any city, is an issue: because of the large-scale of the project, it falls under the city’s Community Benefits Ordinance, one approved by Detroit voters in November of 2016, which targets developments worth at least $75 million, if the development gets $1 million or more in property tax abatements or $1 million or more in value of city property sale or transfer: under said ordinance, a neighborhood advisory council is assembled to provide feedback in meetings during the ensuing two months, with the advisory council subsequently working with Ford to create a community benefits agreement.

To date, Detroit City Council President Brenda Jones has selected Hubbard-Richard resident Aliyah Sabree, a Judge in the 36th District Court; City Councilwoman Janee Ayers chose Sheila Cockrel, a Corktown resident and former Councilwoman. The community elected Jerry Paffendorf, co-owner of Loveland Technologies, and Heather McKeon, an interior designer with Patrick Thompson Design. The Detroit Planning and Development Department will name four appointees, and City Councilwoman Raquel Castañeda-López will name one appointee.

Concurrently, Ford has feedback boards and comment boxes in its Ford Resource and Engagement Center, where questions posed include: “Where do you go to get ___ in your neighborhood (nails, hair, dry cleaning, etc.?); What are the top three things you want to see changed in your neighborhood?”; and “Who is an unsung hero, organization and/or business in your neighborhood?” The company reports that it has already received feedback from excitement to issues of apprehension on issues ranging from housing, to jobs, to traffic, and to culture,” adding: “We really love that the community values the diversity of the neighborhoods from Corktown, North Corktown, and Southwest Detroit. We’re really understanding the importance of that. We’re also understanding the importance of workforce. Recognizing that there’s not only potential construction jobs, but also long-term what are some ways we can build a pipeline or clear pathways for some of the other jobs that may be available in the future. Technology jobs, things of that nature. Jobs around (electric and autonomous vehicles.).”

Some have criticized aspects of the Community Benefits Ordinance and the Neighborhood Advisory Council process. Alina Johnson, a resident of the nearby Hubbard-Richard neighborhood, which will also be impacted by Ford’s project, said she feels residents should be trained in advance on advisory council work in order to be most effective on a tight timeline—or, as she put it: “Right now, the main concern is making sure that the folks who have been selected will be able to be inclusive and able to communicate to the public and serve everyone and not necessarily their community in terms when they’re discussing benefits by those impacted by the train station development.”

Blowing Fiscally Back. Despite a double fiscal and physical whammy of hurricanes, and being in the beginning of this year’s hurricane season, Puerto Rico FY’2017 General Fund revenue came in 1.5% higher than budgeted: total revenue was $9.31. Puerto Rico Secretary of Treasury Teresita Fuentes noted: “The level and behavior of tax collections during the past fiscal year in comparison with other years is considered unusual due to the economic effect of hurricanes passing through the island.” That is a sharp fiscal blowback to FAFAA Executive Director Gerardo Portela Franco’s warning last December 5th that he expected Puerto Rico’s fiscal year General Fund revenues to be 25% less than budgeted.  Secretary Fuentes reported that unexpectedly high revenues from April to June had allowed the government to exceed the budgeted number, while Puerto Rico Secretary of the Interior Raul Maldonado noted: “To a large extent the [revenue] increase is attributed to the temporary economic activity of companies associated with recovery tasks and the flow of insurer and federal government money after the hurricanes.” He noted that the greatest increase was derived from the island’s corporate income tax—some $260 million; however, Puerto Rico’s sales and use tax revenues returned $26 million less than projections from the start of the year. Secretary Fuentes said that many businesses had either been closed or had operated partially in the weeks following Hurricane Maria and that in the period the sales tax on restaurant food was temporarily eliminated; however, the sales and use tax revenue rebounded in the last quarter, with Secretary Fuentes pointing in particular to hardware stores and department store sales.

Back to Escuela.  Puerto Rico Governor Ricardo Rosselló Nevares has announced the territory will provide more than 2,000 regular slots to temporary teachers—a step by which he hopes to alleviate the recurring challenge of recruiting educators at each school start—as teachers are often attracted to more generous salaries and benefits on the mainland.  His stated goal is for these educators to be recruited under 10-month contracts by September:We are going to make an effort to convert thousands of temporary places in permanent seats in the education system.” The Governor noted that his action is intended to make it possible to clarify the system and end current uncertainties which have left teachers in the dark with regard to whether she or he still has a job—an apprehension not just of teachers, but also parents, who are confronting their own choices with September looming.

Two years ago, in the midst of an election year, the Governor acted to convert some 1,519 temporary teachers to become full-time employees, noting, then: “You have teachers who were not sure, and now they are going to have certainty, and you have a school system that did not have visibility, now we are building that visibility,” adding that, in his view, this governing decision would not have an adverse impact on Puerto Rico’s budget—and, ergo, not trigger PROMESA Oversight Board fiscal preemption: “If there is any philosophical consideration that they may have, that is another thing. For us, it gives certainty to the system, particularly in the area of needs that we are going to have to supply.” The Governor explained that the measure was possible thanks to two fundamental actions: the creation of an electronic platform which has facilitated the ability of Education Secretary Julia Keleher to assess where staff is needed, especially with regard to what levels and subjects: that is, via the human resources platform, the Secretary can assess, as the Governor noted, the educational organization of each campus, including how many teachers are transient and what subjects they teach. This could be a valuable fiscal step, because online registration will facilitate the ability to confirm the number and location of students—a critical step for the completion of the school consolidation process.

Sec. Keleher has explained that the system will take into account, first, the educators who occupy places where recruitment has proved difficult, such as Special Education, English, and Math—noting the human and fiscal challenges: “You have to honor the transient teacher. It does not seem fair or correct in terms of the reality we want to offer. This is not a good deal for a person who is giving 100% for their students: The Secretary noted the determination is aligned with the anticipated tax revenues. Her request, this year, is for over 5,500 transitory positions—or, as she notes: “The idea is to have the teachers ready for the start of classes, the week before they know where they are going.” Puerto Rico’s statute 85-2018, the Law on Educational Reform “establishes that the Department, in areas of difficult recruitment such as teachers of English, Mathematics, Physics and Chemistry, will promote the permanence of the same within the term of one year, if fiscal availability of the square and of being the same vacancy.”

Physical & Fiscal Plans of Municipal Debt Adjustment

eBlog

August 10, 2018

Good Morning! In this morning’s eBlog, we consider the fiscal, physical, and governing challenges confronting Puerto Rico’s municipalities or municipios in the wake of both Hurricane Maria and Puerto Rico’s virtual chapter 9 municipal bankruptcy.

Forty employees of the Department of Public Works of one of the Nation’s and Puerto Rico’s oldest municipalities, Toa Alta, a municipio founded in Puerto Rico in 1751, yesterday became early beneficiaries of Puerto Rico’s quasi plan of debt adjustment when they were told they would no longer be mandated to reduced working hours. The municipio derived its name from the Taino word for valley, “Thoa,” albeit it has also been called the “Granja de los Reyes Catolicos,” (the farm of the Catholic monarchs), because it is an important center for agriculture. At the same time, the municipio has also been known as the Cuna de los Poetashe agricultural economy, the town was also known as the “Granja de los Reyes Católicos” (the Farm of the Catholic Monarchs). The town is also called “Ciudad del Josco”. The town is commonly known by its nickname “La Cuna de los Poetas,” or Cradle of Poets,’ because of the numerous Spanish-language poets who were born there.

So it was yesterday that Toa Alta Mayor Clemente “Chito” Agosto announced the municipio will no longer be subject to reduced their working hours, stressing in a city hall press release that the savings achieved by the municipio will enable the municipality to end the cut in working hours which had commenced in January of 2017—with the Mayor noting that the city had achieved savings of 55% in administrative costs, 27% in legal services, 70% in donations, 67% in non-professional services, 15% in building rentals, 58% in festivities, and 30% in the trust payroll—or, as he put it: “We made our decisions with responsibility, focused on having the necessary resources to give good governance to Toa Alta for many years.”

Despite the fiscal recovery, the city will retain 74 employees, or nearly one-third of the city’s work force, on reduced hours. Toa Alto, was among a dozen municipios forced to reduce employee working hours—even as some municipios, such as Cidra, had to take more drastic measures: the closure of a Pepsi plan forced Cidra to lay off municipal employees—or, as the Mayor put it:We take difficult measures, and complicated for the good of the people, and thinking more than now, in the future, in the work that we will do for many in our town.”

For Whom the Bells Tolls. The government of Puerto Rico yesterday in a new report, “Transformation and Innovation in the Wake of Devastation,” noted that it appears that more than 1,400 Americans likely died on the island because of the storm, or some roughly 20 times the previous number it had reported. The new report outlines Puerto Rico’s response to the storm and what it intends to do to strengthen its economy and infrastructure moving forward. In the reports death toll estimate, the report notes: “Although the official death count from the Puerto Rico Department of Public Safety was initially 64, the toll appears to be much higher…According to initial reports, 64 lives were lost. That estimate was later revised to 1,427,” albeit making clear that even this revised number is unofficial, but “realistic,” advising the New York Times: “We don’t want to say it out loud or publicize it as an official number…The official number will come, and it could be close. But until we see the study, and have the accuracy, we won’t be able to recognize the number as official.” It appears the spokesperson was referencing a George Washington University study, which was commissioned earlier this year to examine the death toll.  In its new report, Puerto Rico pledged to invest $118 billion in upgrades to infrastructure, housing, health programs, and education—investments critical, as the report noted, because the “hurricane’s devastating effects on people’s health and safety cannot be overstated.”

Can There Be Too Many Local Governments?

August 8, 2018

Good Morning! In this morning’s eBlog, we consider the fiscal and governing challenges confronting Puerto Rico’s municipalities or municipios—and a federal court’s dismissal of Puerto Rico’s suit challenging the preemption of its governing authority.

Can there be Too Many Local Governments? Puerto Rico Governor Ricardo Rosselló Nevares has stressed that the model of autonomous municipios has failed, because too many lack the fiscal capacity to implement their basic functions without the territory’s help. Instead, he believes that the municipal model must be changed to one where the equivalent of counties are in charge of providing services which are now provided by the territory and municipios, noting in a recent interview: “I know it’s a difficult initiative, but there has to be a conversation about what the future of local government is going to be. We had talked about establishing a counties system in Puerto Rico, and I think we need to have this conversation…The model of autonomous municipalities was a very nice one, but by not having total independence, it never truly showed as it should be.” Indeed, the debate is not new—either on the mainland, where, nearly a century ago, Farrington Carpenter, Colorado’s first Director of the Interior Department’s Grazing Service noted, at a time when there were 20 Colorado counties with populations under 5,000 and three with only 1,000: “How can such small counties afford the cost of a complete county government? So, the Governor noted: “I think there is an opportunity for the counties model…I have my ideas, but I think we depend a lot on local leadership, so that this can be achieved. I think our society understands that they can work under this model.”

Puerto Rico has 78 incorporated cities and towns—each municipio is governed under the Autonomous Municipalities Act of 1991, which establishes that each jurisdiction must have a strong mayor and municipal council or legislature—and each Council must be unicameral with its size determined by the population. Municipios with populations in excess of 50,000 are defined as incorporated cities; those with fewer are defined as towns—which rely on adjacent or nearby municipios to provide certain public services. San Juan, the capital, is home to about 400,000, while Culebra is the smallest municipio, with around 1,800.

The concept of governance change is not new: the Governor had already proposed it to the PROMESA Oversight Board. Likewise, it was a topic of debate under the administration of his predecessor, former Governor Alejandro García Padilla, albeit his administration only published a report which suggested options, such as: the consolidation of municipalities, the creation of counties, or groups of municipalities which could create consortiums made up of mergers with departments of nearby municipios—or, as the Governor put it: “I think there is an opportunity for the counties model…I have my ideas, but I think we depend a lot on local leadership so that this can be achieved. I think our society understands that they can work under this model.”

Unsurprisingly, however, the very idea of altering municipal authority has stirred up a veritable hornets’ nest. Just mentioning the idea of altering municipalities’ authority provokes a negative reaction from the mayors. Both the president of the Mayors Federation, Carlos Molina Rodriguez of Arecibo, and that of the Mayors Association, Rolando Ortiz, the Mayor of Cayey, have expressed their opposition to any consolidation: Mayor Ortiz argues that counties would bring additional expenses and an unnecessary layer of government bureaucracy, insisting that Mayors are the elected officials closest to the people, so their functions should not be limited. In contrast, Mayor Molina, from the New Progressive Party (NPP), while also opposed to the elimination or consolidation of municipalities, indicates that the Mayors Federation has created a committee to evaluate options to reform municipal structures, stressing that the intent is to make recommendations. He notes that he personally prefers that each municipio reach agreement to merge specific departments so that savings can be generated—in effect creating a consortium—a legal option available to municipios in Puerto Rico which has been available for decades, but which have been rarely used. Very few were created to merge tasks of departments of two different municipalities: since such consortia were authorized in 2012, when the Autonomous Municipalities Act was amended to facilitate the creation of these inter-municipal structures, such consortiums were established to manage the permit systems of Comerío, Barranquitas, and Aibonito; another was established for public roads maintenance in Villalba, Juana Díaz, Comerío, and Barranquitas.

Mayor Molina noted: “It would be necessary to analyze what is the best thing for Puerto Rico. I’m not in favor of letting municipal employees go. If you ask the mayors, nobody is in favor of that…I do not agree with the elimination of municipalities or mayoralties.” Similarly, Mayor Ortiz added: “I believe it’s a wrong vision. The municipal governments are the closest to needs and the people’s pain.”

Nevertheless, Gov. Rosselló emphasized that municipalities are in a precarious financial situation, so the local governance model must be revised to improve the government’s fiscal health and the quality of services received to the people, stressing that the model of autonomous municipalities in Puerto Rico has failed, because many municipalities lack the requisite fiscal capacity to implement their basic functions without the quasi-state government’s assistance. Nevertheless, he reaffirmed his view that the municipal model must be changed to one where counties are in charge of providing services which are now in the hands of municipalities and the Commonwealth, noting: “I know it’s a difficult initiative, but there has to be a conversation about what the future of local government is going to be. We had talked about establishing a counties system in Puerto Rico, and I think we need to have this conversation…The model of autonomous municipalities was a very nice one, but by not having total independence, it never truly showed as it should be.”

The Governor’s proposal is not new—it is one he included in his proposed fiscal plan, which was finally certified by the PROMESA Oversight Board last April. Nor is the issue new: the concept of changing municipal structures also was debated during the previous administration of Gov. Alejandro García Padilla; however, the concept never went beyond the publication of a report which suggested options, such as: the consolidation of municipalities, the creation of counties, or the option for groups of municipalities to create consortiums between different municipios’ departments—or, as the Governor put it: “I think there is an opportunity for the counties model…I have my ideas, but I think we depend a lot on local leadership so that this can be achieved. I think our society understands that they can work under this model.”

Nevertheless, any suggestion to curtail or limit the authority of municipios has drawn, as we noted above, a strong, adverse reaction from Mayors, with Mayor Molina emphasizing that mayors are the elected officials closest to the people, so their functions should not be limited; nevertheless, ha has indicated that, currently, the Mayors Federation has created a committee to evaluate options to reform municipal structures, stressing that the idea is to make recommendations—noting that, personally, he would opt for a consortium model, under which each municipality reaches agreements to merge specific departments so that savings could be generated. This is not a new model, but one which, despite being available, has seen few takers: since 2012, when the Autonomous Municipalities Act was amended to facilitate the creation of these kinds of inter-municipal structures, such consortia have been established to manage the permit systems of Comerío, Barranquitas, and Aibonito—and similar structures have been agreed to for public roads maintenance in Villalba, Juana Díaz, Comerío, and Barranquitas.

Nevertheless, as Mayors’ Federation President Molina noted: “It would be necessary to analyze what is the best thing for Puerto Rico. I’m not in favor of letting municipal employees go. If you ask the mayors, nobody is in favor of that…I do not agree with the elimination of municipalities or mayoralties.” His counterpart, Mayor Ortiz, echoed the apprehension: “I believe it’s a wrong vision. The municipal governments are the closest to needs and people’s pain.”

Governor Rosselló, however, emphasizes that the island’s municipios are in a precarious fiscal situation; ergo, he believes the governance must be revised to address not only Puerto Rico’s fiscal health, but also quality of public services received by the people.

Quien Es Encargado? U.S. Title III Judge Laura Taylor Swain yesterday dismissed a suit by Governor Ricardo Rosselló Nevares and Puerto Rico legislators challenging the authority of the PROMESA Oversight Board to impose to impose a fiscal plan and related budget, granting the Board’s motion to dismiss the U.S. territory’s claim that the Board had encroached on the Legislature’s authority by refusing to certify its budget, instead certifying a new fiscal plan with reduced appropriations. The legislators had sought to have the Judge rule the Board’s actions as “non-compelling recommendations.” PROMESA Board Chair Jose Carrion welcomed the decision in a statement: “There can be no doubt that the fiscal year 2019 budget certified by the Oversight Board is the only one and must be enforced,” adding that now the Board needs to focus on “implementing critical reforms, resolving the crushing debt crisis, and transforming the island’s economy.” He promised to announce steps in the coming weeks to increase public-sector efficiency and economic improvements, while working with creditors on debt restructuring.

After the court released its decision, Governor Rosselló released a statement vowing to disobey Judge Swain’s order, stating that: “The federal court ruling states that our public employees won’t receive their deserved Christmas bonus unless the government takes unjustified, draconian measures against our very own employees, which include massive layoffs. We are adamantly opposed and will not comply with the decision.”

Judge Swain wrote: “PROMESA is an awkward power-sharing arrangement…The power bestowed on the Oversight Board by section 205(b)(1)(K) of PROMESA allows the Oversight Board to make binding policy choices for the Commonwealth.” Nevertheless, she noted, this does not “render the elected Governor irrelevant or toothless.” She wrote that the Governor is required to start the process of putting together a budget—and that he has the right to publicly object to fiscal plan provisions, defining that to grant the Commonwealth some ability to obstruct the implementation of PROMESA Board-ordered policy, holding that the Board had power over the “reprogramming” or control of Puerto Rico departmental unspent funds, and writing that the PROMESA Board could include mandatory “policy” statutes in its fiscal plans even if the Governor deemed them unacceptable; however, Judge Swain said she would not rule against the PROMESA Board’s efforts to consolidate government agencies, eliminate the Christmas bonus, impose a hiring freeze, standardize healthcare provided to government employees, nor prohibit future liquidation of sick and vacation days. In an intriguing part of her decision, Judge Swain wrote that the Oversight Board had asserted it was not mandating the Governor to take these actions; rather the Board was cutting the budget with the assumption that these matters would be addressed, and noting that under PROMESA, the Board has the right to impose a budget on the government of Puerto Rica—comparable in many senses to the preemptive governing and budget authority granted to emergency managers in chapter 9 municipal bankruptcies in a number of states. At the same time, Judge Swain concurred with Gov. Rosselló on his claim that the Board was using planks of its approved budget to write Puerto Rico law concerning budgetary matters—steps which Judge Swain wrote appeared to go beyond the authority Congress granted to the Oversight Board.

Under the current PROMESA fiscal plan, one provision provides that, “If, after the third fiscal quarter of any fiscal year, there remains unrealized agency efficiency savings for any grouping relative to the projected agency efficiency savings in the new fiscal plan for the applicable fiscal year, the Oversight Board will automatically reduce the budget for the corresponding grouping for the following fiscal year in the amount equal to the unrealized agency efficiency savings.” However, Judge Swain determined this interpretation contravened the intent of the PROMESA statute to make any final fiscal decisions as interactive, rather than preemptive, albeit, under her ruling, her grant of final fiscal authority to the Board would appear to render any such guidance largely an empty governing promise.

Unsurprisingly, Governor Rosselló responded to her decision by stating: “This ruling is further proof of Puerto Rico’s colonial status and our lack of self-government. We must put an end to this undignified relationship that allows Congress to discriminate against us and take actions without our consent which are detrimental to our island.” He added that while his government would consider options to appeal Judge Swain’s decision, his government would “keep looking for ways to work with the Oversight Board, so that we avoid harsh, draconian measures that would be detrimental to our people.” In his own statement, PROMESA Chair José Carríon stated: “In the coming days and weeks, the Board expects the government to deliver material progress on reforms to increase public sector efficiency and transparency, and make Puerto Rico’s economy more competitive and attractive for businesses and investors…At the same time, we will continue to pursue plans of adjustment with creditors to achieve debt restructurings and a return to the capital markets.”

The Human Costs of Misgovernance

August 7, 2018

Good Morning! In this morning’s eBlog, we consider the awful physical, fiscal, and human challenges of municipal governance.

Human Costs of Misgovernance. In the ongoing trial in the Flint water case, Genesee District Judge William Crawford yesterday heard oral arguments in the case of Dr. Eden Wells, the state’s chief medical executive. Judge Crawford said he will make his decision only after all transcripts are completed and after attorneys are given seven days to file additional briefs with the court, meaning that Dr. Wells will likely have to wait several weeks before she learns whether or not she will have to stand trial on charges, including involuntary manslaughter, related to the Flint drinking water crisis—a trial where she faces charges of manslaughter, related to the Flint water crisis. Yesterday, Special prosecutor Todd Flood told Judge Crawford that Dr. Wells had a duty under Michigan state law to warn the public of Legionnaires’ outbreaks in the area during the 17 months that the City of Flint used the Flint River as its source of water—a source turned to under the direction of a state-appointed emergency manager, rather than the city’s elected leaders. The trial proceeded in the wake of the dismissal of Michigan Gov. Rick Snyder from the suit after, last Wednesday, U.S. District Judge Judith Levy had ruled that the suit filed on behalf of residents and businesses did not claim that Gov. Rick Snyder was aware of risks when the city switched to Flint River water in 2014—unlike other defendants who testified they knew and disregarded the hazards involved. The pending case is over claims filed on behalf of 12 Flint residents and three businesses: it names twenty-seven defendants, including state and local agencies and officials. The plaintiffs are asking the Court to establish a Flint Victims Compensation Fund, providing the affected Flint residents with medical and financial assistance. Should the state lose, such a decision could pose a financial burden for the recently upgraded state’s credit rating. Moreover, such a decision could have adverse implications for Michigan’s Emergency Manager law for distressed local governments.

Special Prosecutor Todd Flood testified: “The defendant neglected or refused to perform that duty. She knew about it…it was reasonably foreseeable that someone was going to get sick‒that someone was going to get harmed,” arguing that state officials, four of whom face criminal charges related to the Flint water contamination, and Dr. Wells, in particular, was required by her official position to halt the flow of the contaminated water she knew could create a threat.  

The arguments deemed Dr. Wells a hero during the water emergency, in no small part because of her giving credence to the work of Dr. Mona Hanna-Attisha, the Hurley Medical Center pediatrician who had studied the blood levels of Flint’s children—and concluded that the percentage of elevated blood levels doubled in the wake of the state decision to change the source of the city’s drinking water. Dr. Wells, Michigan Department of Health and Human Services Director Nick Lyon, and Gov. Snyder ultimately provided public notice of the outbreaks of Legionnaire’s disease in the city related to the Flint water contamination; however, that notice was not given until January of 2016—long after the fatal damage to human health had occurred—and months after the city’s reliance on the contaminated water source had ceased—reliance which resulted in at least 10 deaths—or, as we previously noted, U.S. Judge Judith Levy’s opinion finding that “some government officials disregarded the risk the water posed, denied the increasingly clear threat the public faced, protected themselves with bottled water, and rejected solutions that would have ended the crisis sooner.  

The human health and safety crisis arose from a governing issue: the State of Michigan’s reliance on substituting state appointed emergency managers over municipal elected leaders. Thus, Gov. Ric Snyder, named Darnell Earley as Flint’s emergency manager—displacing the city’s Mayor and City Council—in September of 2013—at a time, according to some to the document before the court in which the plaintiffs allege the defendants knew, prior to the fatal drinking water switch, that the Flint River had been was professionally evaluated and rejected as a drinking water source, with the decision to source water from the Flint River made on April 25, 2014, after the city’s contract with Detroit to receive Lake Huron water ended and the city was awaiting the completion of the new Karegnondi water pipeline—a $285 million pipeline to provide Lake Huron water to Flint and Genesee County. Flint has since entered into a long-term primary water agreement with the Great Lakes Water Authority. (Two and a half years ago, Mr. Earley was one of fourteen officials named as defendants in a class action lawsuit brought in federal court by Flint residents, a complaint alleging that “Defendant’s conduct in exposing Flint’s residents to toxic water was so egregious and so outrageous that it shocks the conscience,” and that: “For more than 18 months, state and local government officials ignored irrefutable evidence that the water pumped from the Flint River exposed (users) to extreme toxicity.” The suit also named Michigan Gov. Rick Snyder, former Flint Mayor Dayne Walling, and former Flint Emergency Manager Jerry Ambrose.

Fiscal, Physical, & Human Challenges of Municipal Governance

August 6, 2018

Good Morning! In this morning’s eBlog, we consider the awful physical, fiscal, and human challenges of municipal governance.  

An Enduring State of Emergency. Governor Rick Snyder of Michigan was in West Michigan yesterday morning: he was touring a water system construction site in Parchment, a municipality in Kalamazoo County of less than 2,000. The construction here includes a new pressure reduction system, which will allow Parchment to transition to the City of Kalamazoo water system. The city’s water supply is being flushed out, and the city of Kalamazoo will provide water to Parchment and Cooper Township residents. The transition, raising eerie memories of a previous transfer by the Governor in Flint, comes in the wake of finding that water in Parchment was contaminated with man-made chemicals called perfluoroalkyl and polyfluoroalkyl substances (PFAS). City residents were warned to stop using the water due to the contamination on July 26th, after water tests showed the PFAS level in Parchment was 20 times higher than the EPA recommended amount of 70 parts per trillion. A local state of emergency has been set for Parchment, and neighboring Cooper Township, after, just last week, Gov. Snyder declared a state of emergency for Kalamazoo County.

Fear for children—fear that the impact of Flint’s lead-tainted water could last decades—and distrust in the state and local governance to make decisions affecting children whose development could be hurt, is, unsurprisingly causing generations of residents to lose trust in government. It is, of course, at the same time tainting the assessed property values of homes in cities in Michigan so adversely affected for decades to come by state-imposed emergency managers. What parents would wish to move to a municipality knowing the drinking water would have long-term devastating consequences for their child?

What are the fiscal challenges for municipal elected leaders—especially in a state where the long-term physical and fiscal damages were wrought by state-imposed emergency managers? What do the long-term health effects for children exposed to the lead-tainted water mean for a municipality with regard to legal vulnerability and to financing a long-term recovery? At a conference at the end of last week, Detroit News reporter Leonard Fleming noted: “They don’t trust government officials: It could take a generation or two for residents to trust the city and state again and its water.”

At the conference, Dr. Lawrence Reynolds, who was on the Governor’s Flint task force, said some health officials have tried to minimize the effects of the water on residents; nevertheless, he warned there are babies who drank lead-tainted formula for six to nine months who could experience serious disabilities later in life: “It was a civil rights crisis, a human rights crisis, an environmental racism, and there is no excuse for what was done.” Moreover, there appears little end in sight: Cynthia Lindsey, an attorney representing Flint residents in a class-action lawsuit, said it could take three to four years for the legal process to play out. That is, Flint is held hostage by decisions imposed upon it by a state-imposed emergency manager, and now the question of who will finance—and how long will it take to replace all the city’s pipes, provide it access to safe and affordable drinking water, and long-term health care appear to be decisions to be made in a courtroom.

The fateful decision that led to the lead water contamination was not a municipal decision, but rather one made by the state in 2011 via a state imposed emergency manager, Darnell Earley. That was a decision which led to the finding that hundreds of children have since been diagnosed with lead poisoning; a dozen Flint residents have died of Legionella from drinking river water. Today, some 15 state public employees have been indicted by Michigan Attorney General Bill Schuette for their roles in the water crisis—indictments on charges ranging from obstructing an investigation to involuntary manslaughter.

Now Attorney General Schuette is running to replace the term-limited Governor Rick Snyder. Some in the state claim the candidate is using the Flint charges to “make himself look like a hero.” In the Democratic gubernatorial primary, ex-state Senator Gretchen Whitmer (D-Lansing) has released a plan to speed the replacement of lead pipes, while former Detroit health director Abdul El-Sayed received the endorsement of “Little Miss Flint,” the student whose letter brought former President Barack Obama to the community.

Former Flint Mayor Dayne Walling, who lost his first race for that position in 2009 to a car dealer named Don Williamson, but, when former Mayor Williamson resigned to avoid a recall for lying about the city’s budget deficit, was elected in a special election to replace him: he was elected after promising “to transform Flint into a sustainable 21st-century city with new jobs, safe neighborhoods, great schools and opportunity for all.” Candidate Walling reports that his own trust in government is lower than it was prior to the city’s drinking water contamination; now he claims he wants to take the hard lessons he has learned to the place he sees as the major source of Flint’s problems: the state capitol in Lansing.

Representation could matter: over the last four decades, assessed property values fell more than 40 percent—and with them property tax receipts. That led to, after the city’s police union’s refusal to accept pay cuts, laying off a third of the police force—meaning that for a period of time, the city, with about 100,000 residents, was sometimes able to put only six officers on the street at one time. Unsurprisingly, murders nearly doubled between 2009 and 2010—a year when Flint had the nation’s highest murder rate—and the year when Gov. Ric Snyder announced he was appointing an emergency manager, Ed Kurz, to preempt local control and authority in an effort to eliminate the city’s $10 million general fund deficit. Just prior to that preemption of local authority, the Flint City Council had endorsed a plan to detach the city from the Detroit water system, due to what the Council believed to be unaffordable rates, and join the new Karegnondi Water Authority, which planned to build a pipeline from Lake Huron. Mr. Kurtz authorized an engineering study to prepare the city’s water treatment plant to process Flint River water instead. A sequential state-appointed Emergency Manager, Darnell Earley, implemented the changeover—a fateful decision with precipitous health and human safety and fiscal consequences. Mr. Earley has been charged with false pretenses, conspiracy, willful neglect of duty, misconduct in office, and involuntary manslaughter—charges which will be aired next Monday at a hearing, where he is likely to maintain That the City Council had decided to draw from the Flint River until the new pipeline was completed, and that he was, therefore, only executing their orders. (Mr. Kurz, who has not been charged, has previously testified before Congress that his responsibility was “strictly finance,” thus, he bore no responsibility to ensure “safe drinking water.”

Today, Mr. Walling, currently working as a public policy consultant for Michigan State University, notes he believes there ought to be changes in the relationship between Flint and the State of Michigan, noting: “The distress of Michigan’s cities, starting with Detroit and Flint, is a direct result of policies made in Lansing,” adding: “The only good news is that policy changes at the state level can help restore Michigan’s once-great cities.”

According to a Michigan State University 2015 study: “Beyond State Takeovers: Reconsidering the Role of State Government in Local Financial Distress, with Important Lessons for Michigan and its Embattled Cities,” by Joshua Sapotichne, Erika Rosebrook, Eric A. Scorsone, Danielle Kaminski, Mary Doidge, and Traci Taylor; the State of Michigan has the second-most stringent local taxation limits in the nation—limits which impose what they term “tremendous pressure on local lawmakers’ ability to generate critical revenue.” The fiscal pressure on the state’s local governments has been intensified by decisions to divert revenue sharing, the former program intended to address fiscal disparities, to instead enable state tax cuts. The decision disproportionately impacted the state’s most fiscally challenged municipalities: Flint’s loss was $54 million; Detroit lost $200 million, contributing to its 2013 chapter 9 municipal bankruptcy. Indeed, the state decision indirectly contributed to state imposition of nine emergency managers.

Thus, unsurprisingly, former Mayor Walling has a list of the new policies he wants to enact as a state representative: Allow cities to charge commuters the same income tax rate as residents (instead of just half); broaden the sales and use tax to services; provide state pension retirement assistance. This would have especial import for Flint, where the city’s taxpayers are currently financing the pensions of employees who worked for the city when it had 200,000 residents—pension payments now consuming, he says, a quarter of the city’s budget.

Trust & Intergovernmental Tensions. By candidate Walling’s own admission, throughout most of Flint’s drinking water crisis, he believed assurances from the Environmental Protection Agency and the Michigan Department of Environmental Quality that Flint’s water met safe drinking standards. When residents confronted him with discolored, foul-smelling water, he said: “I thought that water had come out of their tap because of a failure in the system at their house or near the house,” adding that it was not until three years ago when, in the wake of listening to Dr. Mona Hanna-Attisha describe her discovery that Flint children were showing elevated levels of lead in their blood, did he finally realize the city’s entire water system was tainted, asserting that it was at that moment in time that he ordered the city to issue a lead advisory, advising mothers not to mix hot tap water with formula, and for all residents to filter their water and flush it for five minutes. (In her recent memoir, What the Eyes Don’t See, Dr. Hanna-Attisha devotes an entire chapter to her meeting with Mr. Walling, criticizing him for opting out of joining her news conference on lead levels, because he was more concerned about traveling to Washington to meet Pope Francis.)

Candidate Walling’s campaign flyers assert: “My priorities are roads, schools, jobs.” they declare. As he challenges incumbent Mayor Karen Weaver, he says most voters he interacts with want to talk about the shabby state of Michigan’s roads or the excessive auto insurance rates paid by residents of Flint and Detroit. But, it appears, he is willing to support repeal of Michigan’s Emergency Manager law—a concept which journalist Anna Clark notes, in The Poisoned City, her new history of the water crisis: “The idea of emergency management is that an outside official who is not constrained by local politics or the prospect of a reelection bid will be able to better make the difficult decisions necessary to get a struggling city or school district back on solid ground.” But in Flint, emergency managers made decisions based on saving money, not the health and safety of the citizens with whose well-being they had been entrusted. Candidate Walling, in retrospect, notes: “I wish that I had never been part of any of it: “This has all happened to a community that I deeply love, and it is motivating me to make sure policy changes are made to make sure this never happens again.”