Fiscal & Physical Challenges to the Nation’s State & Local Leaders

eBlog

August 17, 2017

Good Morning! In this a.m.’s Blog, we consider the fiscal and physical challenges to municipal and state leaders in the wake of the physical violence this week in Charlottesville, Virginia—and the wavering response from President Donald Trump. Then we return to the City of Flint, where federal court decisions appear to have opened the way for help to assist in access to safe drinking water for the city’s beleaguered residents. Finally, we ask to what degree there might be promise in PROMESA, as the PROMESA Board appears to be seeking independent fiscal analysis in an effort to better address options for fiscal recovery.

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Fiscal & Physical Municipal Mayhem. Municipal leaders across the nation are suddenly on notice that the federal government cannot be counted upon to help respond to threats of violence and mayhem by alt-right groups in the wake the events last Saturday in Charlottesville, Virginia, as alt-right leaders and white nationalist groups have vowed to stage more rallies in coming days: a group claiming it is advocating free speech has planned a rally for Saturday on the historic Boston Common, with a group advocating racial justice planning its own gathering in opposition. Boston officials have responded by setting strict conditions, including no sticks, weapons, or backpacks—or, as Mayor Marty Walsh stated: “Make no mistake: We do not welcome any hate groups to Boston, and we reject their message.” A similar rally scheduled for the end of this month in San Francisco has prompted House Minority Leader Nancy Pelosi (D-Ca.)) and several California lawmakers to urge the National Park Service to rescind the permit to gather on federal parkland there. Indeed, the events this week in Charlottesville—and the President’s response, has confronted municipal leaders with hard questions with regard to how to deal with their Confederate monuments, an issue that has suddenly become much more urgent.

In the wake of the violent public clashes, mayors, governors, and other civic leaders are taking steps that even a week ago might not have seemed necessary. Now, however, uncertain of any federal support, city and county leaders will be confronted by costly decisions both with regard to granting permits, but also with regard to what resources to make available to avert injuries to citizens and destruction of local businesses—fearing that the white nationalist movement could attract a larger following, a following perhaps abetted by the remarks yesterday of President Trump. Darrel Stephens, the Executive Director of the Major Cities Chiefs Association, noted that many of the people who came to Charlottesville wore helmets and carried shields: “These guys, the shields that they showed up with. . . you don’t bring that stuff to a demonstration to just express a view…You bring that there prepared for violence. Why else would you have them?”

From time immemorial in our country, demonstrations in cities have been part of the fabric of the nation, so this challenge is not new: there were certain members of Parliament in the mid-1775’s who very much wanted to ban “hate groups” from Colonials in places such as Chesapeake, Williamsburg, Petersburg, Yorktown, that Virginia municipality where a combined French and American army under Alexandria’s George Washington pinned down and besieged a British force under Lord Cornwallis, forcing his surrender on Oct. 19, 1781. The marches and rallies in Virginia, it seemed, were vital to securing independence from Britain. One may well imagine Lord Cornwallis’ response.

We have, in this country, a long and honored tradition of marches and rallies—the writer even spent unmitigated hours negotiating with authorities in the U.S. Embassy in Vienna, the City of Vienna, and Austria to obtain a permit to demonstrate against the killings at Kent State. It is hard to imagine a more important tradition in our young nation than the right to demonstrate: the challenge of governance, however, is how to ensure such demonstrations do not risk life and limb. That is the hard task upon which Virginia Governor Terry McAuliffe is now proposing to embark upon, appropriately recognizing the Commonwealth—and its cities and counties—really need to rethink how to protect citizens and their rights—much as former President Kennedy and Johnson had to do in a different era. That responsibility will also require determining how to define “hate groups”?  Was the Confederate Army a hate group? Was George Washington’s army a hate group?

In Like Flint? The United States 6th Circuit Court of Appeals’ reversal on July 28th of a federal court’s decision in two lawsuits filed by Flint, Michigan residents over the contamination of their drinking water, has emboldened lawyers and their plaintiffs, who said residents of the predominately African-American city still are being billed for dirty water they cannot use, clearing the way for tens of thousands of Flint residents to continue their lawsuit against the State of Michigan and local officials—or, as the prevailing attorney noted: “The court’s decision means that the trial court’s dismissal of the case was legally incorrect and the appeals court has sent it back…A lot of our case deals with the fact that residents in Flint have been charged three-times the national rate for water, because the city is trying to balance their budget and these charges and fees come at the exact time that they couldn’t use the water…Not only did they come during the period in which they were getting contaminated water and having their children poisoned, but the water bills kept coming and they were told not to drink the water by an EPA mandate, and they were also told that if they didn’t pay their bill, they’d have a lien placed on their home and face foreclosure. That’s not America.”

In its ruling, the federal appeals court overturned a lower federal court ruling which had dismissed a major class-action lawsuit filed in 2015 on behalf of tens of thousands of Flint residents against Gov. Rick Snyder, the city of Flint, and Flint municipal officials who were involved in deciding to switch to the Flint River as its water source. The decision allows the plaintiffs to seek relief from the State of Michigan in another case in the form of compensation for education, medical monitoring and evaluation services for ongoing harm from Flint’s contaminated water crisis, as well opening the way for cases seeking financial damages against individual state employees, the city of Flint, city employees, and state-appointed emergency managers to proceed. The decision came as Michigan Attorney General Bill Schuette and his legal team have pursued criminal and misdemeanor charges against or accepted plea deals with 15 persons, including former Flint employees and former and current state officials, as well as two former Flint emergency managers appointed by Governor Snyder. (The class-action lawsuits involve Flint residents who experienced personal injury and property damage from the Flint River decision, after they were exposed to toxic lead that leached from the city’s pipes into the water supply.) The trial court ruled that the federal Safe Drinking Water Act stopped the plaintiffs from seeking damages, but the appeals panel ruling allows U.S. District Judge Judith Levy to continue weighing the issue.

The appeals court decision came just prior to dismissal, this week, in federal District Court, of a whistleblower lawsuit against Flint Mayor Karen Weaver filed by a former city official who alleged she was fired for raising alarms over possible misuse of water crisis contributions. Former City Administrator Natasha Henderson sued Mayor Weaver and the City of Flint in May of last year, claiming she was wrongfully terminated two days after sending then-city attorney Anthony Chubb an email asking him to look into an “allegation of unethical conduct” by Mayor Weaver; however, U.S. District Court Judge Sean Cox permanently dismissed the three-count complaint, ruling Ms. Henderson failed to prove Mayor Weaver was aware of her complaint prior to firing her, writing: “The Court concludes that Henderson has not produced sufficient circumstantial evidence from which a reasonable jury could infer that Weaver knew of Ms. Henderson’s complaint to Mr. Chubb before she fired Henderson.”

Ms. Henderson had emailed Mr. Chubb one day after a purported conversation with Mayor Weaver’s administrative assistant, Maxine Murray. Ms. Murray “fearfully” told Ms. Henderson that the Mayor had asked her and a volunteer to direct water crisis contributions into the Mayor’s political fund, Karen about Flint, according to the suit. Mr. Chubb was serving as interim chief legal officer during Ms. Henderson’s suit, and said he was seeking the permanent appointment. Ms. Henderson speculated he gave the Mayor a “preview of information about her accused malfeasance” in order to “curry favor,” a speculation with which Mr. Chubb took exception. Judge Cox, in his opinion, noted: “Henderson seeks to prove Weaver’s knowledge by circumstantial evidence,” as he also dismissed a First Amendment claim by Ms. Henderson, ruling that her speech was not constitutionally protected, because she was operating in an official government capacity, not as a private citizen. At the same time, he was entitled to “absolute immunity” against defamation claims by Ms. Henderson, who alleged the Mayor had made false statements about her after her firing, writing: “Weaver is entitled to immunity, because her alleged statements were made in the scope of her executive authority.”

Is There Promise in PROMESA? The PROMESA Board has issued an RFP in an effort to secure an independent research team to conduct an investigation into Puerto Rico’s debt and its connection with the U.S. territory’s fiscal crisis, defining the scope to include:

  • a review of the factors contributing to the fiscal crisis in Puerto Rico, including changes in the economy, expansion of spending commitments and benefit programs, changes in the federal financing it receives and its dependence on debt to finance a structural budget deficit,
  • a review of Puerto Rico’s debt, the general use of the proceeds of borrowing, the relationship between debt and the structural budget deficit of Puerto Rico, the extent of its debt instruments and how Puerto Rico’s debt practices compare with the debt practices of large municipal states and jurisdictions, and
  • a review of debt issuance, disclosure and sale practices of Puerto Rico, including its interpretation of Puerto Rico’s constitutional debt limit.

It was also stated that proposers will be evaluated and selected based on their professional qualifications, the competitiveness of their economic proposal, the integrity and quality of their response to the RFP, their relevant experience in conducting research, their knowledge and experience in federal securities law, knowledge and experience in the municipal bond market, government budget and fiscal management, and the ability to commence work immediately—albeit failure to meet all the above areas will not necessarily disqualify a proposal.

The independent investigative team will report to the Special Investigation Committee of the Supervisory Board, composed of members Ana Matosantos, David Skeel, and Arthur González.

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