Bloomberg News

Michigan Emergency Manager Law Challenged in Suit

March 28, 2013

Michigan’s new emergency-manager law is unconstitutional because it allows unelected officials to rule by decree over municipal governments and school boards, according to a lawsuit seeking to overturn the statute.

Union officials and school board and council members in cities including Benton Harbor and Flint claim the law violates citizens’ due process rights under the U.S. Constitution. The law, passed in December after voters rejected an earlier emergency-manager measure in November 2012, takes effect today.

The complaint, filed yesterday in federal court in Detroit, names Governor Rick Snyder and Treasurer Andy Dillon as defendants and seeks to overturn the statute. The plaintiffs asked the court to immediately bar emergency managers from exercising authority and to void any consent agreements established under the statute.

The suing officials claim elected authorities will be displaced by a “new form of government in Michigan” wherever an emergency manager is appointed and citizens “will have effectively lost their right to vote” or have the impact of their votes diluted.

The global recession, accompanied by “record foreclosures and steep unemployment” in Michigan, caused “sharp reductions to income and property tax revenue” in the state, according to the complaint.

State laws reduced revenue sharing with local governments, leaving Detroit with a deficit of about $327 million and more than $14 billion in long-term obligations.

Six Cities

Emergency managers also have been named for six cities and three school districts in Michigan under a previous law, including for the largest city, Detroit. Most of the affected jurisdictions have high African-American populations, which violates the U.S. Voting Rights Act, according to the complaint.

“We’re fully confident in both the spirit and constitutionality of the state’s most recent emergency manager law, Public Act 436, and will work vigorously to uphold it,” Sara Wurfel, a spokeswoman for Snyder, said in an e-mail.

“This law recognized and respected the will of voters while ensuring local officials have a strong voice in how a financial crisis in their community or school is remedied,” she said.

Anthony Neely, spokesman for Detroit Mayor Dave Bing, didn’t immediately respond to a request for comment on the lawsuit.

Detroit Manager

Kevyn Orr, a bankruptcy lawyer who left a job in Washington with the Jones Day law firm, was appointed this month as Detroit’s emergency manager under a weaker 1990 emergency manager law. The new law gives current emergency managers more power to reorganize local governments, sell assets and change union contracts.

Orr has said he wants to work cooperatively with Bing and the Detroit City Council. This week, he said he won’t cut their pay, which the new law allows him to do. Orr was on the legal team that helped Chrysler Group LLC reorganize in 2009.

The case is Phillips v. Snyder, 13-cv-11370, U.S. District Court, Eastern District of Michigan (Detroit).

To contact the reporters on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net; Chris Christoff in Lansing, Michigan, at cchristoff@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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