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Duggan mum on state theft of city funds

Rick Snyder

Rick Snyder

State cheated cities of $6.2 billion

‘EM could have been avoided’

By T. Kelly
The Michigan Citizen

DETROIT — While mayors across the state are saying state actions to withhold revenue sharing funds from local governments are “unconstitutional” and “illegal,” Mayor Mike Duggan so far is silent on the state’s diversion of $772 million from the city of Detroit. It’s a loss experts say led to the consent agreement, the appointment of emergency manger Kevyn Orr and the filing of bankruptcy.

Mike Duggan

Mike Duggan

According to a Michigan Municipal League report, had the state of Michigan followed the law, the seven predominantly Black cities now under emergency management might well be democratically ruled rather than under an all-powerful EM. The report was publicized at a March 18 roundtable of Michigan mayors responding to cities’ loss of billions of dollars.

From 2003-2013, sales tax revenues went from $6.6 billion to $772 billion, the report said. However, over that same period, statutory revenue sharing declined from over $900 million annually to around $250 million.

“The state is now in an enviable position—revenues that exceeded expectations. It is posting large surpluses but has failed to take steps to restore local funding,” the Michigan Municipal League said.

Detroit, Flint, Benton Harbor, Pontiac, Highland Park might all have avoided emergency management had they received funds the law requires the state to send, the League and mayors noted.

For those cities in emergency management, the League questions, “Did municipalities ignore their duty to manage or did someone else change the rules of the game and then throw a penalty flag at them?”

Mayors from places as diverse as down river Wyandotte and as Republican as Grand Rapids gathered to discuss the Michigan Municipal League report showing cities were missing $6.2 billion in revenue sharing and denounce state actions.

Duggan was not able to attend the March 18 press conference, but was in Lansing the next day to speak before the MML, said John Roach, Duggan spokesperson in an email. Duggan’s speech was brief and to announce that the City of Detroit just officially re-joined the League, Roach said.  The city had not been a member of the MML for several years.”

Roach refused to comment on Duggan’s view of the state diversion of revenue sharing. “I’ve not had a chance to speak with him on today’s revenue sharing issue, so I can’t provide you a comment at this time,” Roach wrote.

EM Kevyn Orr spoke out to state revenue sharing during an interview March 6, 2013 with the Michigan Citizen.

“Detroit gets more than its share,” Orr said (see the interview here).

However, the Michigan Municipal League estimates that Detroit lost sales tax revenues totaling $732 million in the decade leading up to the 2013 bankruptcy filing.

“You can look at pretty much any Michigan community and see where they might be today if the statutory revenue sharing had been fully funded,” the League’s Samantha Harkins said in a statement.

“In Detroit, a city facing the largest municipal bankruptcy in history, the state took over $700 million to balance the state’s books,” Harkins said.

“State elected officials kept the $6.2 billion and “plugged holes in the state budget … (rather than) making their own difficult decisions,” Dearborn Mayor Jack O’Reilly said in published reports. “They’re violating the law, they’re violating the constitution, and it’s been going on a long time.”

Some political observers say they are disappointed Duggan has not been outspoken on other state actions.

Duggan has been quiet on several issues impacting the city including the sale of the city water plant or any other EM-led pland, said elected Detroit Public School Board President Lamar Lemmons.

“Any mayor contemplating the sale of the city water system would be recalled before the weekend was over,”Lemmons said. “However, Duggan said he doesn’t comment on actions of Orr and Orr doesn’t comment on his actions—but Duggan doesn’t have any actions aside from what Orr permits. And Orr is the conduit or vessel of Snyder. Duggan is quiet on a number of issues affecting the city.”

Snyder sought Duggan’s advice in the process of picking Orr as emergency manager. Duggan also served as Snyder’s appointed Treasurer of the Education Achievement Authority, the failing experimental school district created by Snyder with 15 DPS buildings and contents.

State Senator Bert Johnson said he believes Duggan is silent so far because “it has to do with a kind of arrangement between him and the emergency manager and Gov. Snyder regarding getting some authority back in the city.”

Orr’s term will be up in October and he has said on many occasions he intends to leave then.

“Seven hundred thirty-two million dollars is a starting point to making pensioners whole and plugging away at problems in the city,” Johnson said. “Leading up to the bankruptcy, Detroit played by the rules. If I were a city official I’d have to be out on the stump speaking about this to my city.”

During a March 2013 interview with Duggan, the Michigan Citizen asked about the state reneging on a revenue sharing deal worked out between then Gov. John Engler and Mayor Dennis Archer.

“The budget got tight. Two years later, Engler reneged on the deal; subsequent administrations have continued to renege on the deal. There is no doubt there is a moral obligation on the part of the state of Michigan for several hundred million dollars. But one legislature under the Michigan Constitution can’t bind a future legislature. The fact that we did not get that hold harmless in the legislation means that we can sue but I don’t believe we would win that case,” Duggan said.

Revenue sharing was the subject of a Feb. 27 hearing before the House Appropriations Committee in which Duggan did not participate. Many municipal leaders testified that the Snyder administration reporting requirements for cities to obtain revenue share are burdensome.

Under Snyder, revenue sharing is called the Economic Vitality Incentive Program and requires cities to prove they are in compliance with three points before getting the money: Transparency and accountability; consolidation of services; and an un-funded accrued liability plan. These are some of the same points the state uses to measure whether a city should be forced into emergency management.

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