Asked and Answered . . .

Michigan Emergency Manager?Law

by Sheila Pursglove
Legal News

An attorney with Howard & Howard in Royal Oak, Timothy Wittebort practices in the areas of corporate transactions, mergers and acquisitions, transportation and logistics, commercial lending, creditors' rights, and real estate transactions. He received his B.S. from Western Michigan University and his J.D. from Wayne State University Law School. In 2008, he was appointed by former Michigan Governor Jennifer Granholm to  the Financial Review Team formed to oversee and assist the City of Pontiac with its deficit problems and has often been asked to advise on similar issues involving Michigan’s Emergency Manager Law for governmental entities. He is active in multiple community organizations including the Pontiac Neighborhood Revitalization Corp, and Oakland County Mainstreet Advisory Committee.

What are the pros of the Emergency Financial Manager (EFM) Law? 

Wittebort: The real beneficiaries of the EFM statute are local citizens. By assigning an EFM, the EFM can address those financial problems that impede citizens’ right to receive fundamental services in exchange for their tax dollars. By making hard decisions, without local political influence, an EFM can determine the appropriate course of action that is in the citizens’ best interest.

What is the law’s downside?

Wittebort: Lack of formalized training for EFMs. Limited citizen involvement.

What did the bankruptcy filing mean on a short- and long-term basis for Detroit?

Wittebort: In the short term, the bankruptcy filing stopped the financial bleeding of the City of Detroit.  In sum, it enabled EMF Kevyn Orr to cease making payments toward various overwhelming debt obligations. In turn, the funds were redirected to provide fundamental critical services to the citizens of Detroit. In the long term, the city now has the opportunity to start over financially.  By relieving the city of a large portion of its debt burden, it may restructure a number of its obligations and free up additional tax revenue to be used for long-term manageable growth.

Are you pleased with how Detroit’s restructuring is going?

Wittebort: The City of Detroit’s restructuring appears to be exceeding the expectations of many municipal finance experts.

What are the major hurdles for Detroit?

Wittebort: Not repeating the past. It is yet to be seen whether Detroit elected officials will return to past practices of spending without realistic budgets and being unduly influenced by political and personal gain.

What do you find rewarding about helping Michigan towns/cities get back on their feet?

Wittebort: A number of Michigan towns/cities and school districts are experiencing financial crises. Unfortunately, other than electing representatives, citizens have very little control or influence over decisions by elected officials. Any assistance I can provide that ensures citizens receive basic fundamental services in  exchange for their tax dollars is rewarding.

What are warning signs that a city/township etc. is headed into problems?

Wittebort: A good indicator of financial troubles is when necessary services are being cut to fund other non-essential obligations. For example, cutting police and fire service to free up money to pay employee compensation or benefits.

How useful are public tax incentive programs?

Wittebort: Public tax incentive programs are very useful if used properly. A Downtown Development Authority can provide necessary capital under a tax increment financing (TIF) structure to a developer that, in turn, should benefit the specific downtown business area. It can be a  “win/win” if the project is successful. Problems develop, however, when public authorities do not use available resources because they are waiting for that one high impact project.  Sitting on available funds helps no one.

How did you assist the Pontiac Neighborhood Revitalization Corporation and Oakland County Mainstreet Advisory Committee?

Wittebort: In 1993, we assisted the City of Pontiac in privatizing its public hospital North Oakland Medical Center. A portion of revenue from the project helped fund residential development, including projects with Habitat for Humanity and the Unity Park Project.  A number of new homes were constructed with the assistance of the Pontiac Neighborhood Revitalization Corporation. The Mainstreet Advisory Committee advises the Management Program established in Oakland County.

Is southeast Michigan finally turning the corner out of the recession?

Wittebort: Difficult to say. I am encouraged by the new residential construction over the past year.

What are your hopes for the future of Detroit and for Michigan?

Wittebort: Undoubtedly, a turnaround of Detroit will generally benefit the region. However, unless we look at our state tax structure as a whole, we will continue to have difficulty attracting new business to Michigan. As a state, we need to find ways to incentivize business owners to re-locate here.

How might colleges/universities establish programs to train qualified Emergency Financial Managers?

Wittebort: With the number of municipalities and school districts facing financial crises, our colleges and universities need to establish curriculum to educate professionals regarding municipal finance and government processes.  In essence, we will need highly trained individuals to assist the public sector.

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