Emergency Manager Law Makes Pontiac Reforms Possible

Voters will face a choice Nov. 6 of whether to affirm or reject Public Act 4 of 2011. This law gives local government emergency managers powers not found under the previous emergency financial manager law, known as Public Act 72.

If voters choose “yes” Public Act 4 remains in place, if “no” the state reverts back to its old PA 72 statute.

The fight over this union-backed referendum was largely inspired by one major change made to state law when the Legislature enacted PA 4. That was the ability for an emergency manager to — with the state Treasury’s final approval — set aside existing collective bargaining agreements. These CBAs set terms and conditions of employment, and in this case, do so for government workers. In some instances a city charter may do likewise. One need look no further than the city of Pontiac’s fire department to see why PA 4 is needed.

Emergency Manager Lou Schimmel took over in Pontiac on Sept. 11, 2011. One of his first tasks was to tackle the high costs of the city’s fire department. The Pontiac fire department benefited from having minimum staffing requirements enshrined in its city charter. This drove up costs because the city would often need to pay huge overtime bills to keep the department fully staffed. Under the previous emergency financial manager law, managers were unable to address or ignore the contents of a city charter.

Schimmel started his reforms by contacting local units of government and asking officials if they would consider providing some fire services to Pontiac. Waterford Township officials offered to provide coverage for the entire city and a deal was struck that put the township in charge of Pontiac fire services starting Feb. 1, 2012.

A number of benefits accrued as a result of this deal. First, Pontiac reduced its fire-related costs at least 36 percent, from $10.1 million to $6.5 million. I say at least because many past costs related to fire services in Pontiac — capital, utilities, insurance, and legal — had been attributed to other areas of the city budget. Now, Pontiac’s share of those costs is part of the bill they are charged by Waterford Township.

In 2008 the city fire department was protecting property with a state equalized value of $1.95 billion. By 2012, that figure had fallen to $840 million, a 57 percent decline. In fiscal 2013, the cost of fire protection in Pontiac per $1,000 of SEV stands at $7.74. In per-capita terms, Pontiac fire protection now costs $108.55. By contrast, fire protection in the city of Saginaw, which has a similar population but is smaller geographically, costs a staggering $13.75 per $1,000 of SEV and $145.52 per person in fiscal 2013.

Had Schimmel not contracted with Waterford Township and fire expenses remained the same as in 2011, fire protection costs would eclipse $9.94 per $1,000 of SEV, more than 28 percent higher than today. That is why Public Act 4 is so valuable. It allows managers to avoid such staggering cost hikes without harming services.

The city of Pontiac has had three state appointees assigned to remake the city’s finances, starting in 2009. The first two — operating under the old law — accomplished little from July 2009 through mid-year in 2011. This was in large part to having few powers at their disposal. For example, former Emergency Financial Manager Michael Stampfler attempted to contract for police services with the Oakland County Sheriff’s Office, but was stymied from doing so. Why?

A nine-member bargaining unit comprised of police dispatchers refused to agree to dissolution of their unit. When PA 4 was passed, Stampfler was able to recommend that the state revise their union agreement to allow the city to proceed.

The city has seen a $4.2 million drop in the cost of police protection since 2009, and this has occurred as the Oakland County Sheriff added 24 more deputies to the Pontiac beat.

Schimmel insists that none of these changes could have taken place without Public Act 4. He has also warned that the reforms he has put in place could be reversed should the law be repealed.

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Michael D. LaFaive is director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.