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What's in a consent agreement? Do you really want to know?

Are you confused about the proposed “consent agreement” the state is trying to work out with Detroit?

If so, count yourself one among many, including me, and I’ve been covering the story nearly every day for the past couple of weeks. In fact, I’m fairly sure that all the parties involved are confused.

First of all, what is a consent agreement? Technically, it’s an intermediary step that stops short of the Governor appointing an emergency manager under Public Act 4, Michigan’s controversial (and contested) emergency manager law.

Practically speaking, it’s an agreement in which Detroit consents to have the state tell them how to do a whole bunch of things, in hopes that the city doesn’t go bankrupt and totally fall apart.

So if you’re one of Detroit’s leaders, what’s not to love? Well, a lot. There are many big issues packed in the agreement. And because this story changes every day, it’s sometimes easy to lose track of them in the daily grind of who did or said what that day.

So without further ado, here are some of those points, unpacked—and some of the bigger political and legal battles they’re tied up with.

Who’s the boss?

The state has proposed a nine-member financial advisory board, whose objective is to “mitigate fiscal distress and promote fiscal stability.”

The State Treasurer, Andy Dillon, is guaranteed a spot on the board; he also gets to appoint one person. The Governor gets one appointment, as does the City Council. The Mayor would appoint two people, and the Mayor and Council jointly would appoint three—chosen from a “list of six candidates provided by the Governor.”

The make-up of the board is bound to be a sticking point in whatever back-and-forth goes on between the city and the state, and, on another level, between the Mayor and Council (Mayor Dave Bing’s counter-proposal suggests a seven-member advisory board, which would truly be more “advisory” in nature) .

That’s because the consent agreement makes the board the ultimate authority on virtually all city business. It will oversee the city’s “restructuring,” and is in charge of implementing a “recovery plan” (more on that in a minute). They also get to “review and approve the city’s operating and capital budget.”

A lot of people—including some City Council members—think this is basically fine, and necessary. The idea is there needs to be a fairly autonomous, powerful structure working alongside the elected government, to administer some harsh medicine (read: make vital but politically unpopular moves) to produce sweeping reforms.

This is the model that was used to rescue other big American cities who faced financial catastrophe—most famously, New York in the 1970s, and more recently, Philadelphia and Washington, DC. In fact, the state review team looking at Detroit’s finances has broughtformer DC Mayor Tony Williams in to sell the deal to skeptics. Williams worked with Washington’s “control board” as chief financial officer in the 1990s. Not only did they completely turn around the city’s finances, but Williams managed to get himself elected mayor—twice.

Basically, this document boils down to a kind of hybrid—part New York-style control board, part pure Michigan Public Act 4.

What happens to union contracts?

Public Act 4 isn’t totally new—it’s basically a beefed-up version of Michigan’s old Public Act 72, which let the Governor appoint financial receivers in fiscally-distressed communities. However, one of the key new powers granted to emergency managers under PA 4 is the right to tear up collectively-bargained union contracts if they deem it necessary.

No one gets that super-power under a consent agreement. But under certain conditions, the city is released from its duty to collectively bargain new contracts with union employees.

Per Section 5.3 of the proposed agreement:

“…it is the Treasurer’s determination that the duty of the city to bargain…shall cease beginning 30 days after the effective date of this Agreement.”

What this means is that once a union contract has expired—and assuming the agreement has been in effect at least 30 days—the city can impose a new one. No need to bargain.

Lest we all miss the point, Treasurer Dillon laid it out pretty clearly after the state review team meeting last week.

“Eight-five percent, give or take, of Detroit’s collective bargaining agreements expire in June,” Dillon said. “So technically, on July 2nd, the Mayor can impose contracts if he can’t negotiate an agreement with them.”

Open Meetings—what will Judge Collette do?

Last week’s state review team meeting kicked off on a dramatic note. Attorney Drew Paterson tried to distribute “handouts” to review team members. These “handouts” were, in fact, subpoenas.

Paterson is the lawyer for Robert Davis, a union activist who has filed a slew of Open Meetings Act lawsuits against public bodies in Detroit and southeast Michigan. He also sued Detroit’s financial review team for meeting in private, and he won. Ingham County Circuit Court Judge William Collette ruled the review team is a public body, and must hold open meetings.

But with the appearance of this proposed consent agreement, Davis and Paterson are once again calling shenanigans.

“Mr. Dillon, as he admitted, has been secretly preparing drafts. And he’s attempting to get this review team to, I think, rubber-stamp it—although I’m sure he’ll say otherwise,” Paterson said last week.

Paterson and Davis say both Michigan’s Open Meetings Law and Public Act 4 require the review team to deliberate publicly—and that means, apparently, drafting important documents publicly, too. So they were ordered to court on March 22 for a possible contempt hearing.

Except the state wanted to delay that hearing, and asked for an emergency hearing in front of Judge Collette. He agreed to the delay, but—in a classic case of “be very careful what you wish for”—he also prohibited the state from signing a consent agreement before March 29. That’s three days after the state review team is supposed to recommend a course of action to Governor Snyder (as of right now, the state is appealing the injunction).

So at the very least, this is yet another potential hiccup in a situation where time is of the essence (as Governor Snyder himself argues here) . And it’s very unclear what would happen if Judge Collette holds the review team in contempt. Would the review team have to re-start the whole review process? What would that even mean?

Whatever happens, it’s clear Judge Collette is none too pleased with the review team’s record of compliance with the Open Meetings Act. And he’s asserted his authority as an important voice not only in the unfolding situation in Detroit, but in how Public Act 4 will be implemented in the future.

But this doesn’t change the ultimate doomsday scenario—Detroit actually runs out of cash before the state can intervene. Officials project that could happen as early as next month.

What if Public Act 4 folds?

As if this situation weren’t already complex enough, there’s an ongoing effort to repeal Public Act 4 altogether. This muddies the legal and political picture considerably.

PA 4 opponents have already submitted petitions with more 220,000 signatures to the Michigan Secretary of State. If enough signatures are certified, the law will be suspended until a vote in November.

That throws a big hitch in the state’s plans for Detroit—not to mention all the other cities and school districts that already have emergency managers or consent agreements in place. Labor unions, especially the American Federation of State, County, and Municipal Employees (AFSCME), have led the charge. Many of Detroit’s elected officials, including some City Council members, have also lent their vocal support to the referendum and other efforts challenging PA 4, calling it an unconstitutional usurpation of voting rights.

But the state is well aware of this. And they’re trying to insulate themselves through language in the proposed consent agreement.

From Section 7.2 of the state proposal:

“Any action by the City or the City Council…or its unions to contest, through legal proceedings or otherwise, the constitutionality, validity or enforceability of Public Act 4….or, failure to provide the Financial Advisory Board with Cooperation…may, among other things, be considered sufficient cause...”

...for the Financial Advisory Board to do several things.

Like what? Well, the state outlines three possibilities—all of them unpleasant. An emergency manager could be appointed immediately; the city can be forced into Chapter 9 bankruptcy; and/or the state can cut off revenue sharing and other state aid if the city challenges PA 4.

And what if PA 4 does end up getting suspended or repealed? Don’t worry, that’s covered too.

Section 12.1

“If Public Act 4 is repealed, amended, modified, or otherwise rendered not effective, the Agreement shall continue in full force and effect…The City agrees to work in good faith, as requested by the Financial Advisory Board, to modify this Agreement as necessary or appropriate to conform to any successor statute to Public Act 4 for the purposes of achieving Financial Stability and completing the Restructuring.”

In other words: No matter what happens with PA 4, you’re not getting out this, Detroit. Once you’re signed on, you’re locked in. And you can’t even complain about it.

What recovery plan?

Throughout the state’s proposal, there are a number of references to the “recovery plan.” This is, apparently, the grand plan that will guide the city’s restructuring, and to which the Financial Advisory Board will hold the city accountable.

But what is this master plan? The plan tells us to consult “Annex A,” the final page of the document. So one goes there, and finds…nothing.

Well, that’s not entirely true. It says (in addition to “Annex A”) “Initial Recovery Plan [to be developed by the review team].” In other words, this master plan that city officials are supposed to sign off on? It doesn’t exist yet.

We can assume a lot of what’s going to be in the recovery plan. In fact, some of the big ones are laid out straightforwardly in Section 2.6 (“Implementation of Restructuring”): cutting the number of city employees, outsourcing certain departments and functions, potentially selling off city assets, etc. Some of the points are controversial, but most are ideas that have been floated for years (some by Mayor Bing himself) as practical ways to “right-size” city government.

The fact remains, though: there is no plan yet. So Detroit city leaders are being asked to sign an “agreement,” without anything that specifies, in writing, exactly what they’re agreeing to? In my mind, this might be the biggest sticking point of all.

Can Detroit do anything?

But in the end, this is all about politics, and politics is all about power. So the real question is: how much power do city leaders really have to negotiate details with the state?

Legally, the answer is: Not much. Under Public Act 4, the state can always appoint an emergency manager. The state is under no obligation to put forth a consent agreement. So either Governor Snyder and Treasurer Dillon are just feeling particularly generous toward Detroit (more generous than they felt toward, say, Flint), or…we’re back to politics. Detroit is still the state’s largest city, and that means something.

But how much does that mean these days? When it comes to launching a unified counter-attack, Detroit’s leaders are really struggling. Mayor Bing has laid out his own proposal for the City Council’s consideration (I won’t get into that—you can find some great analyses here and here).

But while Council members certainly don’t want to give up too much power to the state, they equally don’t want to give up too much power to the Mayor. Some Council members oppose the whole idea of a consent agreement; others support a stronger state role than Bing might, fearing what might happen if the city truly descends into bankruptcy. And all of this needs to get sorted out in the next few days.

So, it will be an interesting few days. There’s a lot to do in very little time. And whatever decisions get made will be crucial for Detroit, the state, and possibly the country.

Stay tuned.

Sarah Cwiek joined Michigan Public in October 2009. As our Detroit reporter, she is helping us expand our coverage of the economy, politics, and culture in and around the city of Detroit.
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