Reuters: Emergency Manager Law May Help Mich. Cities Avoid Detroit's Fate
WASHINGTON, July 23 (Reuters) - Michigan's emergency manager law may save other cities in the state from the fate of Detroit, which last week filed for the largest municipal bankruptcy in U.S. history, according to the Pew Charitable Trusts.
"These laws are in place because Michigan recognizes that many other localities are experiencing financial struggles and they want to figure out a way to help their localities so they don't become the next Detroit," said Pew's Kil Huh, author of a study released late Tuesday on how states intervene in the finances of distressed cities.
In March, the state appointed corporate bankruptcy lawyer Kevyn Orr as Detroit's emergency manager, who guided the city to file for bankruptcy protection a little more than three months into the job.
"The new laws allow the emergency manger to intervene a lot earlier and so they don't have to be reactive," added Huh on a conference call with reporters. "They can be proactive in stepping in and that certainly will help the state deal with the distressed localities in the future."
Huh noted other cities such as Stockton, California, also filed for bankruptcy protection last year, but that in general, municipal bankruptcy is rare. In all the recent cases of default or bankruptcy, the 2007-09 economic recession and financial crisis have been only contributing factors, the study found.
"Almost every recent emergency can be traced to a one-time blow or a structural problem that worsened over time," the study said, noting that Harrisburg, Pennsylvania, was caught by a bad infrastructure investment, while Mammoth Lakes, California, did not have enough money to cover a legal judgment."
Read the full article at Reuters.