Former Emergency Financial Manager Says Capital Improvements, Community Involvement Are a Must

If emergency financial managers are going to be successful for distressed municipalities and school districts, said two things must change.

The state law regulating them must put more emphasis on providing money for capital infrastructure and people from the civic arena, namely a Chamber of Commerce or a Rotary Club, need to be brought into the conversation.

“The finances of the operation have to be sound, but my point is that we’re not taking it far enough to build capacity in the organization and the community to pick up and run the community successfully after the emergency management position is over and the books are balanced,” Stampfler said Tuesday during a packed luncheon of the Rotary Club of Wyandotte.

“There isn’t sufficient attention given to capital infrastructure during this term of emergency management … to really make it possible for these communities who exit emergency management finally to make it on their own.”

Stampfler served as the emergency financial manager of Pontiac in 2010 and 2011 and said emergency managers are not the answer for struggling municipalities and school districts unless the law that governs them is changed. However, he said, he has no reason to believe that it will be changed.

“For communities to actually be able to succeed, the state legislation is going to have to cover more than (balancing the budget)," he said.

Stampfler said that’s proved by communities such as Ecorse and Flint that have sunk financially multiple times, even after having an emergency financial manager or a state receiver appointed to help them. He calls those communities “repeat performers.”

“We don’t want to have communities recycling,” he said. “We need to do more … to help them be ready to face the situation and not repeat the situation.”

If capital infrastructure isn’t provided for, Stampfler said, he wonders what benefits the distressed community has after emergency management that it didn’t have before.

“What have we as a society, as a state, done to strengthen that community to avoid it slipping right back into that situation?” he asked. “(We) have to build the capacity of the community to be ready for when those books are balanced and the state leaves. ... Changes have to be made that give it more than just a cold, clinical financial approach. Although that’s important, it has to be understood that there are several other components.”

Some people criticize emergency financial managers because after one is appointed, the powers of locally elected officials are stripped.

Stampfler said he’s OK with that in some circumstances, especially those where corruption led to the appointment of the financial manager in the beginning. Or, as he put it, if “they were part of the group that drove the bus into the ditch.”

While a city is accustomed to operating under the rules set forth in its city charter, Stampfler said, all of that is tossed out the window once an emergency financial manager is appointed.

“The charter is maybe just interesting reading,” he said. “In the emergency management situation, you have other things on your mind. The charge is let’s get the books balanced and get out of here.”

Stampfler said he’s unsure of Detroit’s financial future. While an emergency manager has been avoided for now because city officials signed a consent agreement with the state, there are still lingering questions that are on a wait-and-see approach.

“It’s more than just balancing the books,” he said. “There’s a lot more at stake. I don’t know if they have the formula exactly correct.”

junior Marshall Rademacher said he doesn’t understand why financially strapped communities often first resort to police and fire layoffs. The high school junior was one of six students from his school’s political science club to attend the speech.

He said he knows of a Detroit firefighter who is concerned about the possibility of a layoff due to that city’s dire financial straits.

“I don’t see how firing him and laying him off will help them,” the 16-year-old said. “He saves people. … How did an emergency financial manager come up with the idea that laying off teachers, firemen and police is a good idea when they’re the leaders in our community?”

Wyandotte City Administrator Todd Drysdale said Stampfler’s arguments have some validity and prove “the absolutely conundrum with emergency financial managers.”

“You have the state allowing these cities to get too far in the hole and you take these drastic measures of appointing emergency financial managers,” he said. “By the time the emergency financial manager comes in … there’s little left to improve. … If there was an easy concept to improve all of this, it would have been refined a long time ago.”

The talk garnered a lot of media attention, including MSNBC’s Rachel Maddow Show. Two staffers from the show flew into Detroit from New York to cover the event in Wyandotte. Their segment is expected to air on Wednesday’s show. It also was written about on The Maddow Blog.