Financial Stability Agreement Forced on Detroit

Abayomi Azikiwe, editor of the Pan-African News Wire, addressing a capacity audience at the Solidarity Center in New York City on March 16, 2012. Azikiwe discussed the capitalist economic crisis and its impact on the housing sector. (Photo: Sue Harris), a photo by Pan-African News Wire File Photos on Flickr.

Financial Stability Agreement Forced on Detroit

5-4 vote by City Council defies broad public opposition to state takeover

By Abayomi Azikiwe
Editor, Pan-African News Wire

April 4 was the 44th anniversary of the assassination of Dr. Martin Luther King, Jr. in Memphis, Tennessee. Dr. King was in Memphis to support a sanitation workers strike led by 1,300 African American men seeking recognition through the American Federation of State, County and Municipal Employees union.

Many within Detroit saw the imposition of a so-called “Financial Stability Agreement” (FSA) on the City of Detroit as another type of symbolic assassination. This act of capitulation by a narrow margin within the municipal legislative branch represented the attempted destruction and repudiation of the decades of labor and mass struggles waged by the people of this city for economic, civil and political rights.

Detroit had been under tremendous pressure since 2011 when a new Republican-dominated state legislature and governorship took power. In the fall a “secret audit” release by Ernst & Young claimed that the city would run out of cash by the end of this fiscal year on June 30 or sooner.

Consequently, the results of the audit were utilized to make a major push to force the city into a consent agreement or emergency management as mandated by the recently passed Public Act 4. The law provides for the liquidation of local governmental control of school districts and municipalities in the interests of corporate power in order to pay the banks the usurious interests and fees accumulated over decades of predatory lending.

The short-term deficit in Detroit has been reported to be approximately $200 million. However, long-term debt obligations are said to be $13.2 billion and rising.

Yet the politics of these figures are clearly related to the agenda of the right-wing leadership of the state and the weak and facilitating position of the Democratic Party officials. The money that the banks say is owed by the city should be the point of departure for the challenge to the wholesale seizure of municipal governmental structures and assets including public lighting, parks, union wages and pension funds.

The criminal operations of the financial institutions in the United States have brought on the worst economic crisis since the Great Depression. Despite the daily reports that the country is in recovery, the concrete conditions in Detroit and other cities in the state say otherwise.

Why would it be necessary to place Detroit under the dictates of a Financial Advisory Board and a Project Director if the bailout of the banks and auto industry had been sufficient to create adequate employment and tax revenue for the largest city in the state? Why are the unemployment and poverty rates in Detroit well above the state and national averages while people continue to lose their homes and social safety nets?

Structure of the Agreement and Its Implications

The FSA establishes a nine-person Financial Advisory Board (FAB) which will essentially usurp the existing limited authority of the elected City Council and Mayor. Although five members of the Council voted to accept this capitulation to the banks, four members rejected the agreement saying that it was illegal and purely designed to overturn the voting rights and labor contracts of residents and union members.

Even a legal opinion from the Corporation Counsel of the City of Detroit’s Law Department indicated that “There is no authority under the Michigan Home Rule City Act for the City to enter into such an agreement with the state…and that Public Act 4 does not contain any explicit grant of authority to create a Financial Advisory Board.” (Legal analysis of the proposed Financial Stability Agreement Submitted to the Detroit City Council)

Also the Law Department pointed out that “Unless based upon Public Act 4 of 2011, the proposed agreement contains a number of provisions which, without legal authority, vitiate the 2012 Detroit City Charter, are not authorized by State law…Because, as required by the Michigan Constitution, the proposed Agreement is not based, in its entirely, upon any state enabling statue, it is possible that a court may determine that the Agreement is not authorized under state law.”

Therefore, if the FSA is not necessary based upon Public Act 4 and potentially violates the City Charter, why would a narrow margin of the City Council vote to accept it? The answer to this question and others relate to the political balance forces in the city and will only be resolved outside the courts in the streets of public opinion and consciousness.

Under this Agreement the city will also be forced into hiring a “Chief Financial Officer” and a “Chief Operating Officer” ostensibly to work on the restructuring of Detroit’s finances and its purported “recovery.” Yet just a cursory look at the impact of the emergency management that the Detroit Public Schools has been placed under since March 2009 illustrates that the conditions will be far worse for city residents and employees.

Enrollment has declined even further in the DPS and the system has been split with numerous schools taken out and placed in an educational alternatives district which is supposedly designed to rehabilitate distressed buildings. The debt of over $300 million has been left with the DPS and the proliferation of charter schools are being encouraged by the state and the corporate media.

In essence the so-called FSA is set up to not only render moot the petition drive that collected 226,000 signatures aimed at nullifying Public Act 4 but to also obviate the legal challenges being made to Public Act 4 through the Michigan court system.

In forcing a slim majority to accept this Agreement under duress, the state backed up by the banks feel that they have the legal ammunition to ward off any potential ongoing challenge to the criminal character of this document. A $137 million bond initiative was floated by the state to convince certain Council members to vote in favor of the FSA, although the majority of the funds are slated to be channeled right into the banking system to service the debt.

Other legal challenges had prevented the state-appointed review panel from even meeting up until April 4. An appeal by Gov. Snyder was granted by the appellate court and the panel voted the same day to accept the FSA which preceded only by a few hours the vote of the five members of the City Council.

Struggle Must Move to a Higher Level

There is serious disappointment and outrage in the city among the majority of people which is directed at the City Council, the Mayor and the Governor. Nonetheless, the Moratorium NOW! Coalition to Stop Foreclosures, Evictions and Utility Shut-offs has been pointing the finger directly at the banks as the source of the Detroit’s financial crisis.

Others have picked up on this theme including Steve Babson of the People Before Banks Coalition, who slammed the financial institutions before City Council just days before the vote. A demonstration downtown at the Rosa Parks Transit Center on the night of April 4 represented the first public response to the imposition of the FSA.

The demonstration was organized by the Amalgamated Transit Union (ATU) workers who drive the buses in the city. There have been massive cutbacks in public transportation in Detroit and through the FSA there is bound to be even deeper reductions of service for the city’s largely working class and poor population.

Efforts aimed at overturning the Agreement will undoubtedly continue. There is the certification of the petitions to repeal Public Act 4 that is pending before the Secretary of State in Lansing.

Also other legal challenges are still underway. Nonetheless, the struggle must move into the arena of directly targeting the banks and corporations who have destroyed the city over a period of decades.

City workers and community organizations are ready to move to another level of mass protests and the demand for a moratorium on the payment of debt-service will cause even more consternation and fear on the part of the bankers. The struggle in Detroit portends much for the plight of cities throughout the U.S.