Georgia View: Learning From Others

Emerging from the ruins of one of America’s greatest industrial empires is a leaner and hopefully cleaner Detroit. Currently finalizing its reorganization from Chapter 9 bankruptcy under the supervision of federal bankruptcy court, the Motor City has been on the racks being fine-tuned and having its motor and transmission rebuilt over the past 18 months by a court-appointed emergency manager.

Some parallels may be drawn between Detroit and DeKalb County, once one of Georgia’s most admired local governments. The DeKalb County Commission and school board have both been plagued for years by scandal, financial irregularities and misconduct by public servants and elected officials alike.

In Michigan, Gov. Rick Snyder appointed bankruptcy lawyer Kevyn Orr as emergency manager to oversee Detroit’s fast deteriorating financial operations in March 2013. Following Orr’s recommendation, and with the approval of Gov. Snyder, the city filed for Chapter 9 bankruptcy and reorganization on July 18, 2013. It became the largest local government failure and bankruptcy in our nation’s history.

As an attorney with Jones Day, Orr served as the lead advisor and bankruptcy counsel for Chrysler as it entered and later exited Chapter 11 bankruptcy and reorganization in 2009.  Orr directed Chrysler to close and sever relationships with a quarter of its U.S. dealerships, in part to reduce supply and help create demand for more popular Chrysler brands like Lincoln and Jeep. Though litigation around that bankruptcy is still winding its way through the courts, the new Chrysler emerged a leaner and more fit competitor in the global automotive marketplace.

Similarly, as Detroit’s emergency manager, Orr has reduced the city’s debt obligations, union and government employment contracts, healthcare benefits, pensions costs, and other municipal contracts and wasteful business practices to the tune of $7 billion. Post-bankruptcy, Detroit will still owe on obligations of roughly $2.6 billion, but it will be able to invest $1.4 billion in long-needed infrastructure improvements over the next decade.

Orr’s recently completed tenure was not without controversy. Detroit’s mayor and city council that temporarily lost their power and authority, as well as the city and state’s labor unions, which had to make major benefits and compensation concessions as part of the bankruptcy agreement, were all highly critical of Orr.

Over in California, following years of overcrowding in the state prison system, a federal court order mandated the appointment of a special receiver. The receiver is responsible for improving the quality of prison medical care to standards that no longer violate the U.S. Constitution. The receiver is providing and overseeing healthcare for a prison population exceeding 135,000. This healthcare delivery system is spread across 34 prisons and a corrections staff of 7,000.

The federal courts took control of the system away from the state after years of little progress, and the receiver has brought down costs of healthcare delivery while also improving outcomes and moving the system closer to compliance. Similar to an emergency manager, receivership is also not without its pain points, but certainly allows for turning or changing the course of large ships with much greater speed.

In DeKalb County, my lifetime home, local taxpayers are weary of the never-ending series of scandals and overall ineptitude demonstrated by many aspects of local government.

However, DeKalb’s school system appears to have turned a corner following the removal and replacement of a majority of the school board and the leadership of Superintendent Michael Thurmond. Still, DeKalb government is unlikely to be the last in Georgia to be on an apparent collision course with failure.

Georgia and California do not currently have a law on the books to allow the government to intervene in distressed localities; 19 other states – including Michigan – do.

Though hardly spoken aloud, and more often in quiet and in the offices of more learned members of the Georgia General Assembly and Judiciary Committees from both parties, the word Receivership is being whispered.

Such a bill or law may not reach the floor or be heard of again in an election year, but before another county reaches the brink perhaps Georgia needs such a plan in its tool kit. It may be time to learn a few lessons from California and Detroit.

Categories: Georgia View