Municipal Takeovers: Examining State Discretion and Local Impacts in Michigan

Abstract

State interventions during municipal financial emergencies can play a critical role in ensuring the continuation of public services and preventing municipal bankruptcy but have often been applied unevenly. Using a case study of municipal takeovers in Michigan, we examine their predictability based on financial stress indicators and effects on drinking water services. We find financial stress alone does not explain takeover decisions, and that a city’s reliance on state revenue and racial and economic context play a role. Cities that have been taken over are more likely to experience drinking water privatization and rate increases than similarly financially stressed cities. The malleable definition of financial distress and discretion in implementation allow takeover policies to be applied unevenly, creating additional challenges for already distressed communities. Decision makers should seek alternative approaches to municipal financial emergencies that address underlying causes while minimizing the potential for bias and significant changes to public services.

Competing Public Values Amidst Fiscal Crisis: The Case of State Takeover System in Michigan

“…Our analysis reveals that the EM system in Michigan underscores neutral competence and technical expertise of professional managers in addressing the fiscal crisis at the expense of other public values, which echoes findings from several previous studies of the emergency management system (Fasenfest, 2018, 2019; Fasenfest & Pride, 2016; Hughes et al, 2021; Nickels, 2019; Seamster, 2018; Wang & Crosby, 2019). The EMs’ lack of democratic accountability to residents and elected local officials reflects the pursuit of the utmost degree of neutral competence, in an effort to resolve the financial emergency that Michigan communities confronted.…”

“…As such, the EM law received a great deal of criticism for the "biased and racialized responses" to fiscal distress (Fasenfest, 2018(Fasenfest, , 2019Fasenfest & Pride, 2016;Hughes et al, 2021), as well as for its negative impact on democratic governance at the local level (Kirkpatrick, 2015;Nickels, 2019;Seamster, 2018). For example, in one critique of the EM system Anderson (2012) describes the situation as a "democratic dissolution" that "suspend[s] local democracy," thus, effectively replacing the whole system of government with "a single official acting with unprecedented authority, discretion, and autonomy" (p. 581).…”

“…Local elected officials may not be able to successfully adopt and implement much-needed cuts that are politically unpopular (Levine, 1978(Levine, , 1979; hence, in an effort to restore fiscal health through enhanced fiscal accountability, a temporary interruption of democratic governance is justified. The case of the Flint Water Crisis, which erupted under the control of EM, however, calls into question whether it is worthwhile to suspend local democracy for the sake of fiscal accountability, even in the short run (Buckwalter & Balfour, 2020;Fasenfest, 2021;Hughes et al, 2021;Nickels, 2019).…”

Barriers to water infrastructure investment: Findings from a survey of U.S. local elected officials

“…Debt constrains spending in other areas and can cause financial distress. At the extreme, debt-ridden cities are at risk of default and heightened state supervision [27]. Whether financed by debt or by revenue, investment often requires an increase to water rates, which reduces affordability for low-income households and struggling businesses [28,29].…”

Race to the top and the diffusion of state education intervention policy in the American states

“…The spread of policy innovations, like takeover and turnaround laws, in the United States is often connected with geography and political ideology (Grossback et al, 2004; Hughes et al, 2021; Mallinson, 2021). Both play a role in structuring the pathways through which policy ideas spread (Desmarais et al, 2015).…”