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Christie goes all in on Detroit-style manager for Atlantic City

Suspension of local government’s power in Detroit taken as precedent for struggling gambling hub

The democratically elected mayor and city council of Detroit had virtually no legal authority from March 2013 to September 2014 after Michigan’s Republican Gov. Rick Snyder put a corporate lawyer in the driver’s seat. Kevyn Orr, the first emergency manager to control a major U.S. municipality, guided the city through the grueling process of Chapter 9 bankruptcy in a process that seemed often at odds with Detroit residents.

Now with Atlantic City in financial turmoil, New Jersey is gambling on Michigan's stringent emergency management system to improve their own hand, but it’s a bet many say shouldn’t even be on the table.

Late last week, New Jersey’s Republican Gov. Chris Christie installed his own emergency manager to govern Atlantic City. The decaying casino town, though much smaller than Detroit, has found itself in dire straits for similar reasons: Both cities have suffered from shrinking tax bases, widespread poverty and the collapse of an industry that was central to its economy.

Orr has had a hand in managing both fiscal crises; Christie named him as a consultant to Atlantic City’s emergency management team. His appearance on the troubled city's new management team underscores the extent to which Christie's edict is explicitly modeled off the Detroit takeover.

The Rev. Charles Williams, president of Detroit's chapter of the National Action Network, said he fears conservative governors in states with other economically failing cities might attempt takeovers of their own. He pointed to the political advantage Snyder derived from his imposition of emergency management; the governor, who is now a rumored presidential candidate, has been hailed by some commentators for "trying to save Detroit."

"Now Snyder's on the shortlist for vice presidential candidates, or even presidential candidates," said Williams. "They want to use this [emergency management in Detroit] to say, 'Hey, we've been cutting government down.'"

Christie appears to be inching closer to a presidential bid of his own. Late last week, he formed a leadership PAC, generally seen as the first step toward running for a party's presidential nomination.

Orr’s tenure in Detroit was controversial. Progressive groups accused the emergency manager of exaggerating the city’s debt burden, and public employee unions fought with him over the size of their retirement benefits. During the summer of 2014, thousands of people marched in the streets of Detroit to protest mass water shutoffs occurring in low-income neighborhoods.

Michigan progressives and labor unions are wary of the state’s emergency management system in general, seeing it as a way for the conservative state government to override local wishes, rewrite union contracts and carve pieces out of municipal governments. In Pontiac, Michigan, for example, another emergency manager privatized the Department of Public Works and cut the public workforce by 90 percent.

"Replacing legally elected leaders without an election or a conviction is fundamentally anti-democratic, anti-voter and unconstitutional," said John Philo, legal director for the liberal Sugar Law Center, a group that has challenged emergency management in federal court, in a 2013 statement.

Some fiscal conservatives, on the other hand, criticized Orr for not doing enough. “[Emergency management in Detroit] was technically a success in that the city has exited bankruptcy with a much better balance sheet than it had before,” said Michael LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center, a conservative think tank in Michigan. “However, I think it could have been done a lot better. I think there were a lot more assets to sell off and a lot more services to privatize."

It’s not yet clear whether Atlantic City’s restructuring will be as dramatic as Detroit’s or Pontiac's. One member of New Jersey’s advisory board that initially recommended emergency management in Atlantic City told the local press that "someone outside the political process" was needed to bring spending in line with the city's collapsing tax revenue. As in Detroit and other Michigan cities, the Atlantic City emergency manager will have the power to unilaterally rewrite public sector union contracts.

Nineteen states in the U.S. have laws allowing the state government to intervene in managing the finances of cash-strapped cities, but only a few of them are as active as New Jersey and Michigan. In Pennsylvania and Rhode Island, for example, cities and school districts are placed under receivership instead of emergency management, but the basic principle remains the same — a state appointee temporarily asserts control over local finances.

"New Jersey is one of the most active states," said Steve Fehr, a senior officer with Pew Charitable Trusts. "They have a long tradition of assisting their troubled local governments."

Detroit-style emergency management, however, doesn't have a direct precedent in the Garden State. Christie appointed Atlantic City's emergency manager by way of executive order, something not previously attempted under New Jersey law.

"The state legislature may want to look at the power of the state to intervene and what the ground rules are," said Fehr.

In February 2014, Harrisburg, Pennsylvania, ended a more than two-year stint spent under receivership; more recently, in December of that year, York County public schools entered receivership as part of a scheme to turn the entire school district over to a charter company. And Central Falls, Rhode Island, was shepherded through its 2011 municipal bankruptcy by a receiver.

Other states appoint control boards to consult with struggling city governments instead of superseding them, according to Eric Scorsone, an expert in municipal finance at Michigan State University. Although these boards can overrule local decisions, they usually lack the extensive authority of emergency managers. “The more common approach is the board,” he said. “And that board tends to be kind of a veto board, where basically local officials are still in charge."

Despite fears among progressive regarding the proliferation of emergency management, he said he expects cases like Detroit and Atlantic City to be few and far between.

He cited the erosion of the city’s gaming industry as an event unlikely to be repeated in many other places. “Atlantic City is a strange, special case because of the casinos,” he said. “My sense is that generally the fiscal stress on cities has declined overtime as the economy has gotten better."

But Williams is not persuaded, and believes other conservative governors will use emergency management as a mechanism to override local governments in economically struggling cities.

"Politically, it's an agenda that dismantles local leadership," he said.

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