Ecorse provides empirical evidence of the potential benefits of privatization in the Downriver region.

Three years ago, Ecorse teetered on the brink of economic bankruptcy, the result of a $6 million budget deficit incurred by local elected officials. Today, Ecorse's budget deficit has been reduced to $1 million largely through privatization. The city appears to be headed toward full fiscal restoration, but the defeat April 18 of a new city charter designed to prevent financial abuse means the outcome has by no means been decided.

Ecorse public services that have been privatized include:

  • Department of Public Works. Debris removal; park and sign maintenance; street, sidewalk and alley maintenance; street sweeping; snow removal; tree cutting; water meter reading; water and sewer system maintenance; weed cutting; and vehicle maintenance have been contracted out. The DPW Building and all equipment have been sold, and the proceeds used to reduce the budget deficit. [22]

    DPW privatization has saved Ecorse $35,000 monthly, an annual savings of $420,000. The city pays $75,000 monthly, or $900,000 annually, for DPW services, according to Schimmel. [23]

  • Administrative expenses. Contracted out.

  • Ambulance billing. Contracted out.

  • Animal control has been contracted to the neighboring City of River Rouge for $20,000 – nearly half the $45,000 that Ecorse once paid for one animal control officer.

  • Boat launching facility. Contracted out.

  • City Hall maintenance. Contracted out.

  • Equipment maintenance. Contracted out.

  • Equipment purchases. Contracted out.

  • Labor contract negotiating costs and other legal expense. Contracted out.

Surplus city buildings and land have been sold, including the ice arena, named after still-living former Mayor Richard Manning. The ice arena was sold for $185,000, and now houses a successful business operated by a private entrepreneur. The community center, health center and rowing club have been leased out, producing a savings on insurance and utility costs. [24]

Garbage collection had already been privatized, but the contract was renegotiated to save taxpayers $120,000. [25]

Few, if any communities nationwide have experienced privatization to such a degree as in Ecorse. Indeed, Ecorse is evidence of a private sector economic experiment unique in recent American history. "We have created a model city that nobody else in the country has," explains Schimmel. "Some communities have privatized certain functions. I've privatized just about everything. Everything that I could legally."

The outside observer may ask, "How did such a degree of privatization occur in Ecorse?" After all, privatization is frequently characterized as a "Sunbelt idea," while Downriver is synonymous with the so-called "Rust Belt." It is clear that fiscal mismanagement by Ecorse officials led to privatization. A review of the salient historical facts establishes that point.

Wayne County Circuit Court Judge Richard Dunn appointed Schimmel as receiver for Ecorse on Dec. 3, 1985, after local officials created a budget deficit of $6 million through fiscal mismanagement. [26] The city's problems can be traced to the late 1970s when Great Lakes Steel Corp., the major taxpayer, found itself weakened by recession and an inability to compete in world economic markets.

Elected officials in nearby Gibraltar (McLouth Steel) and Trenton (Chrysler) faced a similar economic crunch, but raised taxes or reduced expenditures to offset declining revenues. Ecorse officials did not follow course and the city was millions of dollars in debt by the early 1980s. Creditors like Detroit Edison filed suit against Ecorse and the cases were consolidated in Wayne County Circuit Court before Judge Dunn. [27]

Schimmel implemented privatization as a solution after repeated efforts by Dunn to force officials to address the $5 million budget deficit which had driven the community to the verge of economic bankruptcy. For example, in June 1985, Judge Dunn ordered officials to adopt a balanced budget and instructed the city "to operate each quarter within its revenues for such quarter as budgeted." [28]

In March 1986, Dunn ordered city officials to show cause why they "should not either immediately reduce spending or increase revenues to achieve compliance" with his earlier order. In June 1986, Dunn ordered Ecorse officials to "pass on and adopt a balanced budget for the 1986-87 fiscal year or. or before July 1, 1986," and submit the document by that date. [29]

Local 1008 of the Michigan Association of Federal, State and Municipal Employees petitioned to intervene in the case, along with Ecorse through its attorneys. Dunn granted the petitions. Shortly thereafter, it was revealed that the city's projected operating deficit for FY 1985-86 "might exceed $750,000." On July 8, Dunn urged city officials at a conference to "conduct negotiations with its unions in an effort to formulate a balanced budget for" FY 1986-87. [30]

On July 19, 1986, an Ecorse official reported to Dunn that a balanced budget had not been adopted. On July 22, Dunn granted the city's request for a two-month grace period to compile a budget. Between July 22 and Sept. 23, 1986, meetings were held between Ecorse officials and union representatives. On Sept. 23, a city official reported to Dunn that a balanced budget had not been adopted. Dunn found Ecorse in non-compliance with previous court orders, and appointed Schimmel receiver for the city. [31]

Thus, Ecorse became the first city in Michigan history to be placed in receivership. Dunn ruled the receivership was necessary "because other less drastic measures have failed to work in the past or have merely resulted in impasse." [32] Schimmel accepted the position after receiving a guarantee from Dunn that he would have complete freedom to implement measures necessary to put the city's financial house in order.

"I told Judge Dunn I didn't want the (receiver's) job if I had to do what the typical politician has to do, which is make promises and then chase the taxpayers' money to keep them. That's how Ecorse got in the mess that it is in today in the first place," Schimmel said. [33]

First, Schimmel discharged 40 paid political employees. "Cost was not important in Ecorse even though they were near-bankrupt. Having their political buddies, cronies, relatives and friends on the city payroll had become more important than the taxpayer," he said. [34] Ecorse had 140 public employees when Schimmel was appointed receiver. By early 1989, he had reduced the public workforce more than 60 percent through privatization.

Next, Schimmel privatized the 34-member Ecorse Department of Public Works. He considered privatization of the police department but he found that state law prevented him. [35] Schimmel attempted to contract out police protection to the City of Detroit and the Wayne County Sheriff's Department, but political opposition prevented the action. Detroit Mayor Coleman Young supported the move, but was opposed by city council members. Wayne County Sheriff Robert Ficano's supported contracting-out but was opposed by Wayne County Executive Edward McNamara. However, Schimmel privatized the Ecorse police pension fund, restoring sanity to a system once underfunded by $15 million.

Through attrition, the fire department has been reduced more than 25 percent. The current full-time force will eventually be entirely part-time or volunteer under the fire union contract that Schimmel was able to renegotiate. "We have a long list of applicants for the new positions. They don't seem to mind that it's not full-time. They just want to work," Schimmel said. [36]

Two points emerge when examining Ecorse privatization. First, the Ecorse example offers empirical evidence that privatization is practical in the real world including the Downriver area. Socialist academic critics once objected to privatization on the grounds that public services were "natural monopolies." That theory was discarded long ago. Today, socialists argue that privatization is "impractical," i.e., it cannot guarantee sufficient suppliers to permit competition. That argument and other socialist objections do not hold up under scrutiny in Ecorse.

Second, it is clear that Ecorse represents a major, although tentative victory for market forces. Fiscal mismanagement has been stopped, an out-of-control bureaucracy has been reduced, and the same general level of services has been maintained. But property tax rates remain too high (76.72 mills) [37] and should be reduced as soon as possible to encourage economic development in a community plagued by double-digit unemployment.