Over the last several decades, the City of Ecorse, Michigan
(Ecorse) has experienced radical financial, operating and structural changes.
Certain of these changes were not controllable by Ecorse. Operating reductions
resulting in the loss of jobs by a major employer and the resultant decline in
assessed property values, reductions in State and federal grants, reductions in
the overall revenue base, declines in the quality of services provided to its
residents, and an ever increasing expenditure requirements were just a few of
these changes. By the mid-1980s, a once vibrant Ecorse was teetering on the
brink of bankruptcy.
When Wayne County Circuit Court Judge Richard D. Dunn
appointed a receiver on December 3, 1986, he set in motion a series of events
that would change the history of Ecorse, and potentially the operations of many
other fiscally distressed communities. Tired of the City's inability to address
its failing operations, Judge Dunn sought out a municipal bond expert, Mr. Louis
Schimmel, as Receiver, to correct the fiscal distress of Ecorse and to ensure
that the residents received the minimum level of quality services mandated by
Black's Law Dictionary defines a receiver as "a trustee or
ministerial officer representing court, and all parties in interest in
litigation, and property or funds intrusted to him."
The steps taken by Mr. Schimmel as Receiver (Receiver) to
resolve Ecorse's fiscal problems may assist other governmental entities in their
efforts to improve operations into the 21st century. Declining revenues,
increasing expenditures, anti-tax sentiments from residents, increasing needs of
residents, and a general decline in the financial health of cities throughout
the nation require that the story of Ecorse be told. Ecorse experienced all of
these fiscal problems and more.
Locally, the Cities of Detroit, River Rouge, Hamtramck, and
Highland Park and Royal Oak Township (and others) are currently experiencing
various levels of fiscal distress. Several have recently missed payrolls. Many
of Ecorse's fiscal problems are likely being experienced by these governmental
units. The manner in which the Receiver resolved these concerns would be of
interest to their management.
Many have argued that the Receiver's accomplishments
resulted from the backing of the Court system. While in several instances this
is true, more often than not the accomplishments arose from the Receiver's
stead-fast desire to restructure Ecorse's services because it was the right
thing to do. Several Ecorse officials, although publicly outraged at the
Receiver's appointment, were privately relieved that the tough decisions
required to correct the fiscal ills were finally being addressed.
Failure to restructure Ecorse's services at the time of the
Receiver's appointment would have resulted in continued financial condition
declines and ultimately the potential restriction of critical services affecting
the safety or health of Ecorse's residents. Bond defaults were possible and
likely, if the operating trends continued. Delays in Ecorse's preventative
repairs and maintenance of its infrastructure (roads, sewers, water transmission
lines, etc.) saved Ecorse current cash outlays only to create more severe
infrastructure problems subsequently.
The "political will" to change financial and operating
patterns was critical to the successful restructuring of Ecorse services. The
effort to thwart change was institutionalized at Ecorse, as is the case in many
governmental units. The City Council, bargaining groups and others fiercely
objected to the loss of autonomy at the outset of the receivership. Various
lawsuits and petitions were filed throughout the receivership to either block
the Receiver's actions or to challenge the receivership itself. Physical threats
by more than one of the receivership opponents occurred. Yet, the Receiver
Throughout the objections by residents and Ecorse
employees, the Receiver continued to implement his program to restructure
services, improve financial management and prevent a recurrence of fiscal
distress after the receivership's termination. No formal deficit elimination
plan was developed by the Receiver. The Report on the Analysis of the
Receivership of the City of Ecorse, Michigan (Report) identifies the depth of
fiscal distress, the 'informal' deficit elimination plan used by the Receiver,
the "plan's" implementation, and the status of Ecorse today.
During the 45 months of receivership, the Receiver set
about addressing the many financial and operating issues facing Ecorse. While
much has been written about the receivership, this Report assembles as complete
a document as can be developed at the current time. The Report is based upon
interviews with the parties involved in the receivership, audited financial
statements and related account analyses prepared by Ecorse management, and other
sources of information.
Many may consider this Report to be informational and of
use only to those governmental units facing fiscal distress. However, the
financial and operating issues facing governmental managers today are similar to
those discussed throughout the Report. It is the enlightened governmental
manager who can look past Ecorse's fiscal distress and see similarities in their
own communities. The problems facing the Receiver at the inception of the
receivership were not unique to Ecorse. The approach and resolution to the
problems can be used as a model for improvement in other communities, providing
there is the political will to accomplish the necessary tasks.
SCOPE OF REPORT
This Report has been segregated into the following
History preceding the receivership. This section briefly
describes Ecorse's size, operations, organizational structure, demographics, and
other information useful to an understanding Ecorse, as well as a six year
financial history leading up to the receivership.
Fiscal distress at inception of receivership. The depth
of fiscal problems at the time the Receiver was appointed by the Court is
discussed. An understanding of the nature and extent of the issues addressed
during the receivership is critical to an evaluation of its success.
Actions taken by Receiver. This section discusses issues
facing the Receiver, alternative solutions explored and final resolution of the
problems. To the extent possible, costs and benefits associated with the
Receiver's actions have been quantified. This section highlights the actions
taken in the first six months of the receivership (through June 30, 1987) and
the actions taken through the receivership's termination on August 31, 1990.
Post-receivership status. The actions taken by the Mayor
and City Council since August 31, 1990 are discussed, as well as several of the
operating issues currently facing Ecorse.
Conclusion. A summary of the Receiver's actions, the
applicability to other governmental units and future concerns affecting
governmental units facing problems similar to Ecorse is provided.
Comparative operating statements for the General Fund,
Water and Sewer Fund, and Police and Fire Pension Plan have been included as
Appendices A and B for the pre- and post-receivership periods, respectively. The
operations of these funds reflect approximately 95% of Ecorse's financial
transactions. Other operations, to the extent necessary, have been reflected in
the body of the Report.
In addition to the above comparative analyses, comparative
property tax millage rates and State Equalized Valuations for property within
Ecorse are included in Appendix C for the 1983 through 1991 fiscal years.