Policy Research

Dictators for Democracy: Takeovers of Financially Failed Cities

Clayton Gillette

Summary

Gillette examines situations where states have installed boards to correct local financial issues. Gillette argues that these boards, which are responsive to the state’s interest in reversing local financial distress, are actually much more democratic than frequently cited. He further argues that in most situations, local financial distress is the result of long term mismanagement by the local government, resulting in population loss among mobile residents, and that “any viable response must therefore address the causes of political dysfunction”. He continues “I contend that by addressing the political underpinnings of fiscal distress, takeover boards may be more capable of satisfying the interests of local residents for public goods than local elected officials, and may also represent the interests of nonresidents and creditors who are not considered by those officials”. He concludes with a call for more state appointed boards imbued with expanded powers.

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Policy Implications

For Michigan policymakers, Gillette’s analysis and conclusion align closely with the theory behind Public Act 436, the Emergency Manager Law. Gillette quantifies the familiar argument that in cities such as Detroit and Flint, their financial distress is a result of long periods of financial mismanagement and public official errors. Therefore, if this is the case, the only viable course for correcting such mismanagement is the installation of a governing body, or official, who is not beholden to local elected officials, but instead takes a neutral approach to return the city to financial health.