Bankrupt Cities Using Emergency Financial Managers to Recover


Cash-Strapped Cities Get Emergency Financial Managers

Her efforts seem to be succeeding: Parker has balanced Ecorse's budget and eliminated what had been a structural deficit of close to $5 million. The city's cumulative deficit she has reduced from $14.6 million, she says, to $13.5. She hopes by the end of this fiscal year to reduce it another $1.5 million.

Edward Plawecki Jr. sees an opportunity to train more managers.

Plawecki, general counsel for the investment-banking firm Stout Risius Ross, has helped to develop a training course for emergency financial mangers in association with the Turnaround Management Association. The most recent teaching session, held in Lansing, Mich., in mid-April, drew about 350 attendees from states including New York, California, Ohio and Michigan.

Each participant paid $175. "About 100 were private sector turnaround individuals," he said, including lawyers and accountants.

Topics included "Dealing with a Unionized Workforce." The Turnaround Management Association is considering rolling out variations of the class nationwide.

Plawecki said it's difficult to quantify how big an opportunity near-bankrupt cities represent to the private sector. "But it would appear, due to the volume of distressed communities, that there would be significant opportunity for the private sector to expand its expertise into the municipal sector.

"Most of the lessons learned in the private sector are absolutely applicable, allowing for constraints. Constraints would be the state constitution, state statutes, laws, and charter provisions."

Imber of Grant Thornton agreed that turning around a failing city is pretty much akin to turning around a failing company, but with one big difference.

The fundamental difference is what he calls "the transparency element." In a corporate setting, "You come in and work in the board room," he said, meaning out of the glare of public scrutiny and media attention.

But in government, there are transparency laws that require working in the open. "There's nothing wrong with that," he said of the exposure that can invite intense examination. "It's how government is designed to work."

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