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Detroit emergency manager, a job for a "poor devil"

Michigan Governor Rick Snyder holds a news conference to talk about why he signed into law right-to-work laws in Lansing, Michigan December
Michigan Governor Rick Snyder holds a news conference to talk about why he signed into law right-to-work laws in Lansing, Michigan December

By Steve Neavling and Tom Hals

DETROIT/WILMINGTON, Delaware (Reuters) - Wanted: A financial whiz with powers of persuasion, an acute political radar and thick skin, for the demanding assignment of taking over a major American city on the brink of bankruptcy.

That's what Michigan Governor Rick Snyder is likely looking for as he decides whether to appoint an emergency financial manager for the city of Detroit, according to restructuring experts and Michigan politicians.

Snyder revealed this week that he has a "short list" of candidates for the job. He still awaits a report from a team of advisers to decide whether Detroit needs an emergency manager, said spokeswoman Sara Wurfel, but is "talking to and looking for prospective qualified candidates."

It's a job few may want as it will probably involve decisions that could lead to further cuts in jobs and services in a city that has been in decline for a long time - with its high crime rate, abandoned buildings and many unlit streets.

Still, success could make the manager a star in the world of restructuring - especially given a number of other financially distressed cities in the United States which might have to seek a similar savior.

"When there is not enough money to go around, somebody is going to be disappointed. And that disappointment will be aimed at whoever is the poor devil that took the job," said Steve Miller, a top turnaround specialist with strong Michigan ties who has worked for automakers Ford Motor Co and Chrysler Group LLC, and parts maker Delphi Automotive Plc.

The ideal qualifications would be someone with both a business background and a sense of public service to do the job for little or no pay, said Miller, who is now non-executive chairman of insurer American International Group, which was bailed out by the U.S. government during the financial crisis.

Scott Eisenberg, managing partner of corporate restructuring firm Amherst Partners and a past president of the Detroit chapter of the Turnaround Management Association, goes even further, saying "a magician" is needed for the job.

"You have a city council that doesn't want to lose control," Eisenberg said. "Who knows how much the mayor will go along. This will be filled with legal challenges over what you can and can't do. Everything the person does that is controversial will be challenged in court."

Snyder isn't talking about the candidates on his short-list, but politicians and restructuring experts say he needs to take their race into account. Eighty-three percent of Detroit's population is black and Mayor Dave Bing and city council members are all African American.

"To forcibly put a Caucasian in that position could have a very negative effect on the workforce, the voting populace and the people he will have to work with," said State Senator Virgil Smith, a Detroit Democrat, who is black.

A HISTORY-MAKING BANKRUPTCY

No large American city in recent history has seen a decline like Detroit. Once the fifth largest city in America, it is now only the 18th biggest, according to the latest population figures. With the exodus has come declines in the tax base and revenue, the flight of jobs, rising numbers of poor, increased crime and a city saddled with the infrastructure and labor costs of a bygone era.

Urban policy experts across the country are closely watching the struggles of Detroit, which could be an example for a number of cities still trying to recover from the housing bust and financial crisis, at a time when their pension and healthcare costs are soaring.

The emergency financial manager could choose to recommend that Detroit files for bankruptcy, although the decision ultimately rests with a board composed of people appointed by Snyder.

If Detroit files for Chapter 9 bankruptcy, its outstanding rated debt of $8.2 billion would make it the largest municipal bankruptcy in U.S. history, almost double the 2011 filing by Alabama's Jefferson County.

Other American cities have gone to the edge of insolvency including New York in 1975, Cleveland in 1978 and Philadelphia in 1991. But none of them filed Chapter 9 municipal bankruptcy.

Republican state lawmakers, who hold majorities in the legislature, said Snyder has not sought their counsel on the appointment of an emergency manager. But in interviews this week there was a virtual consensus among Michigan lawmakers in both parties that an emergency manager is likely.

"Every day that goes by and Detroit does not take action to save itself limits the governor's options," said Ari Adler, spokesman for Michigan's Republican House Speaker Jase Bolger.

NO POPULARITY CONTEST

Snyder has kept the names on his short list within a small circle of advisers, saying only that few people have the financial knowledge and people skills to do the job.

So far, several of the names swirling around Detroit political circles have said they are not in the running.

The Detroit News reported on Sunday that former Washington, D.C. mayor Anthony Williams, now in private law practice, had turned down the job. Repeated efforts to contact Williams for comment were not successful.

Another former politician whose name has surfaced in the speculation said he was not interested in the job.

"I am not a candidate for the emergency manager of Detroit," Thurbert Baker, a former attorney general of the state of Georgia now practicing law in Atlanta and Washington, told Reuters in an email.

If anyone knows the challenges a Detroit financial manager would face, it could be Robert Bobb, who from 2009 to 2012 served as the state-appointed emergency financial manager for Detroit Public Schools.

Bobb closed dozens of schools, outsourced school services, increased class sizes and laid off hundreds of teachers.

"If you are there for a popularity contest, then cast that aside," said Bobb, who said he had not been contacted about the Detroit emergency manager position.

While some described it as the job from hell, others said it could be a huge opportunity for someone to become the leading municipal turnaround specialist in the nation.

"It's a bit amorphous as to what constitutes success in this project, but there are a lot of careers built on one successful job," said Tim Skillman, a managing director in the Los Angeles office of turnaround firm Gavin/Solmonese.

(The story corrects identity of Jase Bolger's spokesman to Ari Adler from Virgil Smith in 18th paragraph)

(Additional reporting by Karen Pierog and James Kelleher in Chicago, Paritosh Bansal, Jessica Toonkel and Nicholas Brown in New York, and Dawson Bell in Lansing, Michigan; Writing by Greg McCune; Editing by Mary Milliken and Tim Dobbyn)

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