Clay Gillette on Financial Control Boards

+ Brandon Fuller

As Detroit's Office of the Emergency Manager worked to resolve the city's financial crisis, a Marron Institute team led by NYU Law Professor Clayton Gillette provided recommendations concerning fiscally responsible structures for municipal governance. As part of this work, Gillette conducted broader research on the role of takeover boards in resolving crises of local democracies—research that culminated in his recently published paper, Dictatorships for Democracy: Takeovers of Financially Failed Cities.


States have traditionally offered support to their fiscally distressed municipalities. When less intrusive forms of assistance fail to bring sta- bility, some states employ supervisory institutions that exercise approval authority over local budgets or, more intrusively, displace locally elected officials. These “takeover boards” are frequently accused of representing an antidemocratic form of local government and a denial of local autonomy.

This Article suggests that the extent to which takeover boards are subject to an antidemocratic critique is frequently overstated. Those making efforts to revive near-insolvent localities cannot be oblivious to the causes that generated their distress. Depopulation, high unemploy- ment, depleted municipal services, and blight do not arise spontane- ously. They are frequently the consequence of long periods of local mismanagement, in which expenditures deviate substantially from those goods and services that residents prefer, inducing the most mobile among them to gravitate to more hospitable jurisdictions. Any viable response to such dysfunction must therefore address the causes of politi- cal dysfunction.

By addressing the political underpinnings of fiscal distress, take- over boards may be more capable of satisfying the interests of local residents for public goods than local elected officials and may also repre- sent the interests of nonresidents and creditors who are not considered by those officials. Moreover, this Article suggests the authority of takeover boards should be expanded to allow them to engage in restruc- turing of municipal governance in order to avoid the entrenched and fragmented institutions that are often associated with local fiscal distress. The temporary nature of takeover board jurisdiction means that when local governance returns to the realm of normal politics, residents will be in a more informed position to evaluate the optimal structure of local governance.

Tile image courtesy of Gerald R Ford School of Public Policy.

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