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Royal Oak Township could be next Chapter 9 bankruptcy 

Small community could be next for bankruptcy protection.

click to enlarge COURTESY ILLUSTRATION.
  • Courtesy illustration.

Although Gov. Rick Snyder’s administration likely doesn’t want to see this happen, Detroit could soon be joined by a second Michigan community to petition for Chapter 9 bankruptcy.

Royal Oak Township, a tiny 0.5-square mile community wedged between Oak Park and Ferndale, with 2,400 residents, has struggled with dire financial issues for years. And last week, nearly six months after the state first opened up the township’s books for review, Gov. Rick Snyder confirmed a financial emergency existed — paving the way for a potential Chapter 9 bankruptcy petition under Public Act 436, Michigan’s revamped emergency manager law. 

Not to be confused with the nearby city of Royal Oak (as the Hits had been until we consulted with a nearby almanac), the township’s physical size and tax base has shrunk for years. Coupled with elected officials who steadfastly refused to merge the municipality with a nearby community — something even Nolan Finley of The Detroit News recently advocated — the township could possibly seek bankruptcy protection.

That’s because under PA 436, a community has the option to pick an emergency manager, petition for Chapter 9 bankruptcy, neutral mediation, or a consent agreement. Under the previous emergency manager law overturned by voters in November 2012, communities found to be in a financial emergency were stuck with an emergency manager who carried sweeping powers. 

But considering the revamped law was touted as a solution that offers communities more options, we found it interesting to consider what the state’s reply would be if Royal Oak Township selected Chapter 9 protection.

Terry Stanton, spokesperson for the state treasury, tells us even if township officials were to choose bankruptcy, the governor would still have to confirm the petition. If Snyder doesn’t sign off, the community would have an additional seven days to choose one of the remaining options. 

It seems the first issue at hand, though, would be if the township even manages to set a meeting by a Wednesday evening deadline to choose an option. By the time this rag went to press, no meeting had been called, and, Stanton tells us, if no action is taken by Wednesday, the township would immediately proceed with neutral mediation. 

We’re not fiscal wizards. But the treasury had found the township failed to submit an annual budget, owes hundreds of thousands of dollars on police services, and overspent more than $500,000 than what it had in its coffers last year. Whichever solution is eventually pursued, the situation isn’t pretty.

[Editor's note: Turns out, the township has made a choice. Stanton, the tresury's spokesperson, tells us Royal Oak Township officials sent a letter to the state treasury confirming they had chosen a consent agreement. Under state statute, the community now has 30 days to negotiate an agreement with the state.]

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