Archive for the ‘Duluth Finances’ Category

Gaming the system

Tuesday, November 22nd, 2011

The ever growing likelyhood of losing Casino money is really big and unpleasant news for Duluth taxpayers. According to this story Duluth was only collecting about 14% of the profits from the Fon du Luth Casino but it still amounted to about $5 or $6 million a year. (I didn’t know our take was that small a percentage of the casino we helped birth)

A lot of the new streets we drive on were paid for by gambling money. The tribe withheld payments for the last three years so we’ve hobbled along without it and the good times may come to an end. (This was one of the things my recent caller predicte) If the judge’s ruling sticks we’ll get one last payment of around $14 million but it will be sayonara for the next thirty years worth of gaming money we thought we had coming.

Unless a lot of new Federal money comes out way after the 2112 election we face some hard times. Taxpayers are facing huge jumps in their property taxes that, I suspect, will kill the GOP majority in the Minnesota legislature next year. Duluth was very lucky to get its “parks” referendum passed in the last election. I don’t see taxpayers authorizing any more regressive property tax increases anytime soon.

The news will be just as dire for the School Board. They will simply have to stew in their own juices.

I’m not sure the news will be all that great for the Indian run casinos in the long run. Gaming has given many Minnesota reservations a leg up over the past thirty years. A tax weary public will look hungrily at that revenue just as the founding Father’s did when they authorized numerous state lotteries two hundred years ago. I think the Reservation casinos will be given a run for their money soon by non Indian casinos which will contribute an even larger share of their revenues to the state. Fon du Luth’s changing revenue stream has probably just lost the Indian Nations a few more allies in the legislature.

Something I couldn’t write when my blog was down

Tuesday, October 11th, 2011

I couldn’t have said it better than this letter writer did in the DNT:

This letter is about the property tax issue. I had to replace my siding last year because I had rain water running down inside my walls. As a reward for being a diligent homeowner, the city raised my property value by $12,000.

Then the state eliminated the homestead tax credit.

The School Board has no concept of reality. After forcing its expensive Red Plan on us taxpayers, every election year, it seems, it has the audacity to keep asking for more money on top of the huge budget the district already has. I pay for other people’s children to attend the most modern, state-of-the-art schools while I live in a shack I can barely afford.

Now the city wants us to pay more in property taxes for libraries and parks. Sure, new park equipment and branch libraries would be nice. But they are luxuries, not necessities, and not worth the $2.6 million in property tax increases. The main library won’t be closed, so people who are looking for a job can still use those computers or the computers at Job Services.

I haven’t had a pay raise in three years, and my health-care and pension costs have increased. I don’t have a cell phone, Internet, cable TV or newspaper. I avoid doing anything that costs money. I realize I am blessed to still have a job and a home. That does not mean I can afford to take on more of the burden for those who don’t.

With all the foreclosures, there are fewer of us to shoulder the tax burden for the rest. We homeowners have to say enough is enough. Please vote “no” to any property tax increase.

Carmelle La Tour

Duluth

Nobodies talking about it

Wednesday, October 5th, 2011

Only about twenty people went to last night’s school board forum. That’s a bit of a rebuttal to the notion of building something so that people will come.

As of now nobody has felt moved to comment on Trib’s story about the forum or the candidates. I learned that only one candidate opposes the operational levy. Most have their doubts that any level of funding increase will pass.

I also learned in today’s Trib details about a levy referendum being offered by the City for Parks and Recreation and also that fewer and fewer of us residents will be left holding the property tax burden bag as the County takes in more tax forfeit houses. There will be something like a ten fold increase. Think regressive taxes – that put a heavier burden on the poor. Quick, go out and pass some more local levies.

Also another Democrat has thrown his hat in the ring to challenge Chip Craavack. He wants to bring the troops home.

Good luck…

Friday, September 23rd, 2011

…figuring out how this will affect your property taxes. It comes from Minnesota Public Radio.

The DNT reported a while back that losing the homestead tax credit would cost Duluthians on average a 5.7% tax increase. That doesn’t include what the City of Duluth or the County or the Duluth School District or voters on a proposed operational tax levy increase in a coming referendum will do to bump up our taxes.

You can see what would have happened in Duluth last year if the Dayton GOP legislative agreement had gone into effect by looking at this. Its a 900 page pdf that won’t easily transfer to the blog here without a lot of tinkering that I don’t have time to do for you, my dear readers. Page toward the end of the alphabetically listed Counties to St. Louis. Duluth is the last entry under St. Louis County.

Virgil’s swing…

Saturday, September 3rd, 2011

…is not a miss. Only his Budgeteer column is missing from the DNT’s online site. That’s too bad.

He points out that the public employee union is pushing hard for City Council candidates. Once seated the councilors will determine how much union members are paid. At a time of diminishing Government services this is troubling.

Coincidentally I got a call a week ago from a surveyer not identifying himself asking me if I had decided upon any city council candidates. When I identified the one I Considering the source the suggestion might have cost both candidates votes from our household.

Like Mr. Swing I have no use for Wisconsin Governor Walker’s heavy handedness. That doesn’t mean that public employee’s political power is not excessive. It is, and it will probably continue to cripple Duluth.

Happy Labor Day!

I wish the School District could get…

Monday, July 11th, 2011

…a $2.3 million settlement from JCI! Only we should be able to collect $15 million.

First it was guaranteed that JCI wouldn’t get a dime over $4.5 million . Then it was guaranteed that we were about to get a $32 million savings on the Red Plan spending. The guarantee that the Red Plan would only cost $297 million turned out to be little more than JCI’s sales pitch.

From the Trib:

Montgomery said he places more stock in the task force’s action plan than he would in the projections of an entity that stood to financially benefit from a project.

Memories of Duluth’s experience with Johnson Controls remain fresh. The city invested about $3.8 million in improvements at the Duluth Steam Cooperative based on the recommendations of Johnson Controls, but many of the projected savings failed to materialize. A legal battle with the company ensued, and the city received a $2.3 million settlement resolving the case in December.

As the Red Planners kept reminding us…

Sunday, May 8th, 2011

…our leaders were elected to make such decisions.

A short, sour and altogether honest assessment of some of our current City Fathers, several of whom are about to retire from the City Council:

It is quite interesting to read and hear our mayor and legislators complaining about threatened cuts to Local Government Aid, something they can’t vote on as its fate is in the hands of the Minnesota Legislature. Maybe now they have an idea how Duluthians felt when they were denied an opportunity to vote on the Red Plan — and the mayor and other elected leaders were silent.

Allen Willman
Duluth

From the Past

Sunday, February 27th, 2011

Sent to me by an email friend:

News Tribune

Feb. 23, 1971

* Members of the Duluth School Board were asked yesterday to support legislation to increase the state sales tax from 3 percent to 4 percent. The request came from Duluth Councilman Leo McDonnell, president of the League of Minnesota Municipalities, which is recommending the proposal.

* Duluth city and school officials agreed last night to delay construction of a pedestrian overpass on Central Entrance to serve the new Central High School. They decided more study is needed to determine whether it is the best solution.

7 million (per year) short of a solution?

Monday, January 3rd, 2011

I don’t subscribe to the Star Trib but I received this bit of intelligence from that paper today in an email. Its a year old. Anyone who thinks our City’s municipal problems are a thing of the past ought to reconsider. I believe I read that the latest census will reveal that we have lost another 5,000 people since the 2000 Census. That will hike the tax burden on those of us remaining while the State prepares to dump Local Government Aid.

Between that and the Red Plan Duluth still has a few hard years ahead.

Here is an excerpt from Star Tribune, 1/2/2011, that isn’t available on-line. The story is about public pensions.

CHEAP TALK WON’T SOLVE CRISIS OF PENSIONS

First, elected officials from both parties often chose to hie the cost of these agreements from voters, often for decades. That’s how a $32 mill liability in Duluth in 1998 became more than $300 mil by 2009, raising the spectre of a potential bankruptcy filing.

Second, wages, pensions, and benefits are the result of collective bargaining. Ultimately, elected officials approved the contracts. Blame should be shared equally and any change will have to be negotiated mutually. Vilification is a standard negotiating tool, but not an effective opening gambit.

In Duluth, the city negotiated with the unions to end free retirement health care for anyone hired after 2007. It also negotiated the right to move all employees to a single health plan, and then did the same with retirees. Those changes have reduced the city’s projected shortfall from $350mil to $208 mil.

“It’s the difference betwee bankruptcy and solvency,” said Mayor Don Ness.

Ness is perhaps more optimistic than he should be. The accountants say the city needs to put aside about $17mil a year to meet current and future obligations, but the city can only afford about $10mil. The outlook worsens if health care costs rise faster than current projections, or if the MN Supreme Court overturns lower-court rulings that allowed the city to shift retirees into one plan.

Good luck getting a new excess levy passed

Thursday, September 23rd, 2010

Its not only the Red Plan that has cost teacher’s jobs. Its the new teacher contract.

On July 20, the board passed a $63 million teacher-labor contract. Teachers were given 3.1 percent pay raises and 13 percent medical benefit increases. They now have 100 percent of their health premiums paid with zero deductible. Most of their dental is paid, too.

This compares to a 0 percent increase for city workers the past three years and high co-pays.

Despite the District’s cry of insolvency the District managed to conclude a new contract without the help of the School Board that was a lot more generous than the City has been in contracts with City employees.

Voters are likely to remember this the next time the District cries poverty and asks for more local property tax increases.

About that JCI Steam Plant arbitration

Saturday, August 7th, 2010

Everything seemed to be working out between JCI and the City of Duluth over the Steam Plant last April.

Since then the City Council nixed a plan to sell the plant and I’m just about positive I heard within the last couple weeks the arbitration between JCI and the City fell through. I can’t find any reference to this on the web pages of the Trib or the local TV stations. If so, its just one more blot on the company that NE Minnesota will have to live with.

Judicial politics

Tuesday, June 30th, 2009

Brandon Stahl’s reliable BuzzDuluth.blog. which describes itself as: “A running conversation on city government and politics” has an interesting post on judicial politics. Its something I could discuss regarding the taxpayer’s case but which I ought not to speculate about just in case we raise our bond and the case proceeds. The post is titled. Spin the BUZZ: Retiree lawsuit edition

Let’s make a deal

Wednesday, February 18th, 2009

Today’s Trib story about Mark Winson had a headline which claimed that the City’s former top administrator mad a deal that “cost the city millions.”

How much did it cost Duluth? Most readers will be drawn to his sentence:

“The contracts approved in 2004 appear to have added to the city’s unfunded health-care liability. In 2002, an audit conducted by a Minneapolis-based accounting firm put the unfunded health-care liability at$178.5 million. By January 2005 the liability was at $279 million. By 2006, the liability had swollen to $300 million.”

Because I’m grappling with the cost of the Red Plan, another $300 million liability, I have been very curious about the City government’s fiscal dilemma. I figured there was more to the story and Brandon Stahl, the story’s author, has an interesting blog which I consulted. Sure enough he has an entry giving a little backstory on this deal.

Buzz Blog

In it Brandon explains that he began covering City government about the time these negotiations were taking place and that he had not fully grasped everything that was going on. I certainly recall some frustration in 03 trying to make heads and tails of the City’s problems. The final line of Brandon’s blog post caught my attention:

“It seems to me that what he did (with approval by then mayor Bergson and the city council) was make a short-term sacrifice– giving employees plan 4 — for a long-term gain that eventually led to getting employees off of retiree health care.”

If the deal cost Duluth over $100 million as a “short term sacrifice” I wondered what the trade off was that might have made this sacrifice justifiable. I called Brandon to ask him if he knew whether any actuaries had calculated the benefit of making the sacrifice. If so, it could certainly go a long way to making Winson’s “deal” look good instead of stupid and would obligate Brandon to do a follow up story.

Brandon took my question seriously but suggested he might wait a couple days for Winson to “cool off” before pursuing it.

So, I called up Winson myself, first at City Hall. I was premature. Mark is still wrapping things up at Lake Superior State.
After I tracked him down Mark gave me a few minutes of his time. If he was exasperated with Brandon he didn’t betray it.

I asked him if there were any actuarys involved in evaluating the tradeoff for reducing the number of health insurance plans from 124 to just a few. No there weren’t but Mark said he did a little calculating on the back of napkins – that’s not quite how he put it – to assure himself Duluth would be better off.

He reminded me that at the time new accounting standards were being forced on all local governments under something called GASBY. It would take up too much space to explain this but check the link for more info. Basically, these were sensible new accounting standards that required government to calculate their future financial obligations or debts. We were wrestling with this on the Duluth School Board at the same time.

The City had negotiated itself into a considerable hole over health insurance and Winson had to navigate the City out of the hole. Whether or not it made sense to incurr additional future debts by simplifying the insurance won’t be known for some years but Winson is confident that it will be an improvement. We are going from an era of “defined benefits” (that can rocket up) to “defined contributions” which puts a serious leash on the future expenses. The City’s new hires will no longer be flying on this rocket.

Winson made two other points which he would be in a better position to know than I would. First, the insistance that the City’s other unions could force AFSCME (Duluth City Government’s main union) to surrender some of their health care benefits was not politically possible even if it would have been desirable. Second, That even if all the employees had retired under another health insurance plan instead of Plan 4, there would still have been a cost. Say that this cost is $100 million whereas the City’s ideal cost under a different hypothetical plan would have been $80 million. Considering this the cost to the city wouldn’t have been the $100 million that the story suggests but the difference between the two plans or – $20 million. I’m a lousy mathemetician and no actuary but I can imagine that what the City eventually got as I’ve described it was a big plus rather than a minus.

The historian in me is glad that the once wet-behind-the-ears Brandon Stahl is getting a do-over on his coverage of the health care crises of 2003. (Much as I hope the Trib’s education reporter gets a chance to reevaluate her coverage of the Red Plan’s early stirrings) Now I hope there is a follow-up story so that the Trib’s dwindling but loyal readership gets a clearer idea about whether the Winson deal of 2003 was a net loss or a net gain.

Doty misses the point

Monday, September 15th, 2008

In his recent column Ralph Doty makes some interesting and valuable comments about the Duluth Area’s property taxes. I have good reason for irritation with Doty on an old score but I appreciate anyone who can wade through the murk to point out useful information.

I found this observation particularly interesting.

“City councilor Todd Fedora recently told a radio audience that tax receipts from Duluth’s property tax levy were $13.5 million in 2007. But — here’s the rub — the city’s total health costs for current and retired employees was $17.4 million.

If the city wasn’t’t taking in a lot of money from its sales tax, it would have been bankrupt a long time ago.”

But on one score Doty is completely wrong.

“While the city of Duluth struggles with its deficit and the school district continues to cut important services to students, St. Louis County blithely goes about the business of funding projects and services the city can only dream about — and increasing property taxes every year to pay the bills.

Anger over city property taxes seems to be misplaced: The county’s share of a property tax dollar is 63 cents, while the city gets 22 cents and the school district receives even less at 11 cents.”

While Doty is right to point out the size of property taxes imposed by St. Louis County he too easily dismisses the tax increases of the School Board. Yes, the Schools consume far less property tax but the School District has a bigger budget than the City of Duluth. The schools property taxes are low because the State has made it a point to keep them low because of the relative importance of public education and its determination not to give poor kids and poor communities inferior K-12 schools. The State legislature didn’t anticipate that School Districts like Duluth would use the state’s school tax relief as cover to gouge taxpayers. If every school district in the state did what Duluth was doing the state would intervene in a heartbeat to prevent the state from going into bankruptcy.

When the District’s rates went down it made the schools share of the total property taxes look much more reasonable relative to the City or County. But to reinterate, The school district’s budget is bigger than the cities. Furthermore, the Red Plan will double the School’s property taxes in a few years while the County is increasing its tax rate by 5%. That’s nothing compared to last years school property tax increase of 56%.

Dismissing this monstrous increase by comparing the School District with the City and County is a lousy way to justify the Red Plan.

City levy cap

Thursday, August 21st, 2008

During my eight years on the School Board I was convinced that there was so much overlap between the three local governments – City, County, School Board – that there should be more cooperation between them. There was some intercommunication but frankly, turf protection was a powerful obstacle.

I think we are overdue for some sort of more formalized integration, especially where the raising of taxes is concerned. Therefore I took note last legislative session when Gov. Pawlenty insisted on putting a temporary 3.9% cap on increases in local levies. This cap was not directed at school districts.

I hadn’t paid close enough attention to it to know the precise details. Did it refer to Cities or counties or both? So, last spring I called a city councilor and asked him about it. He seemed unaware of the law and the new Ness administration had yet to bring the subject up with the City Council.

Well, finally the Trib has written a story about the bind the City is in. The law is a ham handed and clumsy way to end complaints that state cut backs are driving increases in local property taxes. Governor Pawlenty can be accused of insisting on the cap on but Senator Tom Bakk, the State Senate’s Tax Committee chair, went along with it as did the rest of the DFL dominated legislature.

The City desperately needs money (in my opinion) and its having to resort to painful but pragmatic budget cuts. Meanwhile the Duluth School Board raised its taxes by 56% to begin the Red Plan. It still has another third of the Red Plan costs ($90 million dollars worth) to levy for the Red Plan. Now the District is asking for another round of tax increases for operational spending. The Schools are running amok while the City has fallen into a fiscal pothole.

If ever there was a time to give some joint city, county, school district commission authority to regulate the taxing and spending authority of the three entities this is it.

Red ink for schools but not for city

Wednesday, August 13th, 2008

Let Duluth Vote has characterized supporters of the Red Plan as having drunk the koolaid. I don’t think there is a better example of this than Bevan Schraw who ardently believes the Red Plan will be a great boon to Duluth. Bevan is an old friend. I once passed out flyers for his campaign for the school board to about 7,000 homes.

Like other Red Plan supporters Bevan is besotted with Dr. Dixon. You would hardly recognize him as a koolaid drinker from commending Mayor Ness for his tough economy moves in cutting 217 Duluth employees.

“Kudoes to Donnie for his efforts. However, the problems continue to grow!!!When the Retiree Health Care Task Force put together thier list of recommendations, their 1st recommendation was to bring someone on board who had extensive knowledge about Municipal Bankruptcy. At the time City councilors and the Mayor were too proud to admit that the city was on the brink of finacial collapse. The State auditor also acknowledged that ALL property tax revenue collected was being spent for current and former employee Health Care. Nothing from that source to pay for necessary services. That is why every one is searching for additional ways to raise revenue { I am 100 % in favor of selling stained glass and land parcels.) The problem is only becoming worse. I heard on the news yesterday that Health care costs as predicted to rise 16 percent within the next year. This NATION must come to grips with the fact that whole Health Care system, and associated costs, has be totally overhauled!!!. Until then, bring in the bankruptcy attorney, and shed the burden of having all our property taxes end up with the SMDC folks – (those folks Who also get a City Subsidy for their parking ramp.) “

Punishing politicians who will not tax

Tuesday, July 22nd, 2008

The good news, as the News Tribune puts it, is that Duluth’s finances and tax capacity are in good enough shape to guarantee an excellent bond rating for the City. This is how both Moody’s and Standard & Poor’s evaluated Duluth as it puts its biggest ever bond into effect – a $40 million behemoth to finance the DECC expansion. Keep in mind, of course, that this will mostly be paid for by tourists at our hotels and restaurants. Also keep in mind that it is dwarfed by the $293 million in bonding for the School District’s Red Plan which will be paid entirely by local residents.

What the advisors at Moody’s know is important. Government can raise taxes to pay off their debts and the taxpayers can do little about it. That’s why we will all be on the hook if the Federal Government guarantees Fannie Mae and Freddie Mac for encouraging so many sub prime loans. That’s why we will all be on the hook if the Duluth School Board gets away with the Red Plan.

To that point I found this quote from the rating’s agencies interesting:

“However, if city leaders lacked ‘political will’ to use that money — required by a 7/9 vote of the City Council — it ‘could shift our analytic conclusions regarding overall operating liquidity.’”

In other words, If the voters of Duluth lean on their politicians not to raise taxes the bonding community will punish Duluth. Its nice to have friends.

Speaking of being brave

Wednesday, June 11th, 2008

Our Mayor Don Ness is showing some welcome backbone. Faced with a huge deficit he’s proposed serious and controversial cuts. Soon the School Board will do the same thing. That won’t stop them from squandering our taxes on the Red Plan.