Category Archives: Duluth Finances

What the City Council giveth they can taketh away

The banner headline in yesterday’s DNT trumpeted the City’s brave attempt at transparency by replacing “street fees” from Duluth utility bills with honest to john property taxes. This was in anticipation of the Courts jumping in and forcing us to make the change…….well no matter the motivation, transparency is good.

But then the story explains that the City will tripple the “franchise fee” on Minnesota Power from one million to three million dollars. Those are disguised taxes too. Transparency only goes so far.

The Commodore is right again

As Claudia and I sat at Valentini’s having breakfast this morning we saw one of the sailboats from the Trans Superior Race gliding into the Harbor. I called Art Johnston to see if it was him but he didn’t pick up. He may have finished the race (his third) already or may still be out of cell range on the open waters.

It looks like he came in first in his division. He may have been the only competitor in it.

Art told me recently that he is the “commodore” of the Superior Yacht Club. He’d invited me sailing on a number of occasions and I’ve kept putting him off. Its just one more of his surprising skills although navigation like engineering is pretty mathematical. And his engineering skills got another confirmation in last weeks Duluth Reader when another engineer confirmed the news in John Ramos’s column about the ignoramuses the City paid $65,000 to completely botch their analysis of our public library’s energy usage.

Sadly, I can’t link to it: The Library: Don’t take our word for it.” The Reader hasn’t put their “soap boxes” on its website.

The column is by Rick Luck who is an engineer who monitored the Library’s heating and cooling for many years. He agreed. $75,000 of City drinking water is flushed through the library every year and sent back to Lake Superior. It doesn’t have to be that way.

Do ISD 709’s auditors believe it was wise to transfer ten million local levy dollars from the classroom …

and spend it instead on debt repayment?

No they don’t. They have no opinion on that question. Like good auditors they only evaluated whether our financial operations were legal and above suspicion.

Today’s Tribune story on the Board’s Business Committee meeting yesterday trumpeted the very good news that our reserve fund had doubled. Yes, it was five million below what policy dictates but its trending upwards. This is good news. However, it is far too small an advance to fix our crowded classrooms and limited educational programming.

I pointedly asked our auditor if she thought it was good educational decision making by our board to transfer ten million dollars of local levy operating funds into debt servicing for the Long Range Facilities Plan. As I expected she was not prepared to have any opinion on the educational aspects of our District’s spending – just whether we followed the rules.

My 22 minute message

Once again I woke up too early this morning this time a little stiff and achy from a lumpy pillow. As I lay hoping to fall back to sleep the first sentence of a fund raising letter for Art Johnston’s legal defense fund popped into my head. I was soon up typing a five-page request with lots of details that I have yet to spill across my blog. That’s because once raised there will be no turning back. We are close to that now as the folks intent on playing tyrant continue to push Art and me toward an incivil war. Its not one I expect to lose but I can’t say the same for our schools.

I have yet to sit down to work on a good editing of those five pages. That will require a lot more than simply proof reading to correct mistakes. Its why I didn’t go back and edit this recent post. Its just too taxing when my head is moving on to other things.

I got a funny reminder of just how long winded I can be this morning. After three hours of typing I looked up at the time and remembered I was supposed to be the moderator for our men’s church group this morning. Fortunately, I had time to shower and shave first and look for today’s newspaper. It hadn’t been delivered yet but after cleaning myself up I checked my email and found my old buddy had forwarded George Hovland’s letter-to-the-editor to me. He commented that George writes well. No kidding! George must have a good editor himself.

Our guest at the Men’s Club was recently retired Public Defender Fred Friedman. He’s been in the defender’s office for over forty years and had been in charge of it since 1986. I knew he was a good speaker because in my earlier stint on the School Board I heard him give a Law Day speech at Denfeld. I’m sure I’ve written about it before but a quick search didn’t turn up my recollection.

Fred was already at the church when I arrived and although we’d been in the same city for four decades it was my first hand shake with Fred. Fred recognized me and smiled and told me that he and his offices secretaries had a private joke about my having left a 22 minute long phone message at his office. He told me it was the record phone message of his 40 years on the job. We both found that very funny. I obviously have as hard a time editing my mouth as I do my fingers. I have no idea what I called the public defender about. Possibly, it was about the Red Plan but that seems an unlikely place for me to have been making inquiries about Johnson Controls or the school district.

Once I smooth out a rough draft of my fund raising letter I plan on handing it to the Superintendent to ask for an armistice. I’d rather not make my complaints public. But at this point I’ll only accept a truce if I can be assured that in addition to calling off the inquisition and restoring Art’s significant other to her duties the two of us, Art and I, will be allowed to ask reasonable questions concerning the Red Plan and its financing without being stonewalled.

$200 million!

I was a little taken aback reading a March news story about a Tribal panel dismissing complaints against Fond du Lac’s leadership. It wasn’t the dismissal that surprised me it was the casual mention that the Tribal budget is 200 million dollars.

According to Wikipedia the Reservation’s year 2000 population was 3,700. Gaming has been good for Chair Diver’s people. I’d be very interested to know what the Rez’s budget was when I arrived in Duluth 40 years ago pre-Bingo. The City of Duluth with a population of 86,000 projects a budget for 2014 of $254 million. Today the band is rich as Croesus which makes their treatment of the Carter Hotel seem a little high handed. Suddenly the once much put upon local native Americans have real financial muscle on their side and Duluth just has pot holed streets.

I can’t blame Mayor Ness for trying to get the paltry $6 million (19% of casino profits) back from Fond du lac for our crumbling streets that was lost in Court. Someday I’ll have to read the decision but I’ve got too much time to do anything other than to simply link to it now.

Rockridge

Darn it. I’m way to garrulous for my own good. I spent 2 hours and 40 minutes talking with seven folks who are concerned about the Rockridge School and its possible sale for who knows what? Its the “who knows what?” that has them concerned.

There isn’t much we didn’t talk about related to a potential sale. I told them from the outset that my chief concern was for the Duluth Public Schools which might interfere with their desire to keep their neighborhood from being despoiled. The more we (ISD 709) can make the better off our finances and the more likely that a lot more stuff will get crammed into the site’s 17 acres than they want.

I don’t think they have to worry too much in large part because they are not taking anything for granted but they did seem to think that the School Board members hadn’t been too communicative with them and were grateful that I would grace their meeting. Heck, I got free coffee and a chocolate chip cookie out of it. I’m good.

The Tuesday Trib’s trio…

…of stories pertinent to the levy:

The first is about the retirement of Terry Matson. The eye popping figure is this. When he began promoting tourism in Duluth in the 1980’s our tourism revenue was $80 million. Today its $800 million almost twice the cost of the Red Plan. That money is a great boon to Duluth and I’m gratified to have lived in the City to watch it grow. Duluth was a pretty seedy and shrinking town when I moved here in 1974 before its coal blackened Bowery was leveled and replaced with the Holiday Center.

However Dr. Dixon got his Red Plan accomplished and whatever its flaws Duluth can support it. Its not only tourism. Its the phenomenal growth of our local colleges. UMD had an almost tiny 4,000 student enrollment when I moved here. Today it has a hefty 11,000 students. One whole new industry has set up shop in the ruins of the Northwest Airlines Maintenance Base that Cong Oberstar engineered, Aircraft manufacture. Transportation, as always remains strong and the potential of new area mineral development, despite the environmental dconcerns, will redound to Duluth’s economic benefit.

Yes, its a damn shame the Red Plan was so unnecessarily big that it sucked the oxygen out of the air. Yes, its paid for with regressive taxes paid by a lot of folks on fixed incomes instead of the income taxes of the vain elite who wanted a vanity project. Still, these objections should not overrule a sensible call to stop the bleeding in our schools.

The second article is really the Trib Editor’s comment about Minnesota’s surprising economic growth recently despite the anemic overall performance of America as a whole. Things augur well for Minnesota as a whole and Duluth in particular. People in Duluth are justified in showing a little confidence.

Finally, there is the AP story about the State beginning to repay its recent borrowing of public school money to cover its financial butt. Its not the Godsend that it might appear to be. Its three quarters of a million dollars but all it really is is the speeding up of deferred payments the Districts would have gotten originally. Its a story about improved cash flow to our public schools not a story about an unexpected windfall. Still, lots of District’s including Duluth had to do costly short term borrowing to make ends meet while the State hoarded money the District’s had coming.

I endorse this editorial

As one of the nine School Board members who created and or protected the “ten percent reserve” which ended up at about $23 million in 2007 I endorse this DNT Editorial about how the City of Duluth should handle its unobligated reserves:

There are two obvious sources of cash to pay the bill. One is the $21 million sitting in reserve in the city’s Community Investment Trust, the source for making such payments in the past. The trust was built over the years with the city’s share of revenues from the Fond-du-Luth Casino downtown. But the city’s share of those revenues has been cut off, as has been well-publicized, and the trust has dwindled from about $50 million. While some of the drawdown has been by design (too much cash in such a reserve isn’t financially healthy, either, as it can crimp a city’s ability to borrow and win state and federal aid), a trio of city councilors has stated clearly, they don’t want the fund to be drawn down any further, certainly not below a healthy $20 million.

The other source the city could tap to pay the bill is an unobligated reserve in the city’s general fund. But that’s an option that has Montgomery waving red flags at the City Council and at anyone else who’ll listen. Tapping that fund just to pay a bill is precisely the sort of action that could get the city’s AA bond rating downgraded to A. Those who determine bond ratings specifically have told Montgomery that. It’s on the list of ways to be downgraded.

Tapping the general fund reserve for an emergency like last summer’s flood is one thing. Bonding companies understand having to do that. But using it to pay a bill that comes around every year is quite another thing.

The Duluth School Board has, since Dr. Dixon encouraged the School Board to open a vein, been drawing down the School District’s reserve to the tune of three million a year to pay off the lenders of Red Plan Bonds or to put in operations. The bonds will be repaid over a course of twenty years. This is the last year bond payments can be paid from the fund before even more has to be pulled from school operations (the classroom) to do the job. After Dixon’s run on the reserve is over we will have to take three million out of the classroom to pay the bondholders.

The City Council would be wise to avoid the School Board’s example.

Gaming the system

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

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

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…

…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…

…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…

…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…

…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

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?

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

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

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

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