David's Blog

Friday, December 16, 2005

Accepting a Large Dose of Bitter Medicine – Resolving the City’s Health Care Liability

The first step toward resolving a problem is recognizing that there is a problem. Thanks to the City’s Post Employment Health Care Benefits Task Force, every adult member of our community should realize that Duluth has a problem - a problem of titanic, Olympian proportions. This shared problem is the City’s employee and retiree unfunded healthcare benefit liability.

Benjamin Disraeli wisely said: “To be conscious that you are ignorant of the facts is a great step to knowledge.” Until the task force reported its findings at Monday night’s city council meeting, Duluthians were largely ignorant of the facts. At that meeting, we took a great step forward to knowledge.

Boxing champion Smokin’ Joe Frazier said it in colloquial terms when he pointed out: “The punch that knocks you out is the one you didn’t see.” I attended the city council meeting and listened to the two hour report delivered by members of the Post Employment Health Care Benefits Committee. While I saw this punch coming for months, its impact was, nonetheless, jarring.

The city needs to find a way to fund its $280 million health care benefits liability to the tune of $26 million each year for the next thirty years. To accomplish this goal, the task force offered a detailed, fourteen-step correction plan. The plan combines cost saving measures; an increase in utility rates (gas, water, sewer and storm water) paid by Duluthians; and an increase in the City’s portion of our local property taxes.


The correction plan calls upon city employees, city retirees, and residents to share the burden in resolving this problem. As City Council President Donny Ness said: “There are a lot of tough decisions and sacrifices outlined in this report. But in light of the severity of the problem that we face and the historic nature of Duluth’s financial stability, it’s the only way this problem can be resolved.”

Utility rate increases and property tax increases are painful for most home owners. They are extraordinarily painful and upsetting to business owners and operators who may use these utilities to a far greater extent than the average home owner. This is why news of the proposed utility rate and property tax increases will generate an immediate negative reaction to the task force recommendation from many in the business community.

My appeal to business community members is to seek to fully understand the city’s financial dilemma by thoroughly reading the task force’s recommendations. The task force’s report is available on the City’s web site at: www.ci.duluth.mn.us/city/mainpage. The report clearly illustrates how all of the task force’s fourteen recommendations must be implemented to resolve the problem. This is not a situation where a 90% solution will work. Every interest group - city employees, city retirees, elected officials, home owners, and the business community - should encourage city council members to fully implement the recommendations.

To do anything less will likely lead the City to face bankruptcy. Bankruptcy will inflict more financial pain on every citizen of Duluth than will implementing the task force’s recommendations. For this reason, I respectfully recommend that business community members encourage the mayor and the city council to fully endorse and implement the recommendations suggested by the task force. City councilors can be reached at council@ci.duluth.mn.us.

It is important for the mayor and the city councilors to fully realize that the Duluth Area Chamber of Commerce’s advocacy for supporting and implementing the task force recommendations comes in the form of “conditional support.” That is to say, Chamber support will remain only if every interest group - city employees, city retirees, union leadership, and elected officials - fully embrace all of the fourteen recommendations. If this “shared pain and shared solution” approach unravels and other interest groups begin to lobby for a reduced level of pain, the Chamber will reconsider its support for the tax and utility rate increase imbedded in the recommendations.

Moving forward with the task force recommendations will take discipline and resolve – for everyone. Strong leadership from Mayor Bergson and city councilors will be required to head this corrective effort. And elected officials must be vigilant to ensure that Duluthians never find themselves in such a difficult position again.

posted by David Ross at

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