David's Blog

Thursday, July 27, 2006

Going Against Intuition and Experience to Develop New Solutions to our Community's Challenges

The Duluth Area Chamber of Commerce remains an unwavering advocate for implementing the Task Force’s fourteen recommendations. This is why we are concerned with the apparent lack of progress realized in implementing the recommendations. We encourage Duluthians to stay apprized of the unfolding concern. Implementation deadlines are fast approaching. As Task Force members stated in their recent Report on Implementation of Recommendations (July 17, 2006): “Time is of the essence!”

We also recognize how it will take unconventional leadership, along with educated risk-taking and a break from traditional roles, to resolve the city’s financial challenges. Said differently, what got us here won’t get us out of this mess. The Chamber is prepared to think and do differently.

Historically, the Chamber could be counted on to contest any and all local property tax increases. In recent years, we have become increasingly effective at opposing these tax increases. Opposing tax increases has become an almost routine decision for the Chamber’s leadership. To support our anti-tax stance, we applauded and uplifted local officials who joined us in opposing tax increases. Conversely, we challenged and contested local officials who showed a propensity to increase taxes.

The vast majority of our members affirmed these actions. The Chamber’s popularity within our membership would rise each time we took a public stand against an increase in property taxes. These actions produced a predictable surge in enthusiasm for the Chamber and an increase in our members’ participation in our tax fighting efforts.

Our opposition to the annual proposal for increased property taxes could be an expected response. That is, until this year.

The city’s unfunded retiree healthcare liability, and the ominous financial collapse it may precipitate, has changed everything. Life as we know it in our tax opposing world is changing. The Post Employment Healthcare Benefits Task Force recommendations (approved by the Duluth City Council on December 19, 2005) call upon all of us, including the Chamber, to rethink everything. Predictable actions and reactions no longer will work. All bets are off.

All fourteen of the task force’s recommendation must be implemented to avoid the city’s financial ruin. If any of the recommendations are not implemented, the financial gains generated by the remaining recommendations will not suffice to correct the financial problem. It’s an all-or-none deal.

Two of the fourteen recommendations are a particularity bitter pill for the business community:

Recommendation # 5: Increase all utility rates (gas, water, sewer, and storm water) to fully fund the Annual Required Contribution attributable to utility operations, beginning not later than July 2006 or earlier if possible, amounting to a rate increase of 4-5%.

Recommendation # 14: Phase in an increase in the City’s portion of property taxes over a 4-year period, as the last piece of the funding puzzle.

Overall property taxes, related to the task force recommendations, would be increased modestly. Increases would be in the range of 2% on the overall property tax bill for Duluth residents for 2007, with follow-on increases of similar size in years 2008, 2009 and 2010.

Here is the unnatural response from the Chamber: we will not oppose the recommended utility rate increases or the property tax increases proposed by the task force. We accept these increases as our dose of the bitter medicine needed to heal the city’s financial woes.

The Chamber’s board of directors fully supports implementing all fourteen of the task force recommendations. Now is not the time to shy from this difficult implementation. We encourage city administration, the city council, city employees and city retirees to also support the implementation of all fourteen recommendations.

Recommendations to have city employees assume additional cost sharing for their health care and insurance expenses need to be implemented. City retirees need to agree to have their retiree health care eligibility and benefits reduced. Just as this is the time for the Chamber to rethink and reevaluate its historical approach to opposing utility and property tax increases: it is time for the city employee’s union representation to break from its history of fighting employee benefit reductions with all its might.

We are hopeful city employees, city retirees and their union representation can bring uncommon leadership to this shared challenge. It will require them to do what is unnatural: to transcend old stereotypes and willingly agree to contract and benefit concessions.

These concessions, along with the implementation of utility rate and property increases, are the unnatural cure for the financial crisis facing our beloved city. These are exceptional times requiring unconventional leadership.

The Chamber welcomes suggestions on how we can serve as a positive force for change in encouraging decision makers to resolve the city’s financial dilemma.

posted by David Ross at

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