David's Blog

In 2005, the Duluth City Council formed a Retiree Health Benefits Task Force to address the city’s unfunded retiree healthcare liability. The task force generated its formal report in December 2005. The report contains 14 recommended steps to avert a financial implosion within our beloved city. The task force strongly encouraged the city and its unions to begin implementing the 14 recommendations within the following year. In other words, the task force urged the parties involved to implement the recommendations by December 31, 2006.

The task force report declares: “Settlement beyond 2006 should be considered unacceptable by all parties, and not being in the best interest of the city, its employees or taxpayers.”
Although all of the 14 recommendations have not yet been implemented, significant progress has indeed been made.

The fifth of the task force’s recommendations is to raise, our utility rates (city gas, sewer and water) by 5%. Earlier this month, the City Council raised utility rates by $2.3 million a year to go toward paying the city’s retiree health care liability.

The fourteenth recommendation is to raise property taxes to pay for the liability. Earlier this month, the City Council approved a 15.3% property tax levy increase for 2007, including $600,000 annually to help pay for the retiree health care liability.

The first recommendation (the recommendation that has been the most contentious) addresses city union contract concessions. Specifically, the recommendation is to negotiate more health care cost-sharing with city employees; put all employees on one health care plan (that includes higher premiums, co-pays and deductibles); and move toward a defined contribution plan for future retirees. Task force members calculated that such concessions could reduce the city’s liability and required annual contribution for health care by 20%.

There is exciting news to share related to attaining these needed union contract concessions: four of the city’s five unions have reached tentative agreements containing the concessions. Only the city’s largest union – the American Federation of State, County and Municipal Employees (AFSCME) - has not reached an accord.

I applaud the leadership representing the four union groups that have reached tentative contract agreements: the police, fire fighters, supervisory and confidential unions.
At the same time, I encourage AFSCME’s leadership to become a part of the solution. The current AFSCME contract expires on December 31, 2006 – just 4 days from now. City and AFSCME leaders are involved in contract negotiations being facilitated by the State Bureau of Mediation.

The business community and home owners have accepted their share of the bitter medicine needed to heal the city’s finances. This has been done, as promised by the community’s business leaders, without a whimper. One year ago, we assured the mayor and the task force members that we would not contest the utility rate increases or the property tax increases that were needed to contribute toward resolving the unfunded health care liability.

We are pleased that four of the five city unions have concurrently done their share in bringing resolution to the city’s financial challenges. We applaud them for honoring their part of the deal. It is now time for AFSCME to do its part in bringing resolution to this crisis. The Chamber’s leaders join with every other tax payer in Duluth in urging the city and AFSCME to reach an agreement.

In service,
David