From day one, controversy and strong-arm tactics marred the union’s campaign. According to numerous accounts by childcare providers, door-to-door union organizers have used misleading and intimidating tactics in order to gain signatures of support for AFSCME. In fact, an AFSCME vice president and founding organizer of the childcare union has since renounced the scheme over AFSCME’s "unethical tactics".

Unfortunately, similarly strong arm tactics are now being employed by some of AFSCME’s allies in the legislature.

Prior to a recent committee hearing on the childcare union legislation, the bill’s sponsor declared that no testimony would be heard during the meeting. However, when the hearing began, the legislator proceeded to invite an AFSCME organizer to testify in favor of unionization, while barring testimony from the countless childcare providers who cherish their independence and vigorously oppose the union’s power grab.

The hardball tactics employed by the union and liberal legislators may be distasteful, but they make a certain amount of sense, at least after reviewing campaign finance records.

Between 2010 and 2012, AFSCME spent a minimum of $2.04 million in Minnesota to elect liberal state legislators and statewide candidates, including Governor Dayton. AFSCME was one of the largest contributors to Dayton’s recount effort, donating $125,000. And in 2012, AFSCME paid for numerous independent campaign expenditures on behalf of legislators who are now sponsoring their forced unionization bill.

That may help explain why Dayton and liberal legislators continue their push despite overwhelming public opposition. But why is AFSCME hell-bent on unionizing these daycare workers in the first place? Perhaps because AFSCME, despite boasting steady membership of over 39,000 government employees and tens of millions in annual dues, desperately needs a bailout.

In fiscal year 2012, AFSCME Council 5 was the only Minnesota labor union to report negative net assets to the US Department of Labor. Recent filings by the union show negative net assets of $7,553,202 compared to $7,074,991 just one year earlier. The vast majority of liabilities are post-retirement benefits for union organizers.

AFSCME’s financial woes are also due to a lack of support from their rank-and-file. Compared to other government unions in Minnesota, AFSCME has a remarkably high percentage of "fair share" fee payers. These are individuals who have opted against full union membership, but are nonetheless forced under Minnesota law to pay up to 85 percent of full union dues. Remarkably, nearly 1 in 4 workers represented by AFSCME Council 5 have opted to pay "fair share" dues in lieu of formally joining the union. And the "opt out" numbers are growing: "fair share" payers grew from 21.0% (8,187 out of 38,963) in 2010 to 21.4% (8,162 out of 38,164) in 2011 and 23.5% (9,185 out of 39,042) in 2012.

Solution: Boost membership and revenues with a "nontraditional" organizing drive aimed at unionizing independent business owners, namely childcare workers. Unfortunately for AFSCME, it’s been a tough sell.

A staggering 86 percent of licensed childcare providers oppose unionization. Only 5 percent support it. So AFSCME and the legislature devised a brilliant plan: rig the union election. By expanding the group of eligible voters to include unlicensed providers, and by dramatically lowering the "public support" threshold for AFSCME to meet, legislators have set the stage for a sham election. Unfortunately, even sham elections have consequences. In this case, thousands of independent small business owners will be forced to pay for a union they never requested and do not want. It is coercive, exploitive, and disgraceful. Unfortunately, at the State Capitol, that is now par for the course.

Moody’s has placed 29 local government ratings from across the country under review, a possible precursor to downgrades. The list includes City of Minneapolis General Obligation (GO) bonds and City of Virginia GO bonds and Health Care Facilities Lease Revenue bonds. The new Moody’s rules, as well as new accounting standards adopted by the Governmental Accounting Standards Boards, should be a wake up call for Minnesota policymakers.

Instead of forcing state taxpayers to repeatedly bail out local governments that made promises they could not keep, it is time to make public pensions more transparent, account for them honestly, and stop assuming an unreasonably high rate of return on pension fund investments. Finally, to protect taxpayers and prevent pension liabilities from overwhelming government budgets, the state needs to follow the private sector’s lead and shift to defined contribution pensions.

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Among the bill’s features:

• Increases the current top personal income tax rate by 20 percent (from 7.85 percent to 9.4 percent), with the rate kicking in at $79,730 taxable income for single filers and $140,960 for married joint filers

• Extends the sales tax to clothing and a variety of services including auto repairs and over-the-counter medication, while reducing the overall sales tax rate to 6%.

• Increases regressive cigarette taxes by 94 cents per pack.

• Modifies the formula and increases spending on Local Government Aid, which redistributes state tax dollars to cities with no strings attached

Similar to Governor Dayton’s original tax plan, the Senate increases sales and corporate tax revenues but modestly lowers both rates, allowing supporters to claim they are "cutting taxes" while state government takes in more money. In doing so, they undercut a widely accepted principle (and necessary precondition) of good tax reform: revenue neutrality.

And what ever happened to "taxing the rich"? The Senate income tax hike is not aimed at millionaires and billionaires, but middle class families and small businesses. Liberal policymakers continue to redefine "rich"; it started as "millionaires and billionaires", then it was the top two percent of income earners (according to the Governor’s tax bill,) and now, according to the Senate, the top 7 percent of income earners are rich. This includes individuals with taxable income of about $79,730 or, in the case of married taxpayers filing separately, individuals with taxable income of just over $70,480. MinnPost reports: "The measure would affect 177,800 Minnesotans, who would pay an average of $2,435 more in income taxes, according to the Minnesota Department of Revenue."

Ironically, the Senate majority caucus released their tax plan on April 23, which is Tax Freedom in Minnesota, the day in which taxpayers are supposedly done working to fund government for the year. If the Senate prevails with these massive tax hikes, next year Minnesotans will work a few days longer to satisfy the appetite of big government.

"Tax Day is the perfect day to illustrate how raising taxes will harm Minnesota’s slowly rebounding economy," said Annette Meeks, CEO of the Freedom Foundation of Minnesota.

Governor Dayton’s proposed budget would increase spending by a staggering 7.6 percent in the upcoming biennium (FY 2014-15) for a total of $37.94 billion. This represents a $2.5 billion dollar spending increase over the current biennium and almost $1.2 billion above and beyond what the state had been forecast to spend. Worse yet, it projects another massive spending increase of 7.4 percent in the following biennium (FY 2016-17).

"This level of spending shines a bright light on one of the fundamental problems with Governor Dayton’s budget proposal," said Meeks. "It is not merely a one-time boost in spending, but rather a new baseline that puts the state even further down the path to unmanageable and unaffordable future spending increases."

Meeks continued: "In short, Governor Dayton wants to fund his super-sized state budget with needless tax increases, including regressive cigarette taxes and a new top personal income tax rate on Minnesota families and job creators. The result of these tax hikes will be a less competitive and less prosperous state economy, unsuited to compete with other states for jobs and investment."

Read the full report.

Anemic e-pulltab revenues have been a huge embarrassment to the Dayton Administration but also a threat to taxpayers, because the state’s General Fund could eventually be raided to cover the gambling shortfall.

The Star Tribune revealed this week that e-pulltab revenue projections were largely based on estimates from gambling vendors who stood to profit from the stadium legislation. The Dayton Administration seems to have taken those estimates at face value, and with minimal scrutiny. Why? Well, the governor has offered several explanations and excuses, all of them conflicting.

Excuse #1: Governor Dayton pleaded ignorance, claiming he had no idea that estimates came from gambling vendors and blamed the Gambling Control Board for not disclosing the source. Unfortunately, Minnesota Public Radio revealed that the administration was indeed well aware of industry’s involvement, and had admitted as much in 2011.

Excuse #2: Dayton then claimed he was just too busy to keep up with mundane details like data integrity and taxpayer risk, even though the Vikings stadium was his top priority in the 2012 session: "I don't track every legislative hearing, and there's a tremendous amount going on…If somebody told me something and I don't recall it, that's my responsibility." He reiterated his regret that gambling interests played a major role in estimating e-pulltab revenue.

Excuse #3: Dayton then reversed himself yet again, defending the gambling industry’s involvement, and shifting the blame to legislators, saying, "We’re all responsible for this creation." Except, presumably, the many legislators and fiscal conservatives who not only opposed the stadium proposal, but also warned that revenue projections were unrealistic and indefensible.

It seems the buck never stops with the governor; it just pauses briefly, then gets passed to the nearest convenient scapegoat. That’s leadership, Mark Dayton style.

(Minneapolis) – The Freedom Foundation of Minnesota and the Center for the Study of Politics and Governance at the University of Minnesota’s Humphrey School are co-sponsoring a panel discussion on the February economic forecast and its implications.

The February 28th economic forecast sets the budget numbers that will drive legislative decisions on the budget and potential changes to Minnesota’s tax system. A premier panel of budget experts and legislative leaders on the budget and tax policy will react to the forecast and what they expect to occur during the current legislative session.

What: Panel Discussion on the Minnesota Economic Forecast

Panelists: John Gunyou (former state Finance Commissioner
                Tom Hanson (former Minnesota Management and Budget Commissioner)
                Rep. Mary Liz Holberg (R-Lakeville)
                Rep. Diane Loeffler (DFL-Minneapolis)

Moderator: Professor Larry Jacobs of the Humphrey School

When: Friday, March 1st from 9:00am – 10:00am

Where: Humphrey School of Public Affairs (301 19th Avenue S, Minneapolis), Cowles Auditorium

Contact: Jonathan Blake (612) 354-2192

Which brings us to Duluth, and its current contract with AFSCME Council 5 Local 66, which represents the city’s "Basic Unit Employees", excluding police, fire, and supervisory workers.

The union contract has a curiously generous provision related to paid sick leave: "Effective the first day of the month following the date of hire, an Employee shall be granted up to 120 working days of sick leave with full pay (paid sick leave) for each illness or injury during a calendar year."

That’s right, 120 working days. 24 weeks. Six months. Every year.

And according to a document obtained by the Freedom Foundation from the Bureau of Mediation Services (BMS), at least one city employee actually maxed out his sick leave in 2011. That same employee almost maxed out again in 2012, until the city tried to place him on long-term disability.

If you’re wondering which chronic illness or debilitating disease the employee was suffering from, the answer is… high blood pressure or hypertension.

The employee blamed his medical condition on the stress of a "hostile work environment". Curiously, the employee has a habit of making miraculous recoveries just as he maxes out his sick leave, thereby allowing him to return to work and avoid being placed on long-term disability and having his pay reduced.

But in fairness, high blood pressure is a serious health risk and should not be taken lightly. According to a recent survey by the CDC, more than one-quarter of Minnesota’s adult population has also been diagnosed with hypertension.

There are a number of ways to treat and control blood pressure, including eating healthier, maintaining an active lifestyle, and taking prescription medication.

But if all else fails, move to Duluth, get a government job, and take a few months off. The union will take care of the rest.

Confirmed speakers include former finance commissioner John Gunyou and former MMB Commissioner Tom Hanson. The event is free and open to the public. Reserve your spot today.

Event: Discussion and Debate of Governor Dayton’s Tax Reform Proposal
Date: Thursday, February 28
Time: Noon – 1:30 pm
Location: Humphrey Institute (301 19th Avenue South, Minneapolis) in Room 180
Parking: Ramp across the street from the Humphrey Institute

Short Takes
Dayton’s fraying alliance: Tax experts, economists say Dayton’s business sales tax is a bad idea. And according to the Star Tribune, the proposal is fraying the alliance between Dayton and the business community (to the extent that such an alliance ever existed).

Cautionary tale from Connecticut: The Columbia Journalism Review has a great story on Connecticut’s "growing pains" in creating a state-run health insurance exchange.

Blatant power grab: Duluth News-Tribune editorial calls Governor Dayton’s and the legislature’s proposed changes to the Iron Range Resources and Rehabilitation Board (IRRRB) a "blatant power grab".

Cut to the bone?: MnDOT plans to spend about 18 months and $600,000 studying the potential benefits of reversing a single lane of traffic for a few hours a day on Cedar Avenue in the south metro. If MnDOT ultimately green lights the project, the so-called "zipper lane" on Cedar Avenue is expected to be completed by the time your grandkids’ grandkids start driving.

Union Watch
Airing out the smoke-filled rooms: Be sure to check out the latest policy report from the Goldwater Institute about bringing transparency to government union collective bargaining. In their assessment of all 50 states’ transparency laws related to government sector collective bargaining, Goldwater found that Minnesota is one of many states with "no explicit or minimal statewide transparency requirements". That won’t come as news to the many Minnesotans who have tried (and failed) to gain access to closed-door negotiations between public entities and government unions. Exhibit A: Minneapolis Public Schools

Sabotage, stalking, and stealth exemptions: The U.S. Chamber of Commerce recently released an excellent report about state laws that contain special exemptions and carve-outs for labor unions. The report, entitled "Sabotage, Stalking & Stealth Exemptions", makes for a fascinating, disturbing, and oh-so-timely read.

Unholy alliance: The Star Tribune reports that Governor Dayton and liberal legislative leaders are in lockstep with the Service Employees International Union (SEIU). Of course, that in itself isn’t exactly breaking news. But the Dayton-DFL-SEIU alliance is especially potent this session as they pursue common priorities like increasing the minimum wage and pushing child care providers and home care workers into unions.

This event will take place hours after Minnesota Management and Budget (MMB) releases the February economic forecast which will provide policymakers with a final look at Minnesota's broad economic picture before they commence budget discussions.

Confirmed speakers include former finance commissioner John Gunyou and former MMB Commissioner Tom Hanson. The event is free and open to the public. Details below.

Event: Discussion and Debate of Governor Dayton’s Tax Reform Proposal

Date: Thursday, February 28

Time: Noon – 1:30 pm

Location: Humphrey Institute (301 19th Avenue South, Minneapolis) in Room 180

Parking: Ramp across the street from the Humphrey Institute

Wisconsin Governor Scott Walker responded to Dayton’s budget plan, with its billions in sales taxes on business services, by reminding Minnesota companies that "Wisconsin is open for business." This week, a Wisconsin legislator issued an open letter to Minnesota businesses, touting Wisconsin’s fiscal restraint, low cost of doing business, and forthcoming tax cuts.

It’s not just Minnesota’s immediate neighbors that are pouncing. Florida Congressman Trey Radel sent a letter to Governor Dayton that began: "I’m writing today to thank you. As a Floridian, I am overjoyed to hear about your plan to raise taxes on Minnesotans … Your proposal gives us a chance to shine here in the Sunshine State."

But in North Dakota, policymakers are offering more than rhetoric. Legislators of both political parties are pursuing policies that seem designed to exploit elements of Dayton’s sales tax plan. First it was the North Dakota bill to create a sales tax exemption for clothing, just days after Dayton announced his plan to tax all clothing over $100. (On Monday, the North Dakota house overwhelmingly rejected a proposal to raise the minimum wage and index it for inflation, just as DFL legislators in Minnesota prepare to pass legislation that would do just that.)

But it’s not just retailers and shoppers that North Dakota is after, they also want to lure investment and innovation across the border.

A bill moving through the North Dakota legislature would renew the state’s sales tax exemption on telecom equipment purchases, an exemption that Minnesota also currently allows. The exemption encourages investment in high-tech telecommunications infrastructure. Why is this significant? Because Governor Dayton’s budget proposal imposes a new tax on telecom equipment (one of many business-to-business taxes Dayton is seeking).

The proposed new tax on telecommunications equipment is expected to generate $32.9 million for FY 2014-15 and $52.4 million in FY 2016-17.

This is not merely a tax on business, but a tax on innovation and technological advancement. And it comes at the worst possible time, as Minnesota works toward ambitious goals for expanding broadband access and adoption.

Studies have shown that exempting (or lowering taxes on) telecom equipment increases high-tech investment, increases GDP, and creates jobs. In fact, when North Dakota eliminated the sales tax on equipment, telecommunications and cable TV, investment jumped 207 percent. Governor Dayton is apparently willing to forfeit high-tech investment and economic benefits to more business-friendly states.

Governor Dayton is sending a very clear message to business: Invest and innovate elsewhere. And unfortunately, businesses seem to be getting the message.

Capitol Cronyism: Union Edition
Legislation introduced this week in the state House and Senate would provide taxpayer-supported pensions to private employees of a corporation. The proposal would change state law to identify private workers, who are not employed by the state in any way, shape, or form – as "state employees" But not just any employees, and not just any corporation: it is a strictly for union organizers at the Minnesota Association of Professional Employees (MAPE), the largest union of state employees in Minnesota, representing about 13,000 workers.

The Senate bill (S.F. 280) was introduced Wednesday, authored by Senators Sandy Pappas, Jeff Hayden, Tom Saxhaug, Barb Goodwin, and Alice Johnson. Its companion bill in the House (H.F. 345) dropped Monday, sponsored by Representatives Michael Nelson, Mary Murphy, Will Morgan, John Lesch, and Linda Slocum. The proposed legislation would qualify these non-public union organizers for pension benefits from the underfunded Minnesota State Retirement System (MSRS).

According to the Pioneer Press, the MSRS claims the union would be "on the hook for any unfunded liability if the plan were to fail" and that taxpayer funds are not at risk. These are dubious claims at best, considering the system has been underfunded for years, and even modest reforms to pension fund accounting and employer/employee contributions have been met with fierce resistance, including from MSRS itself.

The Pioneer Press story includes a telling excerpt about Sen. Sandy Pappas, who chairs the legislative pension commission and introduced the MAPE legislation: "When asked for the rationale behind the bill, Pappas acknowledged that she didn't know. 'I guess no one's ever asked me, 'What's the rationale?''"

While the rationale apparently eludes the legislation’s author, it’s not much of a mystery to the rest of us.

MAPE, which spent more than $360,000 to lobby legislators in 2011 and 2012, is a major funder of legislative campaigns and political causes. Between 2010 and 2012, MAPE’s PAC and political fund spent more than $800,000 to fund campaigns, party units, political funds, and independent expenditures. Virtually all of that money went to elect Democratic candidates. MAPE also gave $75,000 to the Dayton Recount Fund in 2010.

In 2011, the last year for which data are available, MAPE reported revenue of $4.7 million, almost all of which came from union dues, and net assets of $6.5 million. Yet apparently they are unable or unwilling to fund their own employees’ retirement.

Luckily it seems the legislature is generously offering to give these non-public political organizers state pensions. And did we mention, the legislature is preparing to ratify a new MAPE contract with an across-the-board pay hike?

Contracts, cash, and cronyism. It’s going to be a long session.

Short takes
A real plan for job growth and economic competitiveness: In case you missed it, be sure to read the Freedom Foundation’s latest report: The Lawsuit Reform That Minnesota Needs Now. The report provides a roadmap for policymakers to attract and retain jobs, improve Minnesota’s economic competitiveness, and lower consumer costs.

Taxation without representation? Legislation introduced this week would remove those pesky voters from the school referendum renewal process, allowing school boards to unilaterally decide to renew expiring tax levies.

Create a job, pay a tax: One of the more perplexing elements of Governor Dayton’s "jobs, jobs, jobs" agenda is his proposal to tax, well, jobs. That’s right, a substantial portion of the revenue in Dayton’s budget comes from a new sales on job creation. The list of newly taxed goods/services includes all employment services (temp agencies, job placement agencies, executive search firms, etc). Revenue for FY 2014-15 is estimated at $268.4 million. For FY 2016-17 it's $456 million, so about $725 million over the next four years. Compared to all other newly taxed services, only computer services and advertising/PR account for more revenue.

MPR on Dayton’s tax plan: Business leaders in the Duluth area are concerned that Dayton’s sales tax plan will make them less competitive, especially with Wisconsin businesses just over the border.

Tweet of the Week (via @Rep_SAnderson): "Verified: new sales tax will apply to ATM & overdraft fees. Every time you take cash out of your account, one is for you & one is for govt."

The Senate bill (S.F. 280) was introduced Wednesday, authored by Senators Sandy Pappas, Jeff Hayden, Tom Saxhaug, Barb Goodwin, and Alice Johnson. Its companion bill in the House (H.F. 345) dropped Monday, sponsored by Representatives Michael Nelson, Mary Murphy, Will Morgan, John Lesch, and Linda Slocum. The proposed legislation would qualify these non-public union organizers for pension benefits from the underfunded Minnesota State Retirement System.

MAPE, which spent more than $360,000 to lobby legislators in 2011 and 2012, is a major funder of legislative campaigns and political causes. Between 2010 and 2012, MAPE’s PAC and political fund spent more than $800,000 to fund campaigns, party units, political funds, and independent expenditures. Virtually all of that money went to elect Democratic candidates. MAPE also gave $75,000 to the Dayton Recount Fund in 2010.

In 2011, the last year for which data are available, MAPE reported revenue of $4.7 million, almost all of which came from union dues, and net assets of $6.5 million. Yet apparently they are unable or unwilling to fund their own employees’ retirement.

Luckily it seems the legislature is generously offering to give these non-public political organizers state pensions. And did we mention, the legislature is preparing to ratify a new MAPE contract with an across-the-board pay hike?

Contracts, cash, and cronyism. It’s going to be a long session.

Wisconsin Governor Scott Walker responded to Dayton’s budget plan, with its billions in sales taxes on business services, by reminding Minnesota companies that "Wisconsin is open for business." This week, a Wisconsin legislator issued an open letter to Minnesota businesses, touting Wisconsin’s fiscal restraint, low cost of doing business, and forthcoming tax cuts.

It’s not just Minnesota’s immediate neighbors that are pouncing. Florida Congressman Trey Radel sent a letter to Governor Dayton that began: “I’m writing today to thank you. As a Floridian, I am overjoyed to hear about your plan to raise taxes on Minnesotans … Your proposal gives us a chance to shine here in the Sunshine State.”

But in North Dakota, policymakers are offering more than rhetoric. Legislators of both parties are pursuing policies that seem designed to exploit elements of Dayton’s sales tax plan. First it was the North Dakota bill to create a sales tax exemption for clothing, just days after Dayton announced his plan to tax all clothing over $100. (On Monday, the North Dakota house overwhelmingly rejected a proposal to raise the minimum wage and index it for inflation, just as DFL legislators in Minnesota prepare to pass legislation that would do just that.)

But it’s not just retailers and shoppers that North Dakota is after, they also want to lure investment and innovation across the border.

A bill moving through the North Dakota legislature would renew the state’s sales tax exemption on telecom equipment purchases, an exemption that Minnesota also currently allows. The exemption encourages investment in high-tech telecommunications infrastructure. Why is this significant? Because Governor Dayton’s budget proposal imposes a new tax on telecom equipment (one of many business-to-business taxes Dayton is seeking).

The proposed tax on telecommunications equipment is expected to generate $32.9 million for FY 2014-15 and $52.4 million in FY 2016-17.

This is not merely a tax on business, but a tax on innovation and technological advancement. And it comes at the worst possible time, as Minnesota works toward ambitious goals for expanding broadband access and adoption.

Studies have shown that exempting (or lowering taxes on) telecom equipment increases high-tech investment, increases GDP, and creates jobs. In fact, when North Dakota eliminated the sales tax on equipment, telecommunications and cable TV investment jumped 207 percent. Governor Dayton is apparently willing to forfeit high-tech investment and economic benefits to more business-friendly states.

Governor Dayton is sending a very clear message to business: Invest and innovate elsewhere. And unfortunately, businesses seem to be getting the message.

Yet just over a year later, Governor Dayton and liberal legislators, working in concert with labor unions, are now pushing legislation that does precisely the opposite. It explicitly allows a state board to arbitrarily and severely restrict the number of insurance plans available on the exchange, even if those providers and plans meet all objective qualifications.

It’s worth noting that even federally-run health insurance exchanges are unlikely to be as restrictive and unaccountable as the "Minnesota model".

So to summarize, the governor and legislature are creating an exchange that violates every one of their ostensible objectives: Their anti-consumer, anti-choice false marketplace stifles competition, interferes with the market, and drives up costs for everyone. 

Welcome to Obamacare.

The Freedom Foundation of Minnesota released a new report Wednesday on how long-overdue lawsuit reform can attract and retain businesses, promote job creation, and improve our state’s economic competitiveness. The report, entitled "The Lawsuit Reform that Minnesota Needs Now", also demonstrates the deleterious effects of Minnesota’s current system of torts, which is outdated, needlessly expensive, and fundamentally imbalanced. Annette Meeks, CEO of the Freedom Foundation of Minnesota, announced the release of the foundation’s report Wednesday morning.

"Unfortunately, the proliferation of lawsuits has shown that America’s tort liability system is excessively costly and inefficient. The latest estimates put annual direct costs at $264.6 billion, or $857 per capita. The data clearly suggest reform is needed to sustain and encourage a healthy economy," said Meeks.

"Minnesota’s system of torts is imbalanced, unfair, inefficient, and needlessly expensive. This outdated system is bad for Minnesota residents and businesses. Our system is currently among the least fair and least efficient in the nation, making Minnesota one of the most attractive states for lawyers and lawsuits," stated Meeks.

"If we are serious about state government creating an environment that encourages job growth and sustains a successful economic recovery, then lawsuit reform needs to be at the top of the list. If Minnesota enacted just a fraction of the reforms outlined in this report, it would encourage employers to create at least 26,000 new jobs in our state," said Meeks.

Class Action Rules – Curb the use of class action suits as a vehicle for lawsuit abuse by making stronger rules for class certification

Attorney’s Fees – Curb attorney fees in contingency cases by requiring they be reasonable

Venue – Prevent or discourage lawyers from shopping for a friendly venue in which to file their suit

Scientific Review – Adopt a stronger standard for admission of evidence

Statute of Limitations – Adopt a four-year instead of six-year limitation for negligence-based claims. Minnesota is one of only three states with this outdated and lengthy statute of limitations

Benefits of Lawsuit Reform

Reduction in Tort System Costs – Enacting tort reform could result in a lowering of insurance losses by 47 percent, which could mean a reduction in annual insurance premiums by 16 percent

Improved Economic Performance – GDP grew 25 percent faster in the states with the ten best tort systems compared to the states with the ten lowest ranked tort systems. Further, states with the worst system of torts have higher out-migration rates than those that do not.

Increased employment – Data and history demonstrate that fair and efficient tort systems help attract and retain businesses while creating jobs

"Efforts to rein in excess costs and reform our tort system would make Minnesota more competitive for business and less expensive for consumers. This is something real and tangible that state government can do right now to help Minnesota’s economy," said Meeks.

Read the full report

# # #

Contact: Jonathan Blake 612-770-2834

Governor Dayton promised tax reform and spending cuts. He promised a simpler tax code, and no more budget gimmicks. He promised to quickly repay the K-12 shift. And he promised that middle class and working class Minnesotans would be held harmless.

On Tuesday, Governor Dayton broke those promises, unveiling a budget chock-full of tax increases (under the guise of "tax reform") to support an unprecedented and unsustainable level of spending. Among the budget "highlights":

• Creates top-tier income tax rate of 9.85%, which is a 25% increase over the previous top marginal rate. And despite all the talk of taxing "millionaires and billionaires", Dayton’s tax would apply to individuals with taxable income over $150,000 and couples over $250,000.
• Raises the cigarette tax by 94 cents, which is a 59% hike, bringing the total tax per pack to $2.52. While running for governor, Mark Dayton said he opposed increasing the cigarette tax because “that’s money out of the pockets of working people and poorer people, and that means kids don’t have as much to eat or don’t have the same quality of food.”
• Imposes a ¼-cent metro-wide sales tax to pay for maintenance and expansion of the transit system.
• Sets the state sales tax rate at 5.5%, but extends it clothing over $100 and countless services, including car repairs, legal services, and more. Extending the sales tax to business services, in particular, is a guaranteed job killer for small businesses in Minnesota. Notably, Dayton would exempt medical and burial services, making the only way to escape Dayton’s taxes are to get sick or die.
• Delays repayment of the "K-12 shift" until 2017. To summarize, Dayton proposed and approved a K-12 shift in the state’s previous budget, then blamed the legislature for the idea. Now, despite promising "no more budgeting gimmicks", Dayton delays repayment of the shift for several years.
• Taxes digital downloads and online purchases

In all, Governor Dayton’s budget would spend more than $38 billion, making it by far the biggest budget in state history, and $1 billion more than the state had even projected. Tellingly, neither Speaker of the House Paul Thissen nor Senate Majority Leader Tom Bakk would commit to supporting any major component of Dayton’s tax-and-spending plan. Unfortunately, that may be the only good news about the governor’s budget. Well, unless you're from the State of Wisconsin.

When the Governor proposed a K-12 funding shift and signed it into law, it was the legislature’s fault. When Dayton signed a deeply flawed stadium bill he apparently never read, it was the Vikings' fault. When electronic pull-tabs fail to meet revenue forecasts, Dayton blames those greedy charities for "shorting the stadium".

And the latest: When streets go unplowed and road conditions are hazardous, it’s… Tim Pawlenty’s fault!?

That’s right. As complaints from around the metro poured in, Dayton defended MnDOT’s seemingly slow response to the recent snowstorm, claiming that Pawlenty budget cuts were to blame. "You cut back on the budget for highway clearing and repairs, then there’s going to be consequences. My understanding is the personnel side of it has been reduced over the last decade."

The only problem? Dayton’s blame game was immediately contradicted by none other than his own Department of Transportation. According to Fox 9, MnDOT said "money was not the issue with this snowfall … the problem arose with how the snow fell and how it froze."

If the governor stays true to form, he’ll find someone to blame for weather patterns too.

Michigan embraces worker freedom
Michigan became the 24th right-to-work state earlier this week, and the second state this year (following Indiana) to embrace workplace freedom. The victory is stunning for its symbolism, taking place as it did in the long-time capital of compulsory unionism. It also comes just one month after Michigan voters overwhelmingly rejected (58 percent to 42 percent) a heavy-handed union-funded ballot initiative that would have enshrined union power in the state constitution.

Unions blamed "corporate special interests" for the landslide defeat of Proposal 2, and they will do the same in the wake of right-to-work. In reality, Michigan residents support efforts to create jobs and make the state competitive once again. That support comes from across the political spectrum. Post-election polling shows remarkably strong public support for right-to-work in Michigan, with 51 percent support overall, including 39 percent of Democrats and 40 percent of voters in union households.

Short takes
Tax calculator: Thanks to a great online tool from the Tax Foundation, you can now estimate your federal tax burden under a variety of fiscal cliff scenarios. Warning: you may regret doing so when you see the results.

Pension trouble: Minnesota’s police and fire pensions are facing a projected shortfall of $68 million next year. And every year, in fact, until 2038.‪ According to the Public Employee Retirement Association (PERA), "the funding level of PERA’s Police and Fire Plan has dropped from 83 to 78 percent over the last year. It is a trend that is expected to continue". Yet pension reform remains curiously absent from Governor Dayton’s legislative agenda.

Broadband report: The Governor’s Task Force on Broadband just released their 2012 annual report, which includes legislative policy recommendations for the upcoming 2013 session.  Soon after the new year, the Freedom Foundation of Minnesota will release our forthcoming report on municipal broadband in Minnesota. It’s a must-read for every elected official in the state.

Euphemism of the Day: The estate tax is better known by its popular moniker: "death tax". But as the Cato Institute recently noted, the liberal Washington Post editorial board prefers a different label: "posthumous federal levy on accumulated wealth".

Schools and shylocks: NPR looks at debt-ridden California school districts’ use of capital appreciation bonds (CAB), which the state’s treasurer describes as the school district equivalent of a payday loan: "Perhaps the best example of the CAB issue is suburban San Diego's Poway Unified School District, which borrowed a little more than $100 million. But debt service will be almost $1 billion."

Summer opportunities for students at AEI: The American Enterprise Institute (AEI) is accepting applications for their 2013 Summer Institute. The program runs from June 16 to July 13 and is fully-funded for current undergraduates and recent college graduates, featuring courses in public policy and lectures from notable policymakers, journalists, and others in Washington. Applications and nominations are both accepted; click here to learn more about the program. AEI is also accepting applications for their 2013 summer internship program.

Well, according to a new report filed with the Department of Labor, exorbitant pay is the rule, not the exception at Education Minnesota. In fact, the union’s “six-figure club” is growing, with at least 59 staffers and three officers collecting pay of $100,000+ in fiscal year 2012.

And for an organization fixated on raising taxes, they sure don’t pay as much as one might expect. Despite reporting almost $47 million in cash receipts, Education Minnesota paid just $716,000 in direct taxes as an organization.

The latest figures are included in the union’s Labor Organization Annual Report (“Form LM-2”), a legally required filing for any union with more than $250,000 in annual receipts.

Among those collecting $100,000+ in FY 2012 are lobbyists, public affairs and communications personnel, and scores of field staff. At the top of the pay scale is Education Minnesota president Tom Dooher, collecting a salary of $177,259 (his total pay, including other disbursements, is $192,632).

The union’s continuing good fortunes might be cause for celebration if it weren’t for the fact that their salaries are paid for with compulsory union dues from the state’s 50,000+ teachers, all of whom are forced to pay union dues even if they are not members. Given this dynamic, it’s not surprising that union leaders are increasingly coming under fire for using union dues to pay for their own exorbitant compensation packages.

Despite a memo from the city’s bond counsel warning of “substantial risks”, the Gaylord City Council has voted to guarantee to pay up to 16.5 percent of the debt service on $77 million of revenue bonds should the proposed RS Fiber telecom network fail to pay for itself.

The bond risk analysis prepared for the city at a cost of $1,500 to taxpayers was initially withheld from the public under a presumption of attorney-client privilege. Upon a request from the Freedom Foundation of Minnesota, the Gaylord City Council voted to waive legal claims and release the memo to the public.

The recent suspension of bond payments by officials in Monticello, Minnesota on their FiberNet telecom network has increased scrutiny of similar taxpayer-backed projects. Proponents of RS Fiber expect the network to start paying for itself after three or four years. To guard against default, however, the eleven cities and two counties participating in RS Fiber will contribute on a proportionate basis to a $4.5 million Debt Service Reserve Fund.

The two-page document highlights the potential downside of participating in an enterprise that will compete directly with several private providers already in the marketplace. The memo produced by bond expert Stephen Rosholt at the city council’s request warns the agreement “nearly doubles the City’s outstanding debt commitments”.

The blunt memo raises fundamental questions about the deal and its potential impact on the city’s financial stability. The memo strongly suggested Gaylord officials consider these key details:
¨ A commitment to paying as much as 16.5 percent of the total debt service on up to $77 million in bonds, more than any other city in the consortium.
¨ The city’s “fiscal capacity” to make large debt payments given its “relatively large amount of outstanding debt”.
¨ The potential impact on Gaylord’s bond rating or access to financial markets should the city fail to appropriate the revenue to make debt payments. “It may also be the case that the fact of entering into the sort of commitment reflected by the Shortfall Agreement would have a negative impact.”
¨ The possibility of additional legal exposure “in connection with litigation that could arise out of the offering of the bonds by the Joint Powers Board”.

The bond counsel’s analysis raises another problematic point—the issue of whether the city has a legal obligation to hold a referendum in order for citizens to authorize participation in RS Fiber. The Rosholt memo notes that state law “requires passage of a referendum in order for a municipality to construct a new telephone exchange” as planned by RS Fiber proponents. State law requires a 65 percent supermajority in order for a telecom referendum to pass. None of the participating cities or counties in RS Fiber has held a referendum.

“We understand the Joint Powers Board believes that the statute does not apply where the (telephone) switching is handled elsewhere. We do not agree with that conclusion,” the analysis pointedly states. “The City should consider requesting that a legal opinion be directed to it addressing that issue.”

The most recent estimates indicate the cost for RS Fiber bonds may be $77 million, a ten percent increase from previous estimates. Groundbreaking was scheduled to occur in August, 2012 but has been postponed until at least next spring.

RS_Fiber_Bonding_Analysis_9-12.pdf

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Metro Transit figures obtained by the Freedom Foundation of Minnesota (FFM) for the first month of the experimental fares indicate that monthly Northstar ridership plunged by more than eight percent , some 12,300 passengers.  Northstar train ridership in August 2012 totaled 66,543 passengers compared to 78,898 passengers in August 2011.  In both 2010 and 2011, ridership on the commuter line increased from month to month July to August.  The August 2012 decline was registered across the board at all Northstar stations with the greatest falloff at the station at the end of the 40 mile line, Big Lake.

Following lackluster results in the first two years of service for the heavily subsidized commuter rail, lower fares were instituted by the Metropolitan Council on August 1st  for the purpose of jump-starting ridership.  While taxpayers already cover more than 80 percent of the cost of each Northstar rider, transit officials under pressure to produce better results cut fares by $1 per ticket at all stations except Fridley, where the price cut was $.50.  The move follows a 2010 decision not to increase temporary introductory Northstar fares as originally planned, again due to disappointing ridership numbers.

Nevertheless, transit officials blamed the ridership deficit on ticket costs and recommended slashing prices further. “Current surveys of non-Northstar Commuter Rail riders living within the Northstar Corridor shows that a prime factor in the decision to not ride the train is the current fare structure and fare set. The recommended temporary fare change reflects current travel market conditions for commuter’s value of long distance service while balancing impacts on fare revenue,” according to Metro Transit.

The nine month fare reduction could result in a maximum estimated revenue loss from ticket sales of $323,000 by the time the temporary prices expire at the end of April, 2013.  It would take an increase in ridership of nearly 20 percent to offset the loss in revenue, according to Metro Transit.  The majority of any loss in revenue will be repaid by savings in professional and technical services, although further losses will be deducted from the rail line’s reserves.

The once ballyhooed Northstar line debuted with 183,000 fewer passengers than projected in 2010, followed by a 2.5 percent falloff in ridership in 2011.  Meanwhile, reliance on public transit in the Twin Cities overall continues to grow, largely on the strength of additional bus ridership.

                                         Tips or comments? Contact Tom Steward at 612-354-2165.

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An analysis of the potential liability in the event RS Fiber fails to attract enough customers was requested by the Gaylord City Council on September 5th.  City Administrator Kevin McCann noted in a memo that Stephen Rosholt, a Minneapolis bond expert, would review the bonding and debt service shortfall funding documents. The analysis cost local taxpayers about $1,500.

“His (Rosholt’s) initial thoughts are that it is a huge risk for the city since he is familiar with Monticello and other cases where the city got into a new venture that ended up costing cities a lot of money in the long run,” McCann stated in the memo.

It’s becoming clear the recent decision by Monticello, Minnesota to suspend bond payments for its FiberNet telecom system has clouded the municipal bond market for local government-owned telecom networks.  To guard against that possibility, cities and counties participating in RS Fiber are planning to contribute on a proportionate basis to a $4.5 million Debt Service Reserve Fund to make bond payments if necessary.

Rosholt deferred comment on his findings, referring FFM to Gaylord officials.  The report was sent to each member of the Gaylord City Council, but staff was instructed not to release the document. “We did consult again with the city attorney to see if we could send you a copy of the letter and his reply was the document is an attorney/client privileged document,” city staff said in an email.

Don Lannoye, attorney for the City of Gaylord, confirmed that the city is withholding the document on the basis of attorney-client privilege.  Lannoye cited a League of Minnesota Cities analysis of the Minnesota Data Practices Act that states “some communications between an attorney and client are subject to attorney-client privilege”. The document also states “it is not always readily apparent what communication qualifies and what does not…The attorney-client privilege must be balanced against the public’s right to access government data.”

“The Gaylord City counsel may choose to make the document public at some point by formally waiving the privilege or choosing to discuss the opinion in depth at a public meeting.  However, that is a choice for the counsel to make,” Lannoye said in an email to FFM.

Lannoye is an attorney with Schauer Law Office, which is operated by the part-time Sibley County Attorney, David Schauer.  In his capacity with Schauer Law Office, Lannoye serves as City Attorney for three cities participating in RS Fiber (Winthrop, Gaylord and Layfayette).  He’s also an Assistant County Attorney for Sibley County, another key participant in RS Fiber.

“This office has reviewed the documents that are being suggested by the joint powers entity and has issued an opinion to the County Board and the three City Councils that address the concerns that we as a law office have in regards to how the proposed documents could negatively effect (sic) all the municipal entities we represent.  Additionally, each individual municipality has hired independent bond council (sic) to also give a second opinion as to the merits of signing the documents provided,” Lannoye said in his email.

“The fact that this office has issued a blanket opinion on the documents and each municipality has retained independent bond council (sic), any potential conflict of interest should be negated.  There is no conflict in advising the City to, for the moment, deny your request to review the bond counsel's opinion as that is an issue specific to the City of Gaylord.”

While RS Fiber participants have the option of not paying into a debt service replenishment fund, there would be sharp consequences.  The penalties could include higher customer fees, service cuts to city hall and a reduced credit rating for the city, according to city council minutes from September 5th. The Rosholt report is expected to come up in discussion at the Gaylord City Council meeting on Wednesday, September 19th.  It’s not clear, however, whether the Gaylord taxpayers that paid for the report will be allowed to see it.                                                                 ###

       Tips or comments? Contact Tom Steward at 612-354-2165.

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--The Environmental Protection Agency’s (EPA) proposed new regulations on six state taconite facilities have not only provoked concern among northern Minnesotans who depend on the mining industry for their jobs and way of life. The controversy has also brought home to Iron Range residents the real life consequences of federal government regulations in the form of a 36 page proposed rule buried deep in the Federal Register (Vol. 77, No. 158, pages 49,308-343).

Technically, it’s just another FIP (Federal Implementation Plan), little more than a footnote in thousands of pages of Washington rule-making, but it’s struck a nerve among some of the rank-and-file in this long-time mining region that continues to suffer during this prolonged economic recession.  The proposed new regulations would potentially affect the Minnesota taconite industry that employs nearly 4,000 workers and thousands more in mining-related jobs.

In the last decade, the Office of Management and Budget (OMB) reports that federal agencies added more than 38,000 new federal rules to the government’s books. Since 2001, the number of pages of regulations published in the Federal Register has increased 20 percent from 141,000 to 169,000 pages. The estimated cost of compliance is a controversial political issue, ranging from $53 billion for the most costly new rules (OMB) to more than $1 trillion overall (U.S. Chamber of Commerce).

By requiring stricter emissions controls, the proposed haze rule seeks to further reduce regional haze on the horizon in Voyageur National Park, the Boundary Waters Canoe Area and Isle Royale.

Whatever the pros and cons of the federal action, the Clean Air Act rule published on August 15, 2012 provides a classic example of the tangled maze of bureaucratic rules, record-keeping requirements and reviews routinely imposed on business and industry, largely out of sight and mind of most taxpayers.

The Regional Haze Federal Implementation Plan consists of more than 30,800 words and three dozen pages in the Federal Register.  Congress has passed laws designed to reign in regulatory overreach which must be taken into consideration as part of the rule-making process.  In drafting the haze regulations, EPA officials evaluated several such laws intended to streamline the process for industry and soften the impact on the local economy.

Case in point? The Paperwork Reduction Act, which as EPA states in the rule aims to minimize the “total time, effort or financial resources expended by persons to generate, maintain, retain or disclose or provide information to or for a federal agency.”  This includes time required to “review instructions, develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information” among other requirements on a much longer list.   There’s just one problem.  The anti-paperwork prohibition only applies to federal regulations that affect ten or more persons or facilities.  Since the haze rule would affect “just” six facilities in Minnesota (plus one in Michigan), they’re out of luck.

It was the same outcome for a “Regulatory Planning and Review” analysis mandated by a 1993 executive order. The proposed FIP does not meet the federal standard for relief from a “significant regulatory action”, again because the regulation applies to seven sources.

Then there’s the Regulatory Flexibility Act (RFA), a tool to cushion small businesses and other small organizations  from adverse consequences resulting from regulation. Déjà vu, all over again.

“After considering the economic impacts of this proposed action on small entities, I certify that this proposed action will not have a significant economic impact on a substantial number of small entities,” wrote Susan Hedman, EPA Regional Administrator in signing the order.  “The net result of the FIP action is that EPA is proposing emission controls on the indurating furnaces at seven taconite facilities and none of these sources are owned by small entities, and therefore are not small entities.”

The State of Minnesota fared no better when it came to the EPA’s application of a 1999 executive order to prioritize federalism in regulatory matters with states.  After rejecting and replacing a Minnesota Pollution Control Agency (MPCA) state haze control plan, the EPA concluded the federalism question was moot.

“This rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government…because it merely addresses the State not fully meeting its obligation to prohibit emissions from interfering with other states measures to protect visibility established in the CAA (Clean Air Act),” according to the EPA filing.

The public comment period for the proposed EPA rule ends on September 28, 2012. But that may be just the beginning for one of the taconite facilities facing the haze regulations.  Mesabi Nugget recently informed local media that the company received a Section 114 ultimatum from the EPA for information on more than two dozen issues related to the Clean Air Act.

“It’s terribly time consuming and we don’t even know the purpose,” Jeff Hansen, the plant’s general manager told the Mesabi Daily News.  “The federal and state government agencies are too big and too powerful.”

                                                   ###

                 Tips or comments? Contact Tom Steward at 612-354-2165.

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In fact, 30 of those staff members (and all three officers) have higher salaries than the state Education Commissioner. The compensation details were included in the union’s Labor Organization Annual Report (“Form LM-2”), a legally required filing for any union with more than $250,000 in annual receipts.

Among those collecting $100,000+ are the union's chief lobbyist, public affairs and communications personnel, and more than 20 field staff. At the top of the pay scale is Education Minnesota president Tom Dooher, collecting a salary of $168,530 (his total pay, including other disbursements, is $190,942).

Large pay differentials between union officials and those they represent are nothing new.The national teachers’ unions have come under fire recently for using compulsory union dues to give union leaders extravagant compensation packages.

Meanwhile, few if any of the union’s rank-and-file members will ever see comparable pay. According to the National Education Association, of which Education Minnesota is an affiliate, Minnesota’s public school teachers are paid an average salary of $53,680. And of course, a chunk of each teacher’s salary goes straight to Education Minnesota, which helps the union pay for… well, we already covered that.

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Take, for example, the current Minneapolis district’s teacher contract. The district was under a great deal of scrutiny as parents, taxpayers, and even liberal education reform advocates urged the district to follow through on their commitment to accountability, particularly in regards to teachers’ performance. During negotiations, the superintendent assured the public that MPS was working "alongside our teachers’ union on many substantial reforms that will convert MPS into a model urban school district". Then, after seemingly endless, secret negotiations between the district and the Minneapolis Federation of Teachers (MFT), the long-anticipated contract was approved in mid-April.

So what’s in the contract?

Well, more than four months after it was ratified, no one can say for sure. No one, that is, except the teachers' union and school district.

Earlier this summer, the Freedom Foundation of Minnesota submitted a Data Practices Act request to the district to obtain a copy of the complete teachers' contract. The district responded by claiming the contract, which was approved four and a half months ago, was still being finalized. Perhaps most disturbingly, the district says, "the Minneapolis Federation of Teachers takes the lead in developing the strikethrough and final contract".

FFM requested the contract from the Minneapolis Federation of Teachers, but was told, "the finalized document takes a very long time to publish" and is not available. The union instead referred FFM to an executive summary and to a previous teachers' contract, which they said “really do give the entire thing while you wait”. The union's website also says the "2011-13 Complete Collective Bargaining Agreement is still being finalized" and advises people to "please direct any contract questions to MFT59 directly".

So not only is the public in the dark about the full contents of a contract they’re already paying for, but the contract is in the hands of a government union that is not accountable to voters or taxpayers. Labor relations experts told FFM that the contract delay and the union’s role in finalizing the contract are highly unusual.

According to media reports earlier this year, the school board has also repeatedly refused to turn over recordings of the labor negotiations that yielded the current contract.

Secret labor negotiations and secret labor contracts. Apparently this is what passes for transparency and accountability in Minneapolis.

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  Ethan Dean never gave up hope during five tours of duty as a US advisor in Iraq and Afghanistan. He kept making his mortgage payments while living halfway around the world, partly due to rent checks from a tenant staying in his house in Winona, Minnesota. Even with his mortgage under water, he continued to hold out hope—until he got back home.

Soon after Dean’s return to the states this spring, however, the rent checks stopped coming in. Not because his tenant moved out or couldn’t pay, but because Winona authorities said it’s against the law for him to have renters in his three bedroom house nearWinona State University. The city refused to renew a temporary rental license that gave Dean an exemption to Winona’s controversial ordinance that capped at 30 percent the number of home rentals per block.

“I’ve lost the house. I’m not in the same state, I can’t live in it and I can’t rent it,” Dean said from his new job in Kansas City. “I’ve tried everything humanly possible to keep that house but the city council is obviously not too concerned about their citizens.”

While Dean may be losing the battle to retain ownership of his house, he’s more determined than ever to continue the legal campaign he’s waging against the southeastern Minnesota city’s so-called “30 percent rule”. The Institute for Justice, a national civil liberties group, has sued in state court to strike down the ordinance preventing Dean and the owners of two other houses from renting their property. The crux of the case:  Renting one’s home to someone else is a fundamental property right.

“The city is playing musical chairs with property rights. Some homeowners can get rental licenses and not even use them, and others cannot get them even when they desperately need them,” said Anthony Sanders, an attorney leading the legal challenge.“The city arbitrarily picks winners and losers. It’s got to stop.”

For Ethan Dean, the rental prohibition has not only prevented him from critical cash to help make his house payments but also serves as a barrier to selling it.

“There is no doubt if I could rent the house, I could have sold It years ago. People have wanted to buy it so they could rent it out,” Dean told FFM. “Half a dozen people have expressed interest with my realtor but they can’t rent it.”

In the process of investigating the case for trial, attorneys have also uncovered evidence of incompetence in administering the rental restriction. Attorneys discovered that city authorities had lost track of an expired rental license that should have been assigned three years earlier to Holly Richard, another plaintiff. While Richard now possesses the newly minted city permit, the costly mistake made her all the more resolved to see the case through.

“I’m still part of the lawsuit because I don’t agree with the city regulations on this,” Richard said. “They can’t keep track of the permits, so I can’t see who it benefits. It doesn’t benefit the average renter or homeowner.”

A city official acknowledged the error but said no changes have been implemented to current procedures. “After we checked all the properties on the block, we found that another property did not renew their rental license in 2008 and the property wasn’t taken off the map,” said Carlos Espinoza, assistant city planner. “We just issued her a rental license as soon as we discovered that. The block in now saturated according to the 30 percent rule.”

The other plaintiffs in the case, Ted and Lauren Dzierzbicki, have been forced to let their house stand empty since their daughter graduated from Winona State University. Despite investing thousands of dollars in maintenance and improvements, they have also been unable to find a buyer without a rental license in hand.

The lack of a permit, however, hasn’t stopped Ethan Dean from tweaking city authorities one more time. The same single mother with two kids who was renting his house while he was serving abroad is living there to this day—rent free.

“She’s been staying there for free for several months only because I want someone in the house. I didn’t want to kick her out,” Dean said. “The city can’t say nobody can stay for free. They can say people can’t rent it. She’s a single mom with 2 kids, what am I going to do?”

The case will go to trial in Minnesota District Court in Winona in January, 2013.

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        Tips or comments? Contact Tom Steward at 612-354-2192.

In short, Twin Cities transit officials appear to be getting out ahead of themselves and taxpayers, planning to build more rail lines than can likely be sustained with the amount of tax revenue generated from existing transit sales and motor vehicle excise taxes.

It all comes down to a little known transit agency formed under a 2008 agreement between Anoka, Dakota, Hennepin, Ramsey and Washington counties for the purpose of funding major transit improvements such as passenger and light rail lines and rapid bus transitways. Known as the County Transit Improvement Board (CTIB), the agency receives about $97 million yearly from a quarter-cent sales tax and $20 motor vehicle excise tax imposed on residents and consumers in the five metro counties.

Some board officials, however, reportedly believe the Twin Cities transit sales tax should be more in line with other metropolitan areas with higher rates. So CTIB has begun quietly laying the groundwork for a sales tax hike, starting with the group’s 2012 financial annual review.

“Within the decade, and if projects develop as indicated, the Board’s Sales Tax will largely be consumed by debt service and its 50% share of net operating subsidy...each year that passes bring (sic) the Board closer to having to seek to increase its revenue base or choose which projects to fund in the future,” according to the Annual Financial Review and Capacity Estimate report from June 2012.

Talk of a tax increase caught some officials off guard at a June 20 CTIB workshop, during which Anoka County Commissioner Matt Look posted a comment on his Facebook page, referencing talk of jacking up the current one-quarter cent transit sales tax to a full cent.

“There are those that are advocating for a 1 cent sales tax (currently .25 cent sales),” Look wrote. “Someone help me.... Is that a 300 or 400% increase?”

The minutes of an official CTIB meeting several days later, at which the annual financial review was unanimously approved, include no mention of a tax hike or increasing revenues. No audio or video recordings are made of CTIB meetings, according to staff.

The transit board is already on the hook to fund 50 percent of the annual operating subsidies for five transitways: Hiawatha Light Rail, Northstar Commuter Rail, Cedar Avenue Bus Rapid Transit, I-35W South Bus Rapid Transit and Central Corridor Light Rail. Currently CTIB spends about $22.6 million on operating costs. By 2021, however, that figure is expected to quadruple to $89 million, depleting nearly all of the board’s sales tax revenues when combined with debt service payments.

CTIB and the Metropolitan Council have commissioned a study that will describe “the funding constraints of the Board and its funding partners and options available to address them.” The first phase of this study is expected to be completed later this summer.

The bottom line: While the Dayton administration and rail advocates plan a huge expansion of our rail system, it’s increasingly clear that massive tax hikes will be part and parcel of their plan.

                                                                              ###

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Article by: ERIC ROPER , Star Tribune Updated: July 30, 2012 

With fewer inquiries and rising labor rates, the expense climbs for Minneapolis' nonemergency line

MINNEAPOLIS, MN--Each report of potholes, overgrown lawns, busted stoplights and other issues to Minneapolis 311 cost city taxpayers $9.15 last year, a per-contact expense that surpasses most cities across the country.

When it launched 311 six years ago, the city joined a national trend of creating nonemergency avenues for citizens to interact with City Hall. The popular service handled 335,427 calls and e-mails in 2011, but fewer inquiries and high labor rates have driven up the cost to handle each contact.

That cost per contact -- a key measure of the service's efficiency -- has risen by $3.67 since 2007. It grew $1.28 between 2010 and 2011 alone because 65,000 fewer calls and e-mails poured in and the costs of running the center remained constant.

Read entire story at the Star Tribune website.

MINNEAPOLIS, MN--It's going to be cheaper for you to ride the Northstar Rail Line during the week.

Metro Transit is hoping discounting fares will get more people to ride.

Most fares will drop one dollar, the fare from downtown Minneapolis to Big Lake that costs seven dollars now, will cost six dollars beginning Wednesday.

Since last year ridership is down four percent. The cheaper fares will last until April of next year.

See video of story including interview with Tom Steward at KSTP-TV.

The proposed municipal fiber-optic network is the centerpiece of an economic development initiative focused on converting the southwest suburb into a technology village with a data center and incubator to draw entrepreneurs and high-tech companies.

As the latest proposed government-owned network to surface in Minnesota, the Prior Lake proposal puts a new focus on the role of government in competing with companies it also regulates. The document states:
      o “It is unlikely that reliance on any of these providers will improve or enhance economic development. If you were a business looking to come or to build here, would you be attracted by them?”
     o “We discuss why business is not, cannot, be attracted to networks that are largely copper-based or that separate our lives into office capabilities and home capabilities.”
     o “We explain why the existing service providers are not motivated to build the network we envision or need if we are to attract high technology companies.”

Under the model recommended in the 93-page feasibility study, the city would market traditional triple play phone, video and high-speed internet services, as well as other digital services. The city system would in many respects duplicate telecom products already available to residents, going head-to-head with private carriers Integra, CenturyLink and Mediacom that currently offer speeds of 20 to 30 megabits per second.

“The scale of it is bigger than anything I’m aware of that Prior Lake has jumped into as a municipal project,” said Dan Rogness, Community and Economic Development Director. “It is a big step and I think that’s why there will be some time taken to vet this out before a decision is made.”

The report also criticizes a state law that gives local voters final say by requiring cities to hold a referendum before moving forward with a local telephone exchange as part of a municipal network. The city study characterizes the law as a “burdensome” and “outdated” statute used by telecom companies “to deny legitimate outcomes.” Especially noteworthy to residents and taxpayers is the city's troubling contention that “alternatives seem to exist” that would allow Prior Lake to circumvent a vote.

The risks to local taxpayers of government-owned networks have been underscored by serious financial troubles at FiberNet Monticello. A city-operated telecom network once hailed as a national model, FiberNet Monticello has lost millions of dollars and faces potential default—a case study that’s close to home in Prior Lake.

“Monticello has come up in some meetings. There’s the realization of course they paid for something with a revenue bond and now are defaulting on that,” Rogness said. “I think it has cast a shadow on the thinking of some cities about moving forward.”

Lookout Point Communications, a St. Paul consultant, drafted the study. Lookout Point Communications also served as a consultant to the nearby TonkaConnect proposed fiber network, leaving the project before the Lake Minnetonka Communications Commission rejected the estimated $80 million system in 2011.

The Prior Lake city broadband fiber network subcommittee involved in overseeing the report includes a nationally known activist for taxpayer-funded telecom, Chris Mitchell of the Institute for Local Self Reliance. Mitchell is an enthusiastic booster of TonkaConnect and FiberNet Monticello, among other government-backed networks.

“They (cities) all recognize that big companies have little incentive to improve a system. Full fiber networks are expensive to build, and the return on investment takes years,” Mitchell wrote in a 2010 opinion piece.

No telecom representative participated on the fiber subcommittee in the Prior Lake study. “This has come up in discussions that one of the next steps in the process to try and evaluate the recommendations is to have this reviewed and discussed with the providers,” Rogness said.

CenturyLink, one of the three private providers in Prior Lake, told FFM the internet speeds the carrier offers in the community are not reflected in the feasibility study. Lookout Point Communications did not respond to an FFM inquiry at the time of this posting.

Following two recent meetings of the Prior Lake Economic Development Authority to discuss the fiber network, the proposal will move on to a city council workshop scheduled for September 9th. City officials hope for a decision one way or another this fall.

                                     Comments or suggestions?  Contact Tom Steward at 612-354-2165.

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In 2009,North Saint Paulcity administrator Wally Wysopal was the loudest cheerleader for a proposed $18.5 million taxpayer-backed telecom network dubbed PolarNet.

“It provides economic development opportunities like we don’t have today and that’s what we want to do is distinguish North Saint Paul from any other community in the metro area,” Wysopal said at the time.

Even after North Saint Paul voters overwhelmingly rejected the controversial fiber-optic network, Wysopal thought it might be viable with some fine tuning. "We need to find out what went wrong and what's salvageable," Wysopal told the Ramsey County-Maplewood Review.

Three years later, Wysopal remains a vocal advocate—not for PolarNet, but for the private telecom providers who opposed the city’s proposal. Since the defeat of the referendum, private cable providers have made major investments into upgrading their existingfiber opticinfrastructure and services in the Twin Cities suburb.

“I don’t know if we dodged a bullet, but I think we’re in a more stable position because we’re not trying to provide a service that the private marketplace has responded to and provided at higher speeds and lower prices,” Wysopal recently told FFM.

Wysopal still contends the city of 12,000 had a sound business plan to operate PolarNet. He also wonders whether the option of PolarNet coming on line might have been a factor in motivating private providers already operating in North Saint Paul to upgrade their systems. Regardless, city hall’s top official has been pleasantly surprised by the increase in speeds and improved coverage following his pet project’s lopsided loss in the February, 2009 special election.

“If it was related or not, it so happens after that project Qwest was in here installing fiber to the node and Comcast came in with a lot more products and offerings and some businesses picked up other service,” Wysopal said. “I think the whole community has benefited with more services and lower costs.”

Although private providers generally do not disclose the cost or technical specifications of their investments for competitive reasons, Wysopal has closely tracked their efforts. It’s given him a newfound appreciation of the enormous expense of competing in a high tech enterprise and the commensurate risk to taxpayers when government gets involved.

“The competition that’s out there and how much effort the private sector has to make in capital and technical upgrades all the time, I look at that and I’m very impressed with their work,” he said. “It’s impressive that kind of investment in infrastructure goes on.”

At the same time, the North Saint Paul official has taken note of mounting problems at municipal networks like FiberNet Monticello, a system that has suffered heavy financial losses and suspended bond payments this summer. Yet he wonders if other local governments are paying close attention. “It’s a little curious to me that some places haven’t learned,” he said.

Wysopal also has questions about the proposed taxpayer-backed fiber network under consideration in Ramsey County. The Ramsey County Institutional Fiber Network CIP Project appears to call for one part of the fiber network to be run by and for Ramsey County and the city of St. Paul. A second part of the county’s fiber network would be available for lease “to any private company and/or not-for-profit”, according to the project description. While Wysopal is waiting to see more details, he has raised concerns with Ramsey County officials about their model, based on his experience in North Saint Paul.

“I don’t’ know a lot about the details of the plan other than it’s a public and private fiber optic conduit and they try and sell that off and use the revenue to pay for the construction of the two,” Wysopal said. “I question that approach because the incumbents, the private providers, don’t want to ride on someone else’s fiber.”

Ironically, Wysopal relies more on his 4G phone for connectivity rather than the internet service in his own Fridley neighborhood.In fact, he cites the explosive growth of cellular internet service as one more factor that few outside the industry saw coming.It’s another reason why “losing” the referendum on PolarNet might well be considered a victory in hindsight, even by one of its most ardent supporters.

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                                        Tips or comments? ContactTom Stewardat 612-354-2192.

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