FFM Bulletin 7/8/08


This is the inaugural edition of the Freedom Foundation of Minnesota's Weekly Bulletin. The Freedom Foundation of Minnesota is an independent, non-profit think tank that actively advocates the principles of individual freedom, personal responsibility, economic freedom, and limited government. Each week, this newsletter will provide research and analysis of local and state government activities, shining a spotlight on government waste and inefficiency, excessive taxation, and anti-free market policies. Questions, suggestions, comments, concerns, and critiques can be sent to Freedom Foundation of Minnesota Vice President Jonathan Blake.

City Spotlight: Duluth's financial woes

Faced with a projected $4.4 million operating budget deficit in 2008, the City of Duluth is scrambling to find money any way it can. Not surprisingly, one of the city's biggest financial liabilities is its generous benefits package for retired city workers. For many years, Duluth city employees retired with full health care coverage for life for themselves and their dependents, a long-term liability estimated at $280 million in 2005. According to Mayor Don Ness, health care costs for retired city workers are increasing by one million dollars a year. Mayor Ness has proposed 120 strategies to generate revenue (read: "increase fees") and cut "non-essential spending" to address the budget deficit. Among the money saving measures the City of Duluth is considering:

  • Closing the ironically titled Office of Sustainability (which, as it turns out, was unsustainable).
  • Selling the Fun Wagon, a city-owned party trailer "preloaded with games, cookout supplies and even two Parks and Recreation staffers." The Fun Wagon was offered for "free" to Duluth residents that needed help throwing a party.
  • Reducing subsidies for Duluth's dog sled marathon.
  • Reducing subsidies for the financially disastrous Great Lakes Aquarium from $300,000 to $200,000.
  • Discontinuing the city-sponsored adult softball program.

Well, they clearly weren't kidding when they called it non-essential spending. Dog sledding and softball may be great recreational activities, but it's tough to argue that they're essential, or even proper, roles of municipal government. And between the feel-good environmental programs, unsustainable retirement benefits, and city-owned party mobiles, it's not hard to see how Duluth ended up in such a dire financial situation. In fact, Duluth's budget mess illustrates just how destructive the big government philosophy can be, even in its softest form.

But while Duluth's city leaders are in budget cutting mode, perhaps they should consider some other courses... namely, golf courses. The City of Duluth owns and operates two golf courses, Enger Park and Lester Park, which have combined for more than $300,000 in losses over the past five years. In other words, Duluth taxpayers have been subsidizing their fellow citizens' golf outings, which is awfully generous of them but not exactly a critical civic duty. Perhaps that money would have been better spent maintaining roadways instead of fairways. Incidentally, the city describes the municipal golf courses as "one of Minnesota's best kept secrets," a claim which is borne out by their respective financial statements.

Of course, it's going to take a lot more than modest reductions in dog sled and aquarium subsidies to get Duluth out of the financial hole, so the mayor and city council are also considering a number of revenue raisers including:

  • Issuing "administrative citations enforcing city code."
  • Increasing parking meter fees by 50%.
  • Selling municipal parking ramps or contracting out ramp management services.

These moneymaking measures are merely short-term fixes that obscure the central point. Duluth does not have a revenue problem. In fact, the city raised its property tax levy 10.9% between 2007 and 2008. (Incidentally, nearly one-quarter of the tax hike was dedicated to help fund the city's out-of-control retirement benefits.) And the city's 2008 budget increased 3.1 percent over 2007 levels. All this despite the fact that Duluth's population has steadily declined for the last several years. The problem is years and years of reckless spending and exorbitant benefits for city employees.

Mayor Ness has acknowledged that Duluth is in such terrible financial shape that, after taking all of the corrective measures, the city would still be nearly a million dollars in the red. And 2009 is expected to be even worse, with a projected operating budget deficit of approximately $5 million. How will they cover that deficit? The mayor says taxpayers should expect "modest revenue increase proposals." Even Minnesota Public Radio recognized the mayor's remark for what it was: "political talk for higher taxes."

Duluth taxpayers should look on the bright side. At least the tax hikes should help keep those golf greens looking immaculate.

Metro Transit fare hike

It turns out that public transit is susceptible to rising fuel costs just like the rest of us. The Metropolitan Council is considering raising Metro Transit bus and rail fares by 25 cents this Fall. An additional 50-cent increase could follow in early 2009. The fare hike is intended to address Metro Transit's $15 million operating budget shortfall for fiscal year 2008 as well as future anticipated funding shortages. Metro Transit's budget shortfall comes despite a recent spike in ridership and massive subsidies for bus and rail operations.

The Metropolitan Council is holding a series of public hearings and meetings to listen to public concerns regarding the rate hike. For a full listing of public hearing dates and times, click here.

Star Tribune gets one right

From the Broken Clock/Blind Squirrel Department, the Star Tribune editorial board says it might be a good idea to at least consider expanding domestic oil production and offshore drilling in order to reduce our dependence on foreign oil and lower energy costs. Apparently the Star Tribune editorialists have been studying up on a little known economic principle called "supply and demand."

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