From: Small Business
To: City Hall
Re: Stop Pooping in our Lunch Pails

Small businesses, those who employ five or less, feel pinched by ever increasing costs and intense competition. One small business owner recently pointed out that non-business owners cannot begin to understand the effects recent rate hikes have on small business owners throughout our community. According to this particular business owner, utilities have torridly increased, liability insurance is out of control, and health insurance for employees has nearly pushed small business over the edge. And the situation facing business owners is only exacerbated by the city, which passed along the cost of mandated fire inspections to business owners. Simply: this is unacceptable.

Local politicians are adamant about their support of local small businesses. Yet, precious few seemingly care if those same small businesses continue to be hammered by costs that cut into profits – which translates into lesser abilities to pay higher wages, lesser abilities to provide health insurance benefits, lesser abilities to purchase other goods and services, and the list goes on. Would the average Duluth citizen continue to patronize local businesses if costs for goods and services went up an average of 20 to 30%?

It is no wonder, then, why small business owners harbor a slow burn over the fire inspection fees. In essence, the city’s decision to pass along its costs to the small business owner can be likened to a junior high student pooping in an elementary student’s lunch pail.

Yes, the city has experienced reduced income. Yes, the city has increased expenses. Yes, the city must provide the inspections and rightly so they assure public safety. But simply passing costs along to small businesses – the very backbone of our community – is tantamount to making a mess.

It is time that the business community makes its case: the city must do whatever it takes to provide and protect local business – and that includes eliminating the fire inspection fee. If the fee is not eliminated, the flies will begin to buzz.

I am convinced that in order for people to participate (in any endeavor) they must be compelled to do so. Clearly, the smoking ban, the Ten Commandments issue, and low to moderate income housing monies (the Housing 1000 initiative) qualify as reasons for people to attend Duluth city council meetings to have their voices heard.

Monday night, approximately 200 citizens filled the council chambers. The sheer number of bodies caused the air to thicken and raised emotions to a fever pitch. There was a lengthy power point presentation – so full of detail I thought I was viewing a schematic drawing of a nuclear reactor – and numerous official speeches affirming the need and right of using the City Investment Trust Fund to build housing for the less fortunate. The Chamber was among those supporting this issue. Pat Mullen, Vice Chair of Public Policy, spoke on our behalf.

During the meeting, the Chamber was recognized no less than a dozen times for being visionary and compassionate. Accolades poured in from non-profits, the NAACP, and concerned citizens. Clearly, the Chamber did the right thing.

The evening climaxed via a successful vote and the crowd swelled into the halls and onto the streets. Horns blared, people gave high fives, and a celebratory spirit ensued. Yet, as I sat there, witnessing this victory cheer, I wondered how many of these same people would come out for the discussion regarding fire inspections. According to the April 25, 2005 issue of the Duluth News Tribune, the city has raised the rate to have one’s business inspected to $400. Isn’t this issue equally as important as the Housing 1000 initiative?

Sure, this is business we’re talking about. One speaker at last night’s meeting even stated that “…we [residents] cannot simply raise prices like a business can,” implying that business owners have an easy time passing increased costs along to their customers. Evidently, this person assumes that business owners don’t mind balancing increased costs passed down by the city because they have the luxury of passing these costs to their customers who gladly – and perhaps unknowingly – pay them.

Yet nothing could be further from the truth. Business owners want their businesses to operate in a safe and healthy manner. Further, they are tired of being portrayed as degenerate members of society, concerned with only one thing: profit. Yes, profit keeps the doors open and the lights on, but it also pays employees and employee benefits and provides for the needs of the owner – all this at the owner’s own risk.

Businesses, then, simultaneously operate to make a profit and serve as the backbone of our community. Which leads me to wonder: will those in our community who had such a compelling reason to advocate for the Housing 1000 initiative come out and rally in support and on behalf of the numerous small businesses that struggle every day who are now faced with one more bill to pay?

The Duluth Area Chamber of Commerce board of directors adopts policy only after Chamber members have an opportunity to offer their feedback. Normally, feedback is solicited during the Government & Policy Task Force (G&PTF) – a monthly meeting that is open to all members. After any proposed policy is debated in the G&PTF, it is forwarded to the Chamber’s executive committee for review. At this point, the proposed policy is either passed to the full board of directors for their consideration or it is rejected by the executive committee. If the proposed policy is approved by the executive committee, it is moved along to the board for adoption as policy, modification, further reconsideration, or rejection. Regardless is potential policy is accepted or rejected at the executive and board levels, it is important to note that as a Chamber member, you have the ability to voice your opinion.

At the Government & Policy Task Force meeting on Wednesday, April 20, we discussed taxation policy. In this case, the task force asked that I, along with a few members from the group, meet independently to further refine the policy before the task force meets again in May. Given our ability to communicate electronically with our members, I thought it might be beneficial to solicit feedback directly. Take a moment to read the statement below, email me your feedback, and I’ll consider your comments when revising the policy.

Email me directly by clicking on the button to the left.

Again, thank you for being a member of the Chamber.

Duluth Area Chamber of Commerce Taxation Policy - Draft

Taxation is a primary concern to our members. The Duluth Area Chamber of Commerce is concerned with the ramification of taxation upon the economy of Northeastern Minnesota and the ability of businesses to compete within a global economy.

We understand the primary function of government to be the provision of public health, safety, primary education, a healthy environment, and a pro-competition milieu within a regulatory atmosphere that makes sense. Further, we understand the government needs to provide a regulatory function to society that ensures businesses operate for the public good. This public good is different from corporate social responsibility in that the government must provide for anti-trust enforcement, open and fair competition, and public trust. Government, then, is not, and should not, be considered an end in itself – it should not compete with private business if it makes good sense for business to provide contracted goods or services at lesser costs to the public.

Given the fact that competition spurs innovation and keeps prices down, the regulatory role of government should spur competition and ensure the collective good of the citizenry. Costs for these services should be collected as fairly as possible from all citizens and should not be collected egregiously from businesses. Further, business should contribute their fair share and not be treated in a preferential manner. The government’s role, then, should be one of regulator.

In a competitive marketplace, prices for goods and services are managed by consumer choice. When a potential consumer deems a price to be too high, he or she quickly sends a “non-competitive” message by shopping elsewhere. Government does not have the same constraints. Citizens are obligated to pay whatever they are told to pay or move elsewhere. Similar to the role of consumer, our role, as a business organization representing the needs of the business community is to balance the need for government revenue against the ability of the marketplace to provide such revenue.

When evaluating the requests of local units of government to raise taxes or fees, we must first consider the real versus politically motivated reasons for such a tax increase. Can the government find adequate areas from which to find efficiencies, or would those proposed efficiencies significantly reduce or eliminate a service that is vital to business success – such as police, fire, and ambulance? Secondly, we must prioritize the most pressing needs of our citizenry. Would the corresponding cuts significantly weaken the marketplace, or could increased taxation be absorbed by those with higher incomes who might simply shift spending and saving priorities? Lastly, we must consider the effects of less government spending upon local business. Will the proposed cuts, as always promised by government officials during budget processes, transcend to the local economy.

Taxation is never easy. However, we should look to minimize its effects while maximizing its benefits to our members.

I try to be nothing but honest. The other day, I blogged about my admiration for City Councilor Russ Stewart. In a recent conversation, Russ pointed out the fact that the Housing and Redevelopment Authority (HRA) was empowered to levy taxes to help provide needed housing in Duluth. In my blog, I simply made this fact apparent. Perhaps I should have reconsidered disclosing what I thought our members should know.

Those who advocate appropriating $3M from the Community Investment Trust Fund (commonly called the street improvement fund, or simply casino money) to build homes for low and moderate income families were infuriated by my disclosure. Yet it is important to understand that I was not implying a lack of support for this important initiative. Simply, I wanted to encourage our community to engage in good and thorough public discourse.

Instead of simply forging ahead in any given initiative, it might behoove our community to put all things on the public table: pros, cons, advantages, disadvantages, and so forth. Making the public aware of all the angles associated with any one given project is a way to garner community support. By engaging in honest public debate, people have the opportunity to have their questions answered and become educated about all aspects of any given issue.

Clearly, had we been able to debate openly about the Great Lakes Aquarium or the proposed golf course in a healthy, community-wide manner, we might be talking about the aquarium’s success and counting dollars earned from a new golf course today. Instead, we all have to suffer a loss because of these less than successful endeavors.

My hope is that the Housing 1000 group – of which the Chamber affiliates itself - is successful in attaining the needed $3M dollars to move this housing project forward. Yes, we need to rebuild our crumbling streets and sewers. Yes, we have deteriorating infrastructure that needs attention. Yes, it is commonly held that the HRA is supposed to provide for families with low and moderate incomes when, in fact, they cannot provide homes themselves. In light of all this, it is my sincere hope that the Housing 1000 group is successful.

Yet, the HRA has its hands full. Evidently, they cannot do more. Seemingly, the HRA has faced severe budget cuts over the last several years, despite the need for its services in our community. Funding cuts have limited the HRA’s abilities at a time when demands are on the upswing. Section 8 subsidies from the Federal Government were cut. The HRA came to the rescue and made sure nobody – neither renter nor landlord – was put out on the street. The HRA did the right thing.

This leads me to my second point: In a time when demand is at an all time peak and there is little ability to extract additional taxes or squeeze more services out of less resources, we need to examine our priorities to make sure the needs of the people are met. The Chamber board debated this issue and reached the conclusion that using the trust fund to support the Housing 1000 initiative is appropriate – it’s the right thing to do for our community.

My only wish is that our community would challenge itself to engage in public discourse when issues such as the Housing 1000 project and others arise.

Andy,
I understand the endorsement, but it sounded like you were apologizing for endorsing a project that will eventually bring 7 million dollars a year in property tax to the city. I am not a big supporter of give away programs unless there is a way that the city as a whole can benefit.You know that I am a die hard fiscal conservative.:) I think giving up 6 million over 5 years to get 7 million a year back is a good thing.

It has to happen with outside money because the state and federal funds are not there and are going to be less from now on. We are also looking at doing other innovative things to create revenue to help make up shortfalls in the future. It is an exciting time to be on the edge of new and creative thinking. You will should talk with Rick about the future of HRA and the way they would like to proceed. It is pretty cool stuff.

J (Name removed to protect privacy)


Andy: When and how did the Chamber endorse this idea? We need street and infrastructure maintenance, not this type of boondoggle. My hat is off to Mr. Stewart on this one!!!! Obviously, the Chamber's membership has been so diluted by the not-for-profits that this is deemed "good public policy" in the eyes of its membership. I find this unbelievable.....it seems to me that the Chamber is fast becoming a reflection of this community, very socialized, green, non-growth, and intellectualized in its views of what "should be." I don't envy my off-spring running a business for the next 20 years in this environment. I certainly feel any participation on their part would be a waste of time. They sure arn't encouraged by anything they see the Chamber doing that would make them want to become active. I'm sure when I cease to be active this company will no longer be a member of the Chamber. I don't blame them one bit.
K (Name removed to protect privacy)

Russ Stewart, one of my favorite politicians, has done it again: he has taken a potentially explosive issue and has evaluated it in the light of good policy. I am talking about the Housing 1000’s (a loosely defined group of non-profit housing developers) request to build one-thousand new units of housing in seven years, using $3M from the Community Investment Trust Fund (commonly known as street improvement funds or casino money). When I approached Russ to let him know the Chamber officially supports using the money for Housing 1000 efforts – namely gap funding to build houses for low income people – he simply pulled out a section of MN statute, 469.001, to demonstrate that the State of Minnesota has already empowered the Duluth Housing and Redevelopment Authority (HRA) to provide for those who need housing. You could say Russ is one dedicated policy wonk.

Further, Russ pointed out the fact that the HRAs in Minnesota are empowered to provide a sufficient supply of adequate, safe, and sanitary dwellings to protect the health, safety, morals, and welfare of all citizens of the state. The statute also allows HRAs to clear and redevelop blighted lands, operate within the context of comprehensive plans, to remedy the shortage of housing for low and moderate income residents, and to redevelop blighted areas in situations in which private enterprise would not act without government participation or subsidies, and so forth. Moreover, HRAs can levy taxation to raise funds to do all these things. Seemingly, we should have been trying to do what Housing 1000 is working to accomplish all along.

The policy rub for the Chamber is that we have already endorsed using $3M from the Community Invest Trust Fund for Housing 1000. Further, we think private developers will not work to build affordable housing - private developers cannot build houses for which they cannot make a profit. Clearly, the Chamber can justify the need to use these funds to build affordable housing.

Regardless of Chamber support, Mr. Stewart has a point. When using public dollars, we need to do things right. Before the city council moves ahead and simply approves the Housing 1000 request, we need to have a vigorous public debate.

In the end, the Chamber still supports the need for affordable housing.

GM covers 1.1 million employees, retirees, and dependents at a cost of $5.2 billion per year (2004), and spends $1.5 billion annually on prescription drugs. This means GM must add $1,525 to the cost of every vehicle it sells. Who wouldn’t want to save a minimum of $1,525 when buying a car? It is no wonder, then, GM’s most sought after public policy is national health care. Yes, GM has been advocating the federal government to help them reduce costs and make them more competitive with car makers from other countries. As it is now, GM pays 0.4% of the health care bill in our country.

Duluth, too, spends egregious amounts of money before they plow the streets, fix a pothole, or work to improve life for any of its citizens. Health care costs for retirees alone stand at $178.5 million. That means every Duluthian should get an additional tax bill for $2070.00 just to balance the books (inflation not included). I am not contending that Duluth dump its retiree health care, however, issues need to be addressed soon or we may find ourselves in the same situation as GM.

It is easy to call for an immediate change. For the most part, businesses have dealt with these kinds of issues for years and we have managed to adapt. What is needed now is a public policy debate that focuses upon facts and solutions rather than upon politics. If we refuse to do this, we will find ourselves facing bankruptcy. Yes, Duluth will be bankrupt. Some predict as soon as 2014.

There are, however, affordable things any company, municipality, or community can do readily to ensure lower health care costs in the future. These include discouraging obesity, smoking, and inactivity. At a recent conference, I listened to a former Canadian health ministry official who advocated life style change as the preferred method of salvaging our health care system. He indicated that we might save billions if our population got into its proper weight categories, stopped smoking, and got active. Moreover, he praised the drug companies for helping lower costs by keeping our inactive, overweight, and smoking population out of the hospital. There are people who need health care and have limited access – but we can do something about that if we only try.

Sure, GM and Duluth have some serious issues that each must confront, but we’ll never solve these issues unless we all try to do what we can.

I am entirely convinced that people only change when they feel uncomfortable enough to do so. For years, doctors have warned Americans about the risks of smoking. Yet, millions of Americans continue to smoke every day – because they do not feel compelled – or uncomfortable enough – to quit. We know that our low savings rate might one day overwhelm us financially. Yet, millions of Americans and our federal government refuse to make changes that might change the course of our financial future – because we do not feel uncomfortable enough to change right now. Many companies refuse to change because they need to pay a huge dividend this year – regardless if next year’s financial success might be compromised.

We fail to change because we do not feel uncomfortable enough to change.

This leads me to my point: General Motors and the City of Duluth are now in the same boat. Both are being eaten alive financially because of their inability to react to changing environments. General Motors, once envied by the corporate world, is now burdened by crushing financial obligations, mostly due to employee health care costs and outdated models. This leaves the company’s credit rating just above junk bond status. Should the General Motors not turn itself around soon, its credit could be downgraded - essentially leaving it vulnerable to bankruptcy.

Duluth appears to be traveling down the same road. Duluth officials promised workers life time health care coverage. Sure, our leaders say no one saw health care costs rinsing faster than inflation, but who bets the farm that costs for any commodity would not increase? Further, who would bank on the idea that health care costs would stay the same, especially considering a clearly aging demographic? Duluth’s problems reflect those of General Motors.

General Motors and Duluth differ with regards to the immediate and pressing pain General Motors now plainly feels. Without a turnaround plan, GM will lose market share, experience credit and cash flow problems, and most likely face bankruptcy - all this for a company that makes up one percent (1%) of the American gross domestic product (GDP). Clearly, the time for General Motors to change is now. And they will change – they feel the pain.

Duluth, however, does not show signs of feeling the pain. Public outcry is still limited to a fringe group or two that do nothing but complain. Meanwhile, the mainstream has survived the snowiest winter in years, uttering hardly a whimper about poorly plowed streets. And now with spring on our heels, the trials of winter are long forgotten. It would be ill-timed to point out that our ever diminishing public services are some of the most expensive. We no longer feel any pain. Unlike General Motors, we have, for the moment, no right to want anything else.

No one likes a person who yells “fire” in a crowded theatre. But wouldn’t someone at least admit that we should install a few smoke detectors? Duluth and its businesses would be better served if we did.

America has declared itself the great mediocrity. We mythically believe that we all have the same opportunities to get ahead. When people struggle, we think it is because they have not worked hard enough. This is not a new problem. Early last century, John D. Rockefeller amassed such a fortune, and subsequent political power, that Teddy Roosevelt (R) initiated an inheritance tax. This tax ostensibly ensures that all Americans earn their money rather than have it passed down from their parents. Essentially, TR’s goal was to equalize opportunities for everyone by preserving the American mediocrity. Americans still believe this exists, that we all have equal opportunities. Yet, the fact remains that we do not.

This is why the Duluth Area Chamber of Commerce’s recent resolution on spending $3 million public dollars on private housing is so controversial. Our goal is to help provide workforce housing for those who struggle to afford it themselves. Sure, the private market can provide housing – yet it is not for those with limited resources. A single mom with two children making ten to twelve dollars per hour is not going to afford anything the private market can provide. Simply stated, the private market is not interested in doing business with those who can not afford its prices.

Will the fact that we provided support for using $3M public dollars to help some moderate income families change the free market as we know it? I doubt it. In fact, using this money to help moderate income families become homeowners may, in the long term, do more to preserve the American way of life than anything else I can suggest. TR saw the future when he looked at the past. We should do well when we do the same.