Councilor asks for city investment update; mayor urges caution

With recent drops in the stock market and fears that the U.S. economy is headed for a recession, some might curious as to what's going on with the city's Irrevocable Trust Fund.

With recent drops in the stock market and fears that the U.S. economy is headed for a recession, some might curious as to what's going on with the city's Irrevocable Trust Fund.

That's exactly what City Councilor Todd Fedora wanted to know. This morning, he sent an email to Duluth's chief administrative officer John Hall telling him that during Thursday night's council agenda session or Monday's council meeting he'd ask for an update on the trust fund.

The fund was established in May last year as a high-risk, but high-return way to invest city money toward in stocks and bonds to pay down the unfunded retiree health care liability.

"I'm interested in what fluctuations, if any, are happening during these turbulent economic and stock market times," Fedora wrote to Hall.

Instead of getting a response from Hall, Fedora got an unexpected an email back from Mayor Don Ness, who said he would be happy to tell him the status of the fund, but asked Fedora not to bring the issue up during either council meeting.


"I am concerned about the impact of an ongoing fund status discussion would have on the public," Ness wrote. "This is a long-term strategy and we need to be committed to this approach without reacting to fluctuations in the market. Obviously, you un-derstand this."

Fedora, however, said today that Ness's response seemed as if he was uncomfortable answering the question.

"Maybe there was something there that he felt people might not feel comfortable knowing about," Fedora said.

"I think people of Duluth deserve to know how their money is being spent and deployed," said Fedora, a vice president with M&I Bank in Duluth. "All I wanted to know is: where are we at?"

According to City Finance Director Genie Stark, because the city only gets monthly reports, it's not known yet how the recent market fluctuations have impacted the trust fund, but the return thus far hasn't yet been what the city had hoped. In 2007, Stark said the city sent $13.7 million to the state to invest in the fund. She said that the fund had made money, but wouldn't say exactly how much until she updates the council during Thursday night's agenda session.

"There's not a whole lot more, but there is more," she said.

Still, she said just because the market is struggling doesn't mean that the city should yank money out of the fund, which has its money half invested in stocks and the other in bonds.

"If we're down... most people would tell me that's the time to buy more," she said. "We wouldn't have any money invested to take advantage when the market goes up."


Ness said today that he has no problem with letting Fedora or anyone else know the status of the fund, but that its short-term status shouldn't affect the city's long-term approach to dealing with the unfunded health care liability.

"It's a matter of how we approach these long-term investments," he said. "There's always a tendency to react to the market. The moment that elected officials inject themselves into long-term investments, it's a slippery slope that could lead to reacting to the market instead of sturdy, long-term financial planning, which is our goal."

Ness said the eventual goal of the fund is to increase from the 2-3 percent rate of return the city had been getting to 6-9 percent a year.

"I respect that [Fedora] wants to know the information," Ness said. "I'm sure that when he and I have a chance to chat, he'll recognize that he and I are on the same page."

What To Read Next
Get Local