BRAINERD — The city of Brainerd is expected to apply for a loan from the League of Minnesota Cities Insurance Trust to cover a portion of the lawsuit settlement owed to five former firefighters.
Finance Director Connie Hillman told the City Council’s Personnel and Finance Committee Tuesday, Sept. 6, the city qualifies for a loan of up to $250,000 from the program to cover an “extraordinary expense.”
The loan would have a zero percent interest rate if paid back within a year, or a 3% interest rate if paid back within five years.
“I really think that this is a good deal, considering that I think there’s going to be a cash flow issue, and we pay it back over five years or sooner if we can,” Hillman said. “… It’s small potatoes, but I think it’s a good plan for us to use right now because I am very worried about cash flow.”
After approving a
settlement agreement
last month, the city owes $3.9 million to the former fire department equipment operators who were terminated in 2015 when the city restructured its fire department from full time to paid on-call. The Minnesota Supreme Court ruled the move, which also dissolved the firefighters union, qualified as unfair labor practices. The city’s insurance with the League of Minnesota Cities will cover $2 million of the expense, leaving the city to come up with the remaining $1.9 million.
If the council were to levy for the expense in 2023, the
property tax levy
would increase by more than 25%, but there are a variety of options available for the council to pursue.
Ideas mentioned at a budget workshop last week include borrowing funds from Brainerd Public Utilities, using money from the general fund, transferring money from the city’s insurance fund, using money from the city’s Economic Initiatives Fund, levying for the sum over several years, issuing settlement bonds or delaying all capital expenses for 2023 until 2024.
Council members authorized staff to apply for the loan program Tuesday, though Hillman said she will not do so until she knows how the city is to pay the money out.
While the council and firefighter’s union agreed on settlement terms, a judge must still sign off on the final agreement, which will state when and how the money is to be paid. That action is expected to happen within 30-60 days of the council’s approval, which came Aug.15.
The council formally put the option of settlement bonds on the table Tuesday as well, by approving a resolution allowing the city to reimburse itself from any bond proceeds if debt is issued after the settlement payment is made.
“I’m not saying that we’re going to issue bonds to pay for the lawsuit,” Hillman said. “It’s just covering our bases in case we do decide to issue bonds.”
Personnel and Finance Chair Gabe Johnson voted for the resolution as a technical step in the process but said he would not be in favor of issuing bonds.
“We have the flexibility,” he said. “We have the ARPA (American Rescue Plan Act) funds, we have the capital funds. We shouldn’t be issuing debt for this, but I’ll vote on this motion just in case something crazy comes up.”
The council began discussions on restructuring the department in 2010 because of a budget deficit and pulled the trigger on the idea in 2015.
Along with rising costs, council members at the time cited response times and the need to buy new equipment as the reasoning behind their decision. Johnson and Council President Kelly Bevans are the last two current members who were on the council at the time of the decision.
Firefighters Union Local 4725 and President Mark Turner — one of the full-time firefighters —
sued the city in January 2016
, asserting the city participated in unfair labor practices and violated various laws with the restructuring.
A district court decision originally ruled in favor of Brainerd, but the Court of Appeals reversed the ruling.
The Minnesota Supreme Court affirmed the Court of Appeals ruling
in 2019, sending the case back to district court for a decision on a remedy.
Judge Patricia A. Aanes granted several motions
for summary judgment on behalf of the firefighters union in March 2022, stating the firefighters were entitled to be reinstated and seek monetary damages from the time of the dissolution in 2015 through 2023, the date to which the union’s future contracts would have extended.
THERESA BOURKE may be reached at
theresa.bourke@brainerddispatch.com
or 218-855-5860. Follow her on Twitter at
www.twitter.com/DispatchTheresa
.
