News Story

City Manager: 'Prosperity Doesn’t Come From Government; It Comes From Freedom'

Port Huron city manager has 'unique perspective' on municipal government

When cities cry poverty, the organization helping them pursue more resources from state or local taxpayers is often the Michigan Municipal League. It is interesting then to see signs that the lobbying group is doing some self-reflection, in the form of allowing a city manager with a fresh point of view to address the organization's annual meeting.

“Prosperity doesn’t come from government. It comes from freedom,” Port Huron City Manager James Freed told league members who gathered in September.

Freed gave the group a candid presentation on how pension and retiree health benefits were making it difficult to govern his city. City governments elsewhere have faced similar problems.

“We need to come together today to free the next generation from the crushing burden of unfunded liabilities,” Freed told the group.

The league billed Freed as “a 30-something … with a unique perspective on the next 30 years of municipal government.”

“I’d like to talk about a challenge that Port Huron is facing and maybe we can find similarities with other communities — that is unfunded liabilities — what we have in the bank versus what we owe,” Freed said in his talk.

He described how Port Huron is facing $54 million worth of pension fund liabilities, plus another $47 million in retiree health benefit promises. Freed said that year after year the city finds itself shifting ever more resources to carry this burden. This year, the payment is $7 million. In 15 years, it will be $12 million. The payments are outpacing Port Huron’s projected growth.

“The growth of these payments is consuming more and more resources that could be going to parks, public safety and general government,” said Freed.

Freed said for every dollar the city pays to employees, it has to pay an additional 70 cents for fringe benefits. Half of that 70 cents goes toward the pension and retiree health benefit funds. In recent years, the city has been making additional annual payments toward the retiree liabilities.

The city manager said he has worked closely with all groups to fix the problem.

Workers are now contributing up to 11 percent of their pay toward retirement benefits, up from zero percent not long ago. Health coverage for current employees now comes in the form of high-deductible insurance policies combined with contributions to their own health savings accounts.

Other cities have closed their defined benefit pension plans to new employees, who instead get contributions to 401(k)-style retirement savings accounts.

“Our focus should be the next generation. We are not the great wizards we sometimes like to think we are,” Freed told the group.

Freed said his presentation was warmly received. The next day he participated in a breakout session that he said was packed. A number of people sent him handwritten letters thanking him for his candor.

“You may be witnessing a cultural change in local government,” Freed said.

The speech:

30x30 from Michigan Municipal League on Vimeo.

Matt Bach, director of media relations for the league, did not return an email seeking comment before the deadline for this article.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.