Local units of government lost $40.3 million in revenue because of the closing of the former Potlatch paper plant in Brainerd and job cuts at the facility in Cloquet, a new study by the union representing paperworkers has found.

The Paper, Allied-Industrial, Chemical & Energy (PACE) Workers released the study, a precise measure of wage and revenue shortfalls over the next two years, at town hall meetings in Brainerd and Cloquet.

Data in the study combines the loss of 616 jobs in Brainerd from last spring's mill closure there with hourly and salary furloughs handed to 280 workers following South African-based Sappi corporation's May 13, 2002, purchase from Potlatch of the Cloquet mill. It then uses statistics from the U.S. Census, Department of Labor's Bureau of Labor Statistics, Minnesota Department of Economic Security, Minnesota Workforce Center in Brainerd and accurate local job market guides for Crow Wing, Aitkin and Carlton Counties by the Minnesota Implan Group in forecasting community tax-base drops and the ripple effect of further job erosion.

The study, done for PACE by the Chicago-based Center for Labor and Community Research, reveals a combined tax loss of $36.5 million to date, and predicts another $3.8 million in tax losses if Sappi's current cuts to workers and

Cost to the community
"We find it interesting that Sappi bought a paper mill in Cloquet for $480 million that recently saw a pulp-line capitalization of $650 million, making it a state-of-the-art mill comparing with the best in Europe, and now it wrings wage and benefit cuts from the 450 who remain in the mill and proposes to reduce prices paid loggers who supply fiber to the mill," said Leon Towne, Vice President of PACE Region 10, covering six Upper Midwest states and Canada. "It's important for those in and around Brainerd and Cloquet, especially local politicians, to know, understand and somehow deal with the economic consequences of these cuts. We're presenting here an accurate and very real portrait of the effect on the tax base, the retail base and other aspects of community life that will occur because of job loss and uncalled for wage and price cuts."

From the permanent layoff of 829 paperworkers--some 67 qualified for full retirement pensions--plus an expected 1,215 ripple-effect service sector jobs that will disappear, the PACE study found: $2.2 million in Minnesota income tax will be lost; $8.8 million lost in indirect business taxes, including sales and property tax revenue; $5.4 million in Federal income tax revenues vanishing; $4.9 million in lost corporate profits tax; $5.9 million in Social Security revenues; and an increase of $9.3 million in Unemployment Compensation costs.

Using local job market guides and government data for the three counties, the study says the average annual paper mill salary in Brainerd and Cloquet of $49,037 will decrease for displaced workers in the first year to $31,368, or 36 percent, inclusive of PACE-negotiated severance pay and jobless benefits. In the second year following displacement, absent of these two, a laid-off paperworker can expect a yearly salary of $25,101. That repesents a 48.8 percent cut from earnings realized in a paper mill.

Seeking more jobs
PACE Region Ten Representative Marv Finendale said the union is active with public entities in seeking another paper firm to operate the Brainerd mill. But the effort is hindered by a "non-compete" clause in the sales agreement between Sappi and Potlatch, a clause that the State of Minnesota is challenging in state court. "We're exploring every option to re-open the Brainerd mill, and feel eventually we'll be successful," said Finendale. "In the meantime, we want people to understand that Sappi's business acumen is the welfare of shareholders, roughly half of whom are foreign-based, not the concern and well-being of its workers or the communities in which they live."

PACE Local 63 as well as Service Employees-affiliated Firemen & Oilers Local 939 in Cloquet had a year remaining on a collective agreement at the time of the May 13 sale. PACE, the Firement & Oilers and Sappi had been negotiating over a new labor agreement, but hourly workers voted in August by better than 80 eprcent to reject across-the-board income and benefit cuts totaling 20 percent.

"Our members, and the members of Local 939, spoke loud and clear that Sappi's concessions are unacceptable," said PACE Local 63 President Brady Nelson. "Our new employer has imposed these harsh cuts at the same time the workforce continues to set new production records."

The Cloquet mill manufactures coated free-sheet paper with a capacity of 260,000 tons annually, and bleached kraft pulp with an annual capacity of 450,000 tons. The Brainerd mill, whose orders were transferred by Sappi to Cloquet, produced 140,000 tons yearly of coated free-sheet. The acquisition more than doubled Sappi's North American capacity in this paper grade, giving the world's largest coated free-sheet producer a North American market share of 22 percent, second only behind MeadWestvaco's 24.5 percent market share.

PACE is the nation's largest union representing paperworkers, and covers some 320,000 workers in collective agreements. The Nashville-based union also represents some 2,000 Sappi workers at paper mills in Westbrook and Skowhegan, Maine, Muskegon, Michigan, as well as paper converting workers in Allentown, Pennsylvania.