For the year ended Dec. 31, 2001, Local 802 incurred a loss of $90,460, compared with the gain of $261,079 recorded during the prior year. It was the first time the union has experienced a loss since 1993. The year-to-year earnings decline of $351,539 is the result of both a 5 percent decrease in revenues, amounting to $260,000, and a 2 percent increase in costs, of $90,000.
On the revenue side, work dues declined by $168,000 – primarily during the second half of the year and most notably on Broadway, reflecting the effect of the events of Sept. 11 on the city’s economy. In addition, as we have previously reported, the year 2000 enjoyed the benefit of a $163,000 write-up to an increased market value of the union’s investment in Union Labor Life Insurance Co. Although that investment was liquidated during 2001 at its written-up value, no additional earnings benefit occurred in 2001. Interest income declined $23,000 during 2001 due to reduced market rates and to the use of reserves to liquidate the mortgage on the 802 building.
With respect to expenses, departmental costs increased $161,000, or 4 percent. This includes the full year effect of staff additions that had been made during 2000, as well as normally recurring staff salary adjustments. Spending also increased for the Live Music Campaign, in the form of both media and consultancy costs.
However, the union incurred lower costs for legal fees (which had been unusually high in 2000 for contract negotiations), for members’ life insurance (due to a negotiated rate reduction), and for mortgage interest.
The decline in market interest rates during 2000 and even more sharply in 2001 resulted in an increasing spread between the rate of interest the union was paying on its headquarters mortgage – 8½ percent – and the rates being earned on our Treasury Bill investments, currently in the 2 percent range. This widening interest rate spread made investment in the mortgage an increasingly attractive option. Mortgage prepayments of $250,000 and $300,000 were made in September 2000 and 2001, respectively, and a final payoff of the mortgage of $298,000 was made last November. Local 802 is now mortgage free.
Payoff of the mortgage relieves us of principal and interest payments which, at the beginning of 2001, amounted to $60,000 annually. These payments would have been required over the remaining approximately 21-year term of the mortgage. The lack of mortgage service expenditures will favorably affect our future earnings. However, members should be aware that the costs of property ownership – including real estate taxes, power, heat and light, repairs and maintenance, cleaning and waste removal, etc. – are substantial, and continuing.
Although the union’s net worth declined during the year by the amount of the year’s loss, our financial position remains quite strong, with just under $3 million in liquid assets and no mortgage. However, it seems clear that our costs will continue to increase, if only at today’s modest rate of inflation of approximately 2 percent. To return to posting surpluses, as we have over the previous seven years, increases in dues and other revenues will be necessary, whether these are generated by improvements in the city’s economy or some other source.