Stillwater votes to challenge State Auditor ruling on $80,000 TIF donation to bridge lobbyists

City Attorney creates novel definition of 'lobbyist' to prove he's right and State Auditor is wrong


Stillwater City Attorney Dave Magnuson

By Karl Bremer

The Stillwater City Council, relying once again on City Attorney Dave Magnuson’s legal and verbal gymnastics, voted 4-1 tonight to challenge the State Auditor’s contention that it cannot spend $80,000 in Tax Increment Financing (TIF) funds on a lobbyist for the proposed Boondoggle Bridge across the St. Croix River.

If that turns out to be a losing argument again, Stillwater Mayor Ken Harycki indicated that he would seek the money from another city fund.

Responding to complaints from myself and Stillwater historian Don Empson, the Office of State Auditor (OSA) last month determined that the City’s donation of $80,000 to the Coalition for the St. Croix RiverCrossing, a lobbying group that Harycki co-chairs, was illegal and recommended that the City get the money back.

The Coalition returned the money to the city today, but the Council found out in the past week that under state statutes governing the use of TIF funds, a large portion of the money would be diverted to the county and school district rather than back to the City’s TIF fund as a penalty for the City’s misappropriation of them. No one seemed certain how much the City would lose. Figures ranging from $40,000 to $60,000 were thrown around during the discussion.

At a special meeting of the City Council today, Magnuson still insisted he was right and the State Auditor was wrong in its determination that using TIF funds to hire a lobbyist is illegal.

“I think it’s worthwhile for the City to respond to the auditor,” Magnuson said. “I think they didn’t get it right.” If the City can convince the OSA that its use of TIF funds was in compliance with the law and simply draw up a contract for their services, Magnuson reasoned, the City would get to keep the entire $80,000 instead of losing a portion of it to the school district and county.

PRETZEL LOGIC

Magnuson’s argument hinges on yet another creative definition of “lobbyist” as determined by the City. It goes something like this, according to his draft response to the auditor that the Council tentatively approved:

The old bridge is in the City’s TIF District No. 1. State law grants to the City within the TIF district the power to “promote developments aimed at improving the physical facilities, quality of life and quality of transportation.”

Building a new bridge and taking the old one out of service would do all these things, Magnuson proposes, but a new bridge cannot be built without an exemption from the Wild and Scenic Rivers Act, and that takes an Act of Congress. “Acts of Congress require the aid and skill of professional lobbyists to assist in the promotion of the new bridge project” so, Magnuson reasons, a promoter is needed.

Turning to his trusty Black’s Law Dictionary, 4^th Addition (sic), Magnuson finds that “a promoter is practically synonymous with a lobbyist,” and cites a couple of legal definitions from his dictionary to prove it. Ergo, a lobbyist under Magnuson’s definition now becomes a promoter.

“Under those circumstances,” Magnuson concludes in his draft response, “the use of TIF funds from District No. 1 may be lawfully paid to lobbyists hired to promote the construction of a new bridge and the closing of the historic bridge to vehicular traffic.”

“The TIF allowed us to promote,” Magnuson told the Council, so the City can “hire a promoter.” At least twice during the discussion, Harycki suggested changing the term “lobbyist” to “promoter.”

Councilmember Doug Menikheim questioned whether it was wise to continue arguing with the State Auditor and risk “compounding the problem. If the auditor disapproves of us again, then what do we do—keep playing the game over and over again?” he asked.

Magnuson replied that the auditor’s final ruling after the City responds will be sent to the county attorney to either be resolved or pursued. At that point, the City would have to decide whether to give it up or go to court.

MORE AUDIT PROBLEMS


Councilmember Micky Cook

Regarding another problem the OSA found, Magnuson said the City’s contract with The Conach Group, a “legislative consultant” hired by the City, is being re-drawn to comply with the auditor’s recommendations. The auditor had noted that “The Conach Group’s attorney has admitted that the contract between the City and the consultant is ‘poorly drafted and significantly misrepresents the scope of what The Conach Group did and is doing for the City.’” It recommended that the contract be re-written “to clearly define the roles, responsibilities, and performance expectations of The Conach Group and City staff.”

Upon questioning from Councilmember Micky Cook, Magnuson and Harycki assured the Council that Stillwater City Hall’s address would no longer be used as the registered address for the bridge Coalition.

The Council also voted 5-0 on a motion by Cook to revoke an earlier action authorizing the City to pay membership dues to the Coalition—another violation the auditor found—even though no one on the Council could recall voting on the matter last November.

A $70 filing fee the City paid for the Coalition’s registration with the Secretary of State also was found to be in violation of state law by the auditor. That was refunded by the Coalition today along with the $80,000 donation.

Finally, Cook, who cast the lone dissenting vote today and on the donation to the Coalition when it was first approved, wanted assurance that “We’re not going to try to find another $80,000.”

Harycki responded: “Not today.”

Boondoggle bridge lobby group says it will return illegal $80,000 donation to City of Stillwater

Mayor Ken Harycki vows to find money elsewhere to give to coalition he co-chairs

By Karl Bremer

Michael Wilhelmi

The Coalition for the St. Croix River Crossing will be sending back the City of Stillwater’s illegal $80,000 donation to the lobbying group following a determination by the Office of State Auditor (OSA) that the donation was an “unauthorized expenditure” and that the City “attempt to recover the money donated to the Coalition.”

The OSA’s opinion was in response to complaints filed by myself and Stillwater historian Don Empson with the OSA regarding the legality of the donation.

"This is a distraction," said Coalition Executive Director and registered lobbyist Michael Wilhelmi.

The Stillwater City Council will discuss the OSA’s recommendations and the City’s response to them at a special September 13 meeting. At the advice of City Attorney Dave Magnuson, the City Council held a closed-door meeting on a portion of the discussion involving the Tax Increment Financing source of the funds last week in a meeting that many citizens felt should have been held in the sunshine instead.

The City relied on the legal advice of Magnuson to support its contention that the donation to the bridge lobbying group was proper. The OSA strongly disagreed.

The OSA chastised the City for its sloppy contracting procedures with the Coalition and stated that “If the City decides to contract with the Coalition for services directly related to one of the City’s authorized functions, the City should use proper contract management procedures to protect public funds.”

The OSA also took issue with the contract between the City and The Conach Group, with whom the City has contracted for $1,500 a month for “legislative consulting” services. The OSA noted that “The Conach group’s attorney has admitted that the contract between the City and the consultant is “poorly drafted and significantly misrepresents the scope of what The Conach Group did and is doing for the City.” The OSA recommended that the City amend its contract with The Conach Group “to clearly define the roles, responsibilities, and performance expectations of The Conach Group and City staff.”

The OSA found during its investigation that the City not only donated $80,000 to the Coalition without authorization, but it also paid—at Stillwater Mayor Ken Harycki’s request—the Coalition’s $70 filing fee with the Secretary of State when it was formed. Harycki is co-chair of the Coalition. The OSA stated that the filing fee payment, along with any membership fees paid by the City to the Coalition, also were not authorized expenditures by the City.

The $80,000 the City donated to the Coalition was to come from a Tax Increment Financing fund for the downtown Stillwater district. The OSA stated that it “will handle any issues related to the use of tax increment for the $80,000 donation through the procedures required under the tax increment financing laws.”

Harycki appears determined to secure the $80,000 in city funds for the lobbying group he co-chairs one way or the other. Following the State Auditor’s initial report, according to the St. Paul Pioneer Press, “Harycki said if the city attorney says using TIF money is a problem, he would simply take the $80,000 from another city source.” Then upon the announcement that the Coalition was giving the money back to the City, the Pioneer Press reported, “Stillwater Mayor Ken Harycki said Friday that the contribution might come up again - as a payment to the same group, with a contract.”

City Council member Micky Cook, the lone dissenting vote against the original $80,000 donation and a critic of other less-than-transparent actions taken by Harycki and bridge supporters on the council, cautioned that the lack of a contract for the donation was only one of several legal questions raised in the OSA report.

“It's disturbing to me that the city of Stillwater would get an 11-page finding reprimanding us, basically slapping our hands,” Cook said, according to the Stillwater Gazette. “I think there's a lot more to this opinion than that we just need a contract.” Cook asked that Magnuson address all the legal issues raised in the auditor’s report.

The City Council will discuss its response to the auditor’s recommendations at a special meeting on Tuesday, September 13, at 4:30 p.m.

State Auditor: City of Stillwater's $80K donation to St. Croix bridge lobbyists 'unauthorized'

Rep. Michele Bachmann and Stillwater Mayor Ken Harycki

Office of the State Auditor agrees with Ripple in Stillwater on legality of lobbying expenditures and recommends the city get its money back.

By Karl Bremer

The Minnesota Office of the State Auditor (OSA) has determined that the $80,000 the City of Stillwater donated to the lobbying group Coalition for the St. Croix River Crossing was an “unauthorized expenditure” and has recommended that the City “attempt to recover the money donated to the Coalition.”

The ruling was in response to a complaint filed by myself and other citizens with the OSA over improper use of taxpayer dollars to promote the proposed freeway bridge across the St. Croix River, aka the “Bachmann Boondoggle.”

The Office of State Auditor (OSA) chastised the City for its sloppy contracting procedures with the Coalition and stated that “If the City decides to contract with the Coalition for services directly related to one of the City’s authorized functions, the City should use proper contract management procedures to protect public funds,” which it did not in this case.

The OSA also took issue with the contract between the City and The Conach Group, with whom the City has contracted for $1,500 a month for “legislative consulting” services. The OSA noted that “The Conach Group’s attorney has admitted that the contract between the City and the consultant is “poorly drafted and significantly misrepresents the scope of what The Conach Group did and is doing for the City.” The OSA recommended that the City amend its contract with The Conach Group “to clearly define the roles, responsibilities, and performance expectations of The Conach Group and City staff.”

The OSA found during its investigation that the City not only donated $80,000 to the Coalition without authorization, but it also paid—at Stillwater Mayor Ken Harycki’s request—the Coalition’s $70 filing fee with the Secretary of State when it was formed. Harycki is co-chair of the Coalition. The OSA stated that the filing fee payment, along with any membership fees paid by the City to the Coalition, also were not authorized expenditures by the City under state law.

The $80,000 the City donated to the Coalition was to come from a Tax Increment Financing fund for the downtown Stillwater district. The OSA stated that it “will handle any issues related to the use of tax increment for the $80,000 donation through the procedures required under the tax increment financing laws.”

When the Minnesota Campaign Finance and Public Disclosure Board last month dismissed my complaint regarding the registration of The Conach Group’s “legislative consultant” as a lobbyist, Harycki sniffed that it was “much ado about nothing.” Perhaps Harycki and his legal advisors will listen to the OSA instead.

More to come on this story as it develops. You can read the entire Office of the State Auditor’s letter to Harycki here.