Auditor: City Should Get $80K Donation Back from Stillwater Bridge Coalition

In response to a complaint filed about the city of Stillwater's $80,000 donation to the Coalition for the St. Croix River Crossing, the Minnesota state auditor office recommends the city get the money back from the coalition.

The looked into concerns that were filed about the to the nonprofit group advocating for the St. Croix River Crossing project.

Complaints were also filed as to whether Stillwater Mayor Ken Harycki—who is also co-chair of the coalition—, the fact that the city paid the $70 filing fee with the Secretary of State and a complaint that a contract with the Conach Group did not accurately reflect the services the group was providing to the city.

The donation to the coalition was approved by a 4-1 vote July 5 by the Stillwater City Council. Ward 2 Council Member Micky Cook was the lone dissenting vote.

State Auditor Rebecca Otto made the following recommendations to the city of Stillwater:

"In the future the City should follow Minnesota law and refrain from making donations to nonprofit organizations absent specific statutory or charter authority. The OSA recommends that the City attempt to recover the money donated to the Coalition and the money the City expended for the Coalition's filing fee. 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 recommends 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.

To avoid even the appearance of impropriety, the OSA recommends that City officials disclose any official position a City official may hold with any organization receiving City funds. The disclosure, at a minimum, should include whether the City official receives compensation for the position held in the organization."

Following the review, the state auditor’s office is required to follow “certain procedures” when finding that an entity is not in compliance with TIF laws, Otto wrote to city officials. “Therefore, the Office of the State Auditor will handle any issues related to the use of tax increment for the $80,000 donation through the procedures required under TIF laws.”

Harycki’s Response

"Everything we did was done by the advice of the city attorney (David Magnuson)," Harycki said Thursday afternoon. "He gave his opinion, now there's a second opinion and we have to reconcile that."

Harycki said the City Council will discuss the issue with Magnuson and is likely to hold a closed session during Tuesday night's meeting to discuss the state auditor's ruling.

It's too early in the process to know or speculate about what city officials will do in response to the state auditor's ruling, Harycki said.

"We'll have the city attorney guide us through this as we always do," he added. "We have to rely on his professional judgment and advice. He is an attorney."

At this point it doesn't make much sense to litigate this, Harycki said. "If we can't do this through TIF funds we'll probably do it through the city reserve funds or other means."

A city does have the authority to appropriate less than $50,000 annually to an organization “promoting, advertising, improving or developing the economic and agricultural resources of the city, Otto’s letter reads.

Harycki said the complaint about the funds and perceived conflict of interest was not unexpected. "As groups lose arguments in the face of facts, they dig in with other means," he said. "This is other means."

A Resident’s Complaints

But Donald Empson, the Stillwater resident who filed the complaint, said he was a stakeholder throughout the bridge process, and eventually signed on to the current four-lane bridge proposal.

“This (complaint) is not about the bridge,” Empson said in an interview Thursday afternoon. “It is about the City Council spending money foolishly and in a manner than is not transparent.”

When the City Council made the $80 million donation, they said the taxpayers , he said.

“That is a little disingenuous because if they didn’t spend the funds, it would be used to reduce taxes, which is misleading on the mayor’s part,” Empson said.

An $80,000 donation by the city to any nonprofit organization, whether it’s the March of Dimes or the bridge coalition, “is a foolish expense of taxpayer funds,” he said.

“The mayor and (the) members of the City Council (excluding Ms. Cook) have run amok,” Empson said.

Empson’s said his frustration about the City Council’s spending of taxpayer’s money extends beyond the donation to the coalition.

It’s about spending about $1.4 million on land for an armory, Empson said. It’s spending about $800,000 for a pedestrian plaza downtown, hiring of a “legislative consultant” on a no-bid contract for $1,500 a month and various travel expenses while city services are being cut, he said.

Empson said he also takes issue with the mayor and council members—excluding Cook—“lack of transparency.”

“The $80,000 donation to the coalition was disguised on the council agenda as an update to the activities of the coalition,” he said. “The public hearing on the Armory was held at a special meeting at 7:30 in the morning. The latest request for the mayor—his third trip— and vice mayor to travel to Washington D.C. was made at an untelevised special-budget meeting.”

The city “did no due diligence” on either the donation to the coalition or the hiring of The Conach Group as a “legislative consultant,” Empson continued.

“A legal request for the mayor’s correspondence with the coalition—for which he is the co-chair—was met with a statement from the mayor saying he had no correspondence or emails regarding the coalition,” Empson said. “Ms. Cook is the only council member who seems to be aware she is spending public money, which requires due process.”