Despite a memo from the city’s bond counsel warning of “substantial risks”, the Gaylord City Council has voted to guarantee to pay up to 16.5 percent of the debt service on $77 million of revenue bonds should the proposed RS Fiber telecom network fail to pay for itself.

The bond risk analysis prepared for the city at a cost of $1,500 to taxpayers was initially withheld from the public under a presumption of attorney-client privilege. Upon a request from the Freedom Foundation of Minnesota, the Gaylord City Council voted to waive legal claims and release the memo to the public.

The recent suspension of bond payments by officials in Monticello, Minnesota on their FiberNet telecom network has increased scrutiny of similar taxpayer-backed projects. Proponents of RS Fiber expect the network to start paying for itself after three or four years. To guard against default, however, the eleven cities and two counties participating in RS Fiber will contribute on a proportionate basis to a $4.5 million Debt Service Reserve Fund.

The two-page document highlights the potential downside of participating in an enterprise that will compete directly with several private providers already in the marketplace. The memo produced by bond expert Stephen Rosholt at the city council’s request warns the agreement “nearly doubles the City’s outstanding debt commitments”.

The blunt memo raises fundamental questions about the deal and its potential impact on the city’s financial stability. The memo strongly suggested Gaylord officials consider these key details:
¨ A commitment to paying as much as 16.5 percent of the total debt service on up to $77 million in bonds, more than any other city in the consortium.
¨ The city’s “fiscal capacity” to make large debt payments given its “relatively large amount of outstanding debt”.
¨ The potential impact on Gaylord’s bond rating or access to financial markets should the city fail to appropriate the revenue to make debt payments. “It may also be the case that the fact of entering into the sort of commitment reflected by the Shortfall Agreement would have a negative impact.”
¨ The possibility of additional legal exposure “in connection with litigation that could arise out of the offering of the bonds by the Joint Powers Board”.

The bond counsel’s analysis raises another problematic point—the issue of whether the city has a legal obligation to hold a referendum in order for citizens to authorize participation in RS Fiber. The Rosholt memo notes that state law “requires passage of a referendum in order for a municipality to construct a new telephone exchange” as planned by RS Fiber proponents. State law requires a 65 percent supermajority in order for a telecom referendum to pass. None of the participating cities or counties in RS Fiber has held a referendum.

“We understand the Joint Powers Board believes that the statute does not apply where the (telephone) switching is handled elsewhere. We do not agree with that conclusion,” the analysis pointedly states. “The City should consider requesting that a legal opinion be directed to it addressing that issue.”

The most recent estimates indicate the cost for RS Fiber bonds may be $77 million, a ten percent increase from previous estimates. Groundbreaking was scheduled to occur in August, 2012 but has been postponed until at least next spring.

RS_Fiber_Bonding_Analysis_9-12.pdf

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Metro Transit figures obtained by the Freedom Foundation of Minnesota (FFM) for the first month of the experimental fares indicate that monthly Northstar ridership plunged by more than eight percent , some 12,300 passengers.  Northstar train ridership in August 2012 totaled 66,543 passengers compared to 78,898 passengers in August 2011.  In both 2010 and 2011, ridership on the commuter line increased from month to month July to August.  The August 2012 decline was registered across the board at all Northstar stations with the greatest falloff at the station at the end of the 40 mile line, Big Lake.

Following lackluster results in the first two years of service for the heavily subsidized commuter rail, lower fares were instituted by the Metropolitan Council on August 1st  for the purpose of jump-starting ridership.  While taxpayers already cover more than 80 percent of the cost of each Northstar rider, transit officials under pressure to produce better results cut fares by $1 per ticket at all stations except Fridley, where the price cut was $.50.  The move follows a 2010 decision not to increase temporary introductory Northstar fares as originally planned, again due to disappointing ridership numbers.

Nevertheless, transit officials blamed the ridership deficit on ticket costs and recommended slashing prices further. “Current surveys of non-Northstar Commuter Rail riders living within the Northstar Corridor shows that a prime factor in the decision to not ride the train is the current fare structure and fare set. The recommended temporary fare change reflects current travel market conditions for commuter’s value of long distance service while balancing impacts on fare revenue,” according to Metro Transit.

The nine month fare reduction could result in a maximum estimated revenue loss from ticket sales of $323,000 by the time the temporary prices expire at the end of April, 2013.  It would take an increase in ridership of nearly 20 percent to offset the loss in revenue, according to Metro Transit.  The majority of any loss in revenue will be repaid by savings in professional and technical services, although further losses will be deducted from the rail line’s reserves.

The once ballyhooed Northstar line debuted with 183,000 fewer passengers than projected in 2010, followed by a 2.5 percent falloff in ridership in 2011.  Meanwhile, reliance on public transit in the Twin Cities overall continues to grow, largely on the strength of additional bus ridership.

                                         Tips or comments? Contact Tom Steward at 612-354-2165.

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An analysis of the potential liability in the event RS Fiber fails to attract enough customers was requested by the Gaylord City Council on September 5th.  City Administrator Kevin McCann noted in a memo that Stephen Rosholt, a Minneapolis bond expert, would review the bonding and debt service shortfall funding documents. The analysis cost local taxpayers about $1,500.

“His (Rosholt’s) initial thoughts are that it is a huge risk for the city since he is familiar with Monticello and other cases where the city got into a new venture that ended up costing cities a lot of money in the long run,” McCann stated in the memo.

It’s becoming clear the recent decision by Monticello, Minnesota to suspend bond payments for its FiberNet telecom system has clouded the municipal bond market for local government-owned telecom networks.  To guard against that possibility, cities and counties participating in RS Fiber are planning to contribute on a proportionate basis to a $4.5 million Debt Service Reserve Fund to make bond payments if necessary.

Rosholt deferred comment on his findings, referring FFM to Gaylord officials.  The report was sent to each member of the Gaylord City Council, but staff was instructed not to release the document. “We did consult again with the city attorney to see if we could send you a copy of the letter and his reply was the document is an attorney/client privileged document,” city staff said in an email.

Don Lannoye, attorney for the City of Gaylord, confirmed that the city is withholding the document on the basis of attorney-client privilege.  Lannoye cited a League of Minnesota Cities analysis of the Minnesota Data Practices Act that states “some communications between an attorney and client are subject to attorney-client privilege”. The document also states “it is not always readily apparent what communication qualifies and what does not…The attorney-client privilege must be balanced against the public’s right to access government data.”

“The Gaylord City counsel may choose to make the document public at some point by formally waiving the privilege or choosing to discuss the opinion in depth at a public meeting.  However, that is a choice for the counsel to make,” Lannoye said in an email to FFM.

Lannoye is an attorney with Schauer Law Office, which is operated by the part-time Sibley County Attorney, David Schauer.  In his capacity with Schauer Law Office, Lannoye serves as City Attorney for three cities participating in RS Fiber (Winthrop, Gaylord and Layfayette).  He’s also an Assistant County Attorney for Sibley County, another key participant in RS Fiber.

“This office has reviewed the documents that are being suggested by the joint powers entity and has issued an opinion to the County Board and the three City Councils that address the concerns that we as a law office have in regards to how the proposed documents could negatively effect (sic) all the municipal entities we represent.  Additionally, each individual municipality has hired independent bond council (sic) to also give a second opinion as to the merits of signing the documents provided,” Lannoye said in his email.

“The fact that this office has issued a blanket opinion on the documents and each municipality has retained independent bond council (sic), any potential conflict of interest should be negated.  There is no conflict in advising the City to, for the moment, deny your request to review the bond counsel's opinion as that is an issue specific to the City of Gaylord.”

While RS Fiber participants have the option of not paying into a debt service replenishment fund, there would be sharp consequences.  The penalties could include higher customer fees, service cuts to city hall and a reduced credit rating for the city, according to city council minutes from September 5th. The Rosholt report is expected to come up in discussion at the Gaylord City Council meeting on Wednesday, September 19th.  It’s not clear, however, whether the Gaylord taxpayers that paid for the report will be allowed to see it.                                                                 ###

       Tips or comments? Contact Tom Steward at 612-354-2165.

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--The Environmental Protection Agency’s (EPA) proposed new regulations on six state taconite facilities have not only provoked concern among northern Minnesotans who depend on the mining industry for their jobs and way of life. The controversy has also brought home to Iron Range residents the real life consequences of federal government regulations in the form of a 36 page proposed rule buried deep in the Federal Register (Vol. 77, No. 158, pages 49,308-343).

Technically, it’s just another FIP (Federal Implementation Plan), little more than a footnote in thousands of pages of Washington rule-making, but it’s struck a nerve among some of the rank-and-file in this long-time mining region that continues to suffer during this prolonged economic recession.  The proposed new regulations would potentially affect the Minnesota taconite industry that employs nearly 4,000 workers and thousands more in mining-related jobs.

In the last decade, the Office of Management and Budget (OMB) reports that federal agencies added more than 38,000 new federal rules to the government’s books. Since 2001, the number of pages of regulations published in the Federal Register has increased 20 percent from 141,000 to 169,000 pages. The estimated cost of compliance is a controversial political issue, ranging from $53 billion for the most costly new rules (OMB) to more than $1 trillion overall (U.S. Chamber of Commerce).

By requiring stricter emissions controls, the proposed haze rule seeks to further reduce regional haze on the horizon in Voyageur National Park, the Boundary Waters Canoe Area and Isle Royale.

Whatever the pros and cons of the federal action, the Clean Air Act rule published on August 15, 2012 provides a classic example of the tangled maze of bureaucratic rules, record-keeping requirements and reviews routinely imposed on business and industry, largely out of sight and mind of most taxpayers.

The Regional Haze Federal Implementation Plan consists of more than 30,800 words and three dozen pages in the Federal Register.  Congress has passed laws designed to reign in regulatory overreach which must be taken into consideration as part of the rule-making process.  In drafting the haze regulations, EPA officials evaluated several such laws intended to streamline the process for industry and soften the impact on the local economy.

Case in point? The Paperwork Reduction Act, which as EPA states in the rule aims to minimize the “total time, effort or financial resources expended by persons to generate, maintain, retain or disclose or provide information to or for a federal agency.”  This includes time required to “review instructions, develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information” among other requirements on a much longer list.   There’s just one problem.  The anti-paperwork prohibition only applies to federal regulations that affect ten or more persons or facilities.  Since the haze rule would affect “just” six facilities in Minnesota (plus one in Michigan), they’re out of luck.

It was the same outcome for a “Regulatory Planning and Review” analysis mandated by a 1993 executive order. The proposed FIP does not meet the federal standard for relief from a “significant regulatory action”, again because the regulation applies to seven sources.

Then there’s the Regulatory Flexibility Act (RFA), a tool to cushion small businesses and other small organizations  from adverse consequences resulting from regulation. Déjà vu, all over again.

“After considering the economic impacts of this proposed action on small entities, I certify that this proposed action will not have a significant economic impact on a substantial number of small entities,” wrote Susan Hedman, EPA Regional Administrator in signing the order.  “The net result of the FIP action is that EPA is proposing emission controls on the indurating furnaces at seven taconite facilities and none of these sources are owned by small entities, and therefore are not small entities.”

The State of Minnesota fared no better when it came to the EPA’s application of a 1999 executive order to prioritize federalism in regulatory matters with states.  After rejecting and replacing a Minnesota Pollution Control Agency (MPCA) state haze control plan, the EPA concluded the federalism question was moot.

“This rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government…because it merely addresses the State not fully meeting its obligation to prohibit emissions from interfering with other states measures to protect visibility established in the CAA (Clean Air Act),” according to the EPA filing.

The public comment period for the proposed EPA rule ends on September 28, 2012. But that may be just the beginning for one of the taconite facilities facing the haze regulations.  Mesabi Nugget recently informed local media that the company received a Section 114 ultimatum from the EPA for information on more than two dozen issues related to the Clean Air Act.

“It’s terribly time consuming and we don’t even know the purpose,” Jeff Hansen, the plant’s general manager told the Mesabi Daily News.  “The federal and state government agencies are too big and too powerful.”

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                 Tips or comments? Contact Tom Steward at 612-354-2165.

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In fact, 30 of those staff members (and all three officers) have higher salaries than the state Education Commissioner. The compensation details were included in the union’s Labor Organization Annual Report (“Form LM-2”), a legally required filing for any union with more than $250,000 in annual receipts.

Among those collecting $100,000+ are the union's chief lobbyist, public affairs and communications personnel, and more than 20 field staff. At the top of the pay scale is Education Minnesota president Tom Dooher, collecting a salary of $168,530 (his total pay, including other disbursements, is $190,942).

Large pay differentials between union officials and those they represent are nothing new.The national teachers’ unions have come under fire recently for using compulsory union dues to give union leaders extravagant compensation packages.

Meanwhile, few if any of the union’s rank-and-file members will ever see comparable pay. According to the National Education Association, of which Education Minnesota is an affiliate, Minnesota’s public school teachers are paid an average salary of $53,680. And of course, a chunk of each teacher’s salary goes straight to Education Minnesota, which helps the union pay for… well, we already covered that.

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Take, for example, the current Minneapolis district’s teacher contract. The district was under a great deal of scrutiny as parents, taxpayers, and even liberal education reform advocates urged the district to follow through on their commitment to accountability, particularly in regards to teachers’ performance. During negotiations, the superintendent assured the public that MPS was working "alongside our teachers’ union on many substantial reforms that will convert MPS into a model urban school district". Then, after seemingly endless, secret negotiations between the district and the Minneapolis Federation of Teachers (MFT), the long-anticipated contract was approved in mid-April.

So what’s in the contract?

Well, more than four months after it was ratified, no one can say for sure. No one, that is, except the teachers' union and school district.

Earlier this summer, the Freedom Foundation of Minnesota submitted a Data Practices Act request to the district to obtain a copy of the complete teachers' contract. The district responded by claiming the contract, which was approved four and a half months ago, was still being finalized. Perhaps most disturbingly, the district says, "the Minneapolis Federation of Teachers takes the lead in developing the strikethrough and final contract".

FFM requested the contract from the Minneapolis Federation of Teachers, but was told, "the finalized document takes a very long time to publish" and is not available. The union instead referred FFM to an executive summary and to a previous teachers' contract, which they said “really do give the entire thing while you wait”. The union's website also says the "2011-13 Complete Collective Bargaining Agreement is still being finalized" and advises people to "please direct any contract questions to MFT59 directly".

So not only is the public in the dark about the full contents of a contract they’re already paying for, but the contract is in the hands of a government union that is not accountable to voters or taxpayers. Labor relations experts told FFM that the contract delay and the union’s role in finalizing the contract are highly unusual.

According to media reports earlier this year, the school board has also repeatedly refused to turn over recordings of the labor negotiations that yielded the current contract.

Secret labor negotiations and secret labor contracts. Apparently this is what passes for transparency and accountability in Minneapolis.

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  Ethan Dean never gave up hope during five tours of duty as a US advisor in Iraq and Afghanistan. He kept making his mortgage payments while living halfway around the world, partly due to rent checks from a tenant staying in his house in Winona, Minnesota. Even with his mortgage under water, he continued to hold out hope—until he got back home.

Soon after Dean’s return to the states this spring, however, the rent checks stopped coming in. Not because his tenant moved out or couldn’t pay, but because Winona authorities said it’s against the law for him to have renters in his three bedroom house nearWinona State University. The city refused to renew a temporary rental license that gave Dean an exemption to Winona’s controversial ordinance that capped at 30 percent the number of home rentals per block.

“I’ve lost the house. I’m not in the same state, I can’t live in it and I can’t rent it,” Dean said from his new job in Kansas City. “I’ve tried everything humanly possible to keep that house but the city council is obviously not too concerned about their citizens.”

While Dean may be losing the battle to retain ownership of his house, he’s more determined than ever to continue the legal campaign he’s waging against the southeastern Minnesota city’s so-called “30 percent rule”. The Institute for Justice, a national civil liberties group, has sued in state court to strike down the ordinance preventing Dean and the owners of two other houses from renting their property. The crux of the case:  Renting one’s home to someone else is a fundamental property right.

“The city is playing musical chairs with property rights. Some homeowners can get rental licenses and not even use them, and others cannot get them even when they desperately need them,” said Anthony Sanders, an attorney leading the legal challenge.“The city arbitrarily picks winners and losers. It’s got to stop.”

For Ethan Dean, the rental prohibition has not only prevented him from critical cash to help make his house payments but also serves as a barrier to selling it.

“There is no doubt if I could rent the house, I could have sold It years ago. People have wanted to buy it so they could rent it out,” Dean told FFM. “Half a dozen people have expressed interest with my realtor but they can’t rent it.”

In the process of investigating the case for trial, attorneys have also uncovered evidence of incompetence in administering the rental restriction. Attorneys discovered that city authorities had lost track of an expired rental license that should have been assigned three years earlier to Holly Richard, another plaintiff. While Richard now possesses the newly minted city permit, the costly mistake made her all the more resolved to see the case through.

“I’m still part of the lawsuit because I don’t agree with the city regulations on this,” Richard said. “They can’t keep track of the permits, so I can’t see who it benefits. It doesn’t benefit the average renter or homeowner.”

A city official acknowledged the error but said no changes have been implemented to current procedures. “After we checked all the properties on the block, we found that another property did not renew their rental license in 2008 and the property wasn’t taken off the map,” said Carlos Espinoza, assistant city planner. “We just issued her a rental license as soon as we discovered that. The block in now saturated according to the 30 percent rule.”

The other plaintiffs in the case, Ted and Lauren Dzierzbicki, have been forced to let their house stand empty since their daughter graduated from Winona State University. Despite investing thousands of dollars in maintenance and improvements, they have also been unable to find a buyer without a rental license in hand.

The lack of a permit, however, hasn’t stopped Ethan Dean from tweaking city authorities one more time. The same single mother with two kids who was renting his house while he was serving abroad is living there to this day—rent free.

“She’s been staying there for free for several months only because I want someone in the house. I didn’t want to kick her out,” Dean said. “The city can’t say nobody can stay for free. They can say people can’t rent it. She’s a single mom with 2 kids, what am I going to do?”

The case will go to trial in Minnesota District Court in Winona in January, 2013.

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        Tips or comments? Contact Tom Steward at 612-354-2192.

In short, Twin Cities transit officials appear to be getting out ahead of themselves and taxpayers, planning to build more rail lines than can likely be sustained with the amount of tax revenue generated from existing transit sales and motor vehicle excise taxes.

It all comes down to a little known transit agency formed under a 2008 agreement between Anoka, Dakota, Hennepin, Ramsey and Washington counties for the purpose of funding major transit improvements such as passenger and light rail lines and rapid bus transitways. Known as the County Transit Improvement Board (CTIB), the agency receives about $97 million yearly from a quarter-cent sales tax and $20 motor vehicle excise tax imposed on residents and consumers in the five metro counties.

Some board officials, however, reportedly believe the Twin Cities transit sales tax should be more in line with other metropolitan areas with higher rates. So CTIB has begun quietly laying the groundwork for a sales tax hike, starting with the group’s 2012 financial annual review.

“Within the decade, and if projects develop as indicated, the Board’s Sales Tax will largely be consumed by debt service and its 50% share of net operating subsidy...each year that passes bring (sic) the Board closer to having to seek to increase its revenue base or choose which projects to fund in the future,” according to the Annual Financial Review and Capacity Estimate report from June 2012.

Talk of a tax increase caught some officials off guard at a June 20 CTIB workshop, during which Anoka County Commissioner Matt Look posted a comment on his Facebook page, referencing talk of jacking up the current one-quarter cent transit sales tax to a full cent.

“There are those that are advocating for a 1 cent sales tax (currently .25 cent sales),” Look wrote. “Someone help me.... Is that a 300 or 400% increase?”

The minutes of an official CTIB meeting several days later, at which the annual financial review was unanimously approved, include no mention of a tax hike or increasing revenues. No audio or video recordings are made of CTIB meetings, according to staff.

The transit board is already on the hook to fund 50 percent of the annual operating subsidies for five transitways: Hiawatha Light Rail, Northstar Commuter Rail, Cedar Avenue Bus Rapid Transit, I-35W South Bus Rapid Transit and Central Corridor Light Rail. Currently CTIB spends about $22.6 million on operating costs. By 2021, however, that figure is expected to quadruple to $89 million, depleting nearly all of the board’s sales tax revenues when combined with debt service payments.

CTIB and the Metropolitan Council have commissioned a study that will describe “the funding constraints of the Board and its funding partners and options available to address them.” The first phase of this study is expected to be completed later this summer.

The bottom line: While the Dayton administration and rail advocates plan a huge expansion of our rail system, it’s increasingly clear that massive tax hikes will be part and parcel of their plan.

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The proposed municipal fiber-optic network is the centerpiece of an economic development initiative focused on converting the southwest suburb into a technology village with a data center and incubator to draw entrepreneurs and high-tech companies.

As the latest proposed government-owned network to surface in Minnesota, the Prior Lake proposal puts a new focus on the role of government in competing with companies it also regulates. The document states:
      o “It is unlikely that reliance on any of these providers will improve or enhance economic development. If you were a business looking to come or to build here, would you be attracted by them?”
     o “We discuss why business is not, cannot, be attracted to networks that are largely copper-based or that separate our lives into office capabilities and home capabilities.”
     o “We explain why the existing service providers are not motivated to build the network we envision or need if we are to attract high technology companies.”

Under the model recommended in the 93-page feasibility study, the city would market traditional triple play phone, video and high-speed internet services, as well as other digital services. The city system would in many respects duplicate telecom products already available to residents, going head-to-head with private carriers Integra, CenturyLink and Mediacom that currently offer speeds of 20 to 30 megabits per second.

“The scale of it is bigger than anything I’m aware of that Prior Lake has jumped into as a municipal project,” said Dan Rogness, Community and Economic Development Director. “It is a big step and I think that’s why there will be some time taken to vet this out before a decision is made.”

The report also criticizes a state law that gives local voters final say by requiring cities to hold a referendum before moving forward with a local telephone exchange as part of a municipal network. The city study characterizes the law as a “burdensome” and “outdated” statute used by telecom companies “to deny legitimate outcomes.” Especially noteworthy to residents and taxpayers is the city's troubling contention that “alternatives seem to exist” that would allow Prior Lake to circumvent a vote.

The risks to local taxpayers of government-owned networks have been underscored by serious financial troubles at FiberNet Monticello. A city-operated telecom network once hailed as a national model, FiberNet Monticello has lost millions of dollars and faces potential default—a case study that’s close to home in Prior Lake.

“Monticello has come up in some meetings. There’s the realization of course they paid for something with a revenue bond and now are defaulting on that,” Rogness said. “I think it has cast a shadow on the thinking of some cities about moving forward.”

Lookout Point Communications, a St. Paul consultant, drafted the study. Lookout Point Communications also served as a consultant to the nearby TonkaConnect proposed fiber network, leaving the project before the Lake Minnetonka Communications Commission rejected the estimated $80 million system in 2011.

The Prior Lake city broadband fiber network subcommittee involved in overseeing the report includes a nationally known activist for taxpayer-funded telecom, Chris Mitchell of the Institute for Local Self Reliance. Mitchell is an enthusiastic booster of TonkaConnect and FiberNet Monticello, among other government-backed networks.

“They (cities) all recognize that big companies have little incentive to improve a system. Full fiber networks are expensive to build, and the return on investment takes years,” Mitchell wrote in a 2010 opinion piece.

No telecom representative participated on the fiber subcommittee in the Prior Lake study. “This has come up in discussions that one of the next steps in the process to try and evaluate the recommendations is to have this reviewed and discussed with the providers,” Rogness said.

CenturyLink, one of the three private providers in Prior Lake, told FFM the internet speeds the carrier offers in the community are not reflected in the feasibility study. Lookout Point Communications did not respond to an FFM inquiry at the time of this posting.

Following two recent meetings of the Prior Lake Economic Development Authority to discuss the fiber network, the proposal will move on to a city council workshop scheduled for September 9th. City officials hope for a decision one way or another this fall.

                                     Comments or suggestions?  Contact Tom Steward at 612-354-2165.

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In 2009,North Saint Paulcity administrator Wally Wysopal was the loudest cheerleader for a proposed $18.5 million taxpayer-backed telecom network dubbed PolarNet.

“It provides economic development opportunities like we don’t have today and that’s what we want to do is distinguish North Saint Paul from any other community in the metro area,” Wysopal said at the time.

Even after North Saint Paul voters overwhelmingly rejected the controversial fiber-optic network, Wysopal thought it might be viable with some fine tuning. "We need to find out what went wrong and what's salvageable," Wysopal told the Ramsey County-Maplewood Review.

Three years later, Wysopal remains a vocal advocate—not for PolarNet, but for the private telecom providers who opposed the city’s proposal. Since the defeat of the referendum, private cable providers have made major investments into upgrading their existingfiber opticinfrastructure and services in the Twin Cities suburb.

“I don’t know if we dodged a bullet, but I think we’re in a more stable position because we’re not trying to provide a service that the private marketplace has responded to and provided at higher speeds and lower prices,” Wysopal recently told FFM.

Wysopal still contends the city of 12,000 had a sound business plan to operate PolarNet. He also wonders whether the option of PolarNet coming on line might have been a factor in motivating private providers already operating in North Saint Paul to upgrade their systems. Regardless, city hall’s top official has been pleasantly surprised by the increase in speeds and improved coverage following his pet project’s lopsided loss in the February, 2009 special election.

“If it was related or not, it so happens after that project Qwest was in here installing fiber to the node and Comcast came in with a lot more products and offerings and some businesses picked up other service,” Wysopal said. “I think the whole community has benefited with more services and lower costs.”

Although private providers generally do not disclose the cost or technical specifications of their investments for competitive reasons, Wysopal has closely tracked their efforts. It’s given him a newfound appreciation of the enormous expense of competing in a high tech enterprise and the commensurate risk to taxpayers when government gets involved.

“The competition that’s out there and how much effort the private sector has to make in capital and technical upgrades all the time, I look at that and I’m very impressed with their work,” he said. “It’s impressive that kind of investment in infrastructure goes on.”

At the same time, the North Saint Paul official has taken note of mounting problems at municipal networks like FiberNet Monticello, a system that has suffered heavy financial losses and suspended bond payments this summer. Yet he wonders if other local governments are paying close attention. “It’s a little curious to me that some places haven’t learned,” he said.

Wysopal also has questions about the proposed taxpayer-backed fiber network under consideration in Ramsey County. The Ramsey County Institutional Fiber Network CIP Project appears to call for one part of the fiber network to be run by and for Ramsey County and the city of St. Paul. A second part of the county’s fiber network would be available for lease “to any private company and/or not-for-profit”, according to the project description. While Wysopal is waiting to see more details, he has raised concerns with Ramsey County officials about their model, based on his experience in North Saint Paul.

“I don’t’ know a lot about the details of the plan other than it’s a public and private fiber optic conduit and they try and sell that off and use the revenue to pay for the construction of the two,” Wysopal said. “I question that approach because the incumbents, the private providers, don’t want to ride on someone else’s fiber.”

Ironically, Wysopal relies more on his 4G phone for connectivity rather than the internet service in his own Fridley neighborhood.In fact, he cites the explosive growth of cellular internet service as one more factor that few outside the industry saw coming.It’s another reason why “losing” the referendum on PolarNet might well be considered a victory in hindsight, even by one of its most ardent supporters.

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                                        Tips or comments? ContactTom Stewardat 612-354-2192.

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A billion dollar government program to get kids to walk and bike to school that was the focus of a Freedom Foundation of Minnesota (FFM) investigation faces sharp funding cuts in the 2012 federal transportation legislation signed into law by President Obama last week.

Advocates for the federal Safe Routes to School (SRTS) program released a statement calling the legislation “a major step backwards” because “bicycling and walking programs suffer large and disproportionate cuts in funding”. Supporters of the program estimate that funding cuts could be in excess of 60 to 70 percent of previous year’s appropriations.

“Safe Routes to School (SRTS) is a national and international movement to create safe, convenient, and fun opportunities for children to bicycle and walk to and from schools. The program has been designed to reverse the decline in children walking and bicycling to schools…reversing the alarming nationwide trend toward childhood obesity and inactivity,” according to the program’s website.

In May, the Minnesota Department of Transportation (MnDOT), which oversees the 100 percent federally funded program in Minnesota, announced another $768,000 in SRTS grants to 92 Minnesota schools. Altogether, the state of Minnesota has been allocated a total of $17.8 million through fiscal year 2012 to support activities like walking school buses and bike rodeos, as well as sidewalks and other structural projects.

Examples of SRTS spending revealed by FFM include:
o A 24 page state handbook with guidelines and strategies for walking and biking to school.
o $35,000 for two mobile speed monitors in St. Louis County.
o $80,000 for driver feedback, a traffic calming and walking school bus project in Rochester.
o $282,000 for city sidewalks despite vocal public opposition in Goodview.

The 2012 transportation bill eliminates special funding for the Safe Routes program, forcing SRTS to compete with several other “Transportation Alternatives” programs. All told those transportation projects will receive 33 percent less funding than in previous years. Moreover, the law allows states to opt-out and redirect existing funding, potentially gutting SRTS and other biking and walking programs in some states.

“The state opt-out provision is a major blow to funding levels. A state that chooses to opt out can use this funding for any program with no additional restrictions. Even a state DOT that cares about biking and walking may be tempted to have unrestricted funding for highway uses,” according to an analysis by the advocacy group America Bikes.

MnDOT did not respond to FFM inquiries regarding the impact of the changes and funding cuts to SRTS at the time of this posting. The impact may vary widely from state to state depending on the transportation priorities set by policy makers. Nationally, Safe Routes to School proponents clearly foresee trouble on the way.

“We will all need to work together to encourage state departments of transportation to use all of their Transportation Alternatives money, rather than opting out of half of it, and we will need to work with local jurisdictions to get them to propose Safe Routes to School projects,” writes Margo Pergroso, SRTS National Partnership deputy director. “Keep your head up, keep fighting and keep presenting the vision and need for a positive future where kids can walk and bicycle safely to school and in daily life.”

Meantime, there’s no word yet on whether the anticipated funding reductions will affect the future of the James L. Oberstar Safe Routes to School Award. The Oberstar Award is given annually to “honor his dedication to American schoolchildren as the pioneer for the federal Safe Routes to School Program.” SRTS officials are looking into FFM’s inquiry on whether the award will continue to be designated annually or face retirement like its namesake.

                                        Tips or comments? Contact Tom Steward at 612-354-2192.

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The federal transportation bill that finally became law last week keeps the wheels on highway funding, construction jobs and public transit programs, but appears to derail passenger rail projects like the proposed $1 billion Northern Lights Express (NXL) line from the Twin Cities to Duluth—at least for now.   

The development bolsters the recent decision by the Anoka County Regional Rail Authority to rescind financial support and pull out of the 155 mile proposed NLX line, which parallels a defunct and failed Amtrak line shut down in 1986. 

“These projects are financially unsustainable.  There’s not enough advocates to spend that amount of money on the federal level to support these projects. The bottom line is that Anoka County is ahead of the game.  The federal government is catching up to what Anoka County has already decided,” said Anoka County Commissioner Matt Look, chair of the Anoka County Regional Rail Authority.

The $105 billion Moving Ahead for Progress in the 21st Century Act (MAP-21 -- the official title of the federal transportation funding legislation) includes no mention of high speed rail funding through the 2014 fiscal year, according to lobbyists and government officials who have combed through the 599 page bill.

The legislation is “a return to a 1950s highway-heavy emphasis”, according to Barb Thoman, executive director of Transit for Livable Communities, a Twin Cities advocacy group.  “The deal also eliminates a critical passenger rail program and eliminates the Senate’s efforts to establish new national freight policies.”

A curt statement posted on the American High Speed Rail Alliance website noted, “This bill will allow funding continuity for 27 months. To be continued…”

For now, NLX remains on life support, sustained by $9 million in state and federal funding already in the pipeline.

"I am grateful that there are finally people in Congress who are willing to say "no" when "no" is the right answer,” said Commissioner Rhonda Sivarajah, chair of the Anoka County Board and NLX opponent. “We cannot continue to spend money we don't have on projects we don't need."

Local and state transportation officials say preliminary engineering, environmental and mapping work underway allows NLX to literally buy time until the next federal transportation bill comes up in 2014.

“The next reauthorization in 2014 will be critical for our projects, as well as other continuing efforts such as California HSR (High Speed Rail), based on whether additional funding or an ongoing program is authorized at that time,” said Dave Christianson, project manager for MnDOT. “If no new funding appears at that time, the PRIIA (Passenger Rail Investment and Improvement Act) and ARRA stimulus will end with very limited results.”

In the meantime, NLX officials continue to quietly wage a public relations campaign, updating city and county officials on the project’s progress and potential.  They pitch NLX as the most “shovel-ready” passenger rail project in the nation and claim the $1 billion construction price tag would not require an operating subsidy within two years of starting up.

“We are hoping to have our first rider in 2015,” Ken Buehler, NLX technical advisory committee chair told the Cambridge City Council in March. “2015 might be a stretch, but it’s possible if Congress passes a six-year transportation bill next year and there’s high speed passenger rail funding in it.”

A document on the NXL website even contends the controversial project can be “completed without congressional action” by following the Federal Railroad Administration (FRA) process.  “There was, and still is, funding within FRA (Federal Rail Administration) and AMTRAK to initiate new passenger rail services throughout the country," Bob Manzoline, executive director of the Minneapolis-Duluth/Superior Passenger Rail Alliance, told FFM.

Supporters of the rail line maintain that this project is the "most shovel-ready passenger rail [line] in country".   Yet, without state or federal funds, final approval of the project remains questionable -- at least until after the next election.

                                        Tips or comments? Contact Tom Steward at 612-354-2192..

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The current train line's latest ridership statistics through May reveal that Northstar Commuter Rail continues to go in reverse, down three percent (7,600 riders) since May 2011. The once ballyhooed line has come up short from the start, debuting with 183,000 fewer passengers than projected in 2010 and dropping 2.5 percent of ridership in 2011. At the same time, reliance on public transit in the Twin Cities continues to grow, largely on the strength of additional bus riders.

As transit officials strive to find ways to attract more riders through newly announced fare reductions, the Northstar express bus service looks better than ever in hindsight, especially in comparison to its failing successor.

The Northstar Commuter Coach began service along a 30-mile stretch of Highway 10 in late 2001 to "mimic the planned Northstar Commuter Rail line route". It got off to a running start with ridership shooting up nearly 50 percent from 2002-05, ramping up from 121,000 to 180,000 passengers and generally exceeding expectations until being retired by the new trains in 2009.

"Despite limited service, Northstar Commuter Coach has been very successful and we expect the demand to continue to grow in the future," said Duane Grandy of the Northstar Corridor Development Authority (NCDA) in 2003.

Today, Northstar Commuter Rail loses more taxpayer funding in a month--$1 million--than Northstar Commuter Coach spent in its operating budget for an entire year. To be sure, the start-up Northstar bus service made just two stops on the way to Minneapolis, Elk River and Coon Rapids, while the trains also serve Big Lake, Anoka and Fridley. Nor did Northstar busses operate on weekends or for Twins games and other special events.

Yet data show that commuter coaches put Northstar on the map at a fraction of the cost to passengers and taxpayers as the trains that took their place. For example, while Northstar trains haul four times as many passengers each year, they cost some fifteen times as much to operate as the express busses. Official state transit statistics also show:

• Northstar bus passengers paid a much greater percentage of the actual cost, 66 percent in the last full year of operation (2008) compared to 16 percent for Northstar rail passengers.
• Northstar bus passengers received a subsidy of $1.77 per ride in the last full year of operation compared to a current subsidy of about $18.46 per rider on Northstar trains. 
• Northstar commuter busses filled a high percentage of available seats, exceeding more than 80 percent of capacity some years. 

• While Northstar Commuter Rail plans to cut fares by a dollar in its third year of service to attract customers, Northstar Commuter Coach increased fares by a dollar in its third year of service (2004), gaining 20 percent more riders and holding down taxpayer subsidies.

Just nine months into Northstar rail service in September 2010, the Met Council postponed plans to increase the "introductory" level passenger fares designed to encourage new customers in the first year of service. "Deferring the fare increase to 2012 will allow more time for the economy to improve and the unemployment rate to decline. With more people commuting to work, Northstar ridership will grow," a Metro Transit memo confidently predicted.

Now transit officials have backtracked again, reducing the so-called "introductory" fares by a $1 starting August 1, 2012. And interestingly, Met Council officials are fielding media questions about the option of shutting down the ailing commuter rail line for the first time. They say the estimated $150 million price tag for refunding the federal government’s share in Northstar makes that an unlikely option. If the Northstar Commuter Rail line continues to fall short of financial and ridership projections, however, the successful Northstar Commuter Coach service remains a link back to the future.

                                        Tips or comments? Contact Tom Steward at 612-354-2192..

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    Some four years after the housing bubble tanked, the number of tax-forfeited properties up for auction has suddenly mushroomed in what used to be one of the fastest growing areas in Minnesota. 

On Monday, June 18th more than 270 tax-forfeited vacant lots in St. Cloud, Sartell and five neighboring central Minnesota cities will go up for sale at an auction by the Stearns County Auditor in an effort to get the parcels back on the tax rolls. 

“Much of it was over-development where all the lots had special assessments against the property. The developer’s cash flow dropped off and they weren’t able to pay off their obligations,” said Steve Holthaus, tax system manager for Stearns County.

Just one house will be among the properties up for grabs to the highest bidder. Local authorities hope for better results than what they experienced in 2011, when just 3 of 30 tax-forfeited properties were successfully sold to the 75 prospective buyers attending the auction. 

“We have our hopes up that there’s a slight turn in the climate we think for bidding on these,” said Mary Degiovanni, finance director for the City of Sartell. “What we hear from folks out there is there’s going to be some interest in these lots. Either way we want to get these out there and move on.”

The legal lag time for tax-forfeited property is much longer than for house foreclosures: three years for vacant lots with unpaid property taxes and five years for improved lots with special assessments. 

Until recently, tax-forfeitures were rare in St. Cloud with only a few isolated cases from 1990-2011. Now the number of tax-forfeited properties working through the system is projected to explode, climbing from 6 in 2011 to 122 in 2012 in St. Cloud, while the number of tax-forfeited lots in Sartell will escalate from 2 in 2011 to more than 75 in 2012. In the next two years St. Cloud anticipates another 337 tax-delinquent lots going up for auction.

“The counties in the metro area don’t seem to have the problem we’re having. They were projecting it would keep going at the rate it was and it just didn’t,” said Holthaus. “The cost of building now is still more than buying a two year old home. There are no building permits to be issued right now.”

An analysis by the City of St. Cloud underscores the fiscal impact this lack of development has caused the city’s finances and taxpayers. The city’s bonding for infrastructure improvements went from $15 million in 1997 to $80 million in 2007. By the end of 2011, the city was owed $5 million for special assessment payments due from delinquent property owners. 

St. Cloud hopes to refinance general obligation bonds to help cash flow, but expects it will take the fund “many years to recover”. In the interim, the city has curtailed projects without direct funding sources. The good news is that those measures “will allow us to financially survive the crisis with a positive cash flow and maintain our current bond rating (AA+),” said John Norman, St. Cloud finance director in the report.

The City of Sartell also plans to be less aggressive in the future in obligating local tax dollars to development. “We’re going to wait and see how the market shakes out,” said Degiovanni. “Like anything else, if the private sector can do it and does it, we’ll get out of the way.”

The Stearns County auction will be held Monday, June 18th at 6:30 p.m. at the Stearns County Service Center at 3302 County Road 138 in Waite Park. Bidders must be present in person to compete for what the county auditor says will be “many prime lots for sale.” 

                                          Tips or comments? Contact Tom Steward at 612-354-2192..

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Not bad for a loosely knit group of small business owners struggling to call attention to an issue that even political insiders hadn’t heard of at this time a year ago, when the Freedom Foundation of Minnesota first reported concerns over coerced unionization among the state’s 11,300 licensed family child care providers.

Today they still go by an ad hoc name, “Coalition of Child Care Providers”, a decentralized group that crosses political party, comprised by a core leadership group of nearly one dozen women scattered across the Minnesota.

Despite prevailing against politically powerful unions and Minnesota’s top elected official, however, they aren't taking anything for granted, other than the reality that home-based private providers remain more vulnerable than ever to the same forces and tactics.

“Governor Dayton made it clear that it is his intent to make this a legislative issue next session. The fight to remain independent is far from over,” warns a recent coalition email sent to thousands of Minnesota licensed family child care providers.

Last week Dayton ruled out filing an appeal of the Ramsey County District Court decision striking down his November 2011 executive order authorizing a union vote among about 4,300 home child care providers who care for state subsidized clients. Yet in the process, Dayton reiterated his view that the case for unionizing licensed home-based child care providers is far from closed.

“Although I strongly disagree with the Court’s decision, I will not appeal it. I will work toward electing a new legislature, which will support the right of working people to decide for themselves whether or not they want to join a union,” said Dayton in a statement.

“They’re pretty desperate. Look at what happened in Wisconsin,” said Jennifer Parrish, a Rochester provider who opposes unionization. “I think people are at the point where they’re not as interested in unions as they used to be. The need for unions isn’t what it used to be and with the loss of members goes the loss of dues money. So this is a really easy way to have some guaranteed income and boost their membership.”

One of the unions behind the organizing drive, AFSCME Child Care Providers Together, has already signaled its intention to continue the to pursue unionization.

“Governor Dayton respects our democratic right to decide for ourselves whether or not we want a union. Every day we wait makes us one day stronger,” said Lisa Thompson of AFSCME Council 5 in a statement. “We’ve already united to increase the qualilty of child care, to improve access for working parents, and to stabilize our profession. Any judge or legislator who tries to stop that is hurting the families who depend on us to keep their kids healthy, learning and safe.”

With the entire legislature up for election in November, child care union opponents are urging private child care providers to attend town hall meetings, find out where candidates stand, and hold workshops to educate other providers and the public on the issue.

“Based on what we’ve seen in other states and on what the union has said, it’s going to be a legislative issue as early as next session,” said Parrish. “It’s just a matter of being organized enough so that when this does come to the legislature that we’re ready for it and can continue to fend it off.”

The Coalition of Child Care Providers has warned providers statewide that union information cards they previously signed and returned to the union may be used by AFSCME and SEIU “as a signal of support” at the state legislature. The coalition recommended providers write to the unions to request their card back if they did not mean to support unionization. The statewide email also warns that more union “door knockers” may show up at their home-based business and not to “sign anything without reading it carefully.”  

Currently, seven states have active child care unions (Connecticut, Illinois, Maryland, New Mexico, New York, Oregon and Washington). Nine states have repealed unionization or no longer enforce a prior executive order (Iowa, Kansas, Maine, Michigan, Minnesota, New Jersey, Ohio, Pennsylvania and Wisconsin).

“We have taken a look at the information and frankly, we are not willing to gamble with the taxpayers’ dollars on a passenger rail system where I believe the studies and numbers just don’t add up,” said Rhonda Sivarajah, Anoka County Board chair and Regional Railroad Authority member.  Commissioners Look, Sivarajah, West and Westerberg voted yes on withdrawal, while Commissioners Erhart, Kordiak and LeDoux voted to continue on the project.

The practical and political impact of Anoka County’s withdrawal on the viability of NLX, which has an estimated price tag of $650 million--$1 billion, will take time to assess.  In the short term, Anoka County will save about $55,000 in annual dues to the rail alliance.  In the long term, Anoka County residents could save a minimum of $10 million in construction costs, if and when the passenger rail line receives approval.

“It’s very easy to say you support a project when other communities are paying the lion’s share of the cost,” said Sivarajah. “If these other communities truly believe NLX is a wise investment, they may have to invest more now.”

In a letter, NLX officials thanked Anoka County for its participation and indicated the project would continue to move ahead. "The loss of Anoka County's funding contribution, 15% of the overall 2012 budget, will not prevent the project from completing its planned 2013 activities.  We hope Anoka County will consider joining the effort again in 2014," said Steve Raukar, chair of the Minneapolis-Duluth/Superior Passenger Rail Alliance.

Conflicting reports and ridership projections have clouded the proposed 155 mile long rail route’s prospects from the start.  Proponents claim NLX would draw 400-800,000 passengers a year, spark $2 billion in economic development and “encourage” 13,800 jobs.

At the same time, a controversial 2010 economic analysis that was eventually spiked by MnDOT concluded the Twin Cities-Duluth HSR (High Speed Rail) Corridor has a low benefit-cost ratio with a return of just 27-35 cents for every government dollar spent.  A follow up report projects an operating subsidy of between $37-83 per passenger.

Preliminary engineering on the controversial NLX line has begun with a $5 million in federal grant and $4 million in state funding.   A recent Freedom Foundation of Minnesota report revealed, however, that it’s far from all systems go—not only for NLX, but for ‘high speed’ rail projects nationwide.

Though the Obama Administration continues to support rail projects, Congress has essentially slammed the brakes on “high speed” rail.  Eighth District Congressman Chip Cravaack, who represents most of the communities along the proposed NLX route, opposes the project.  Proponents were hopeful of receiving funding in the 2012 state bonding bill, but came up empty handed.

                                 Tips or comments? Contact Tom Steward at             612-354-2192      .

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    The City of Monticello has notified bondholders that it plans to stop repayment of $26 million in bonds for the troubled FiberNet Monticello telecom system, due to a shortfall in operating revenue from telecom subscribers. This development marks the most dramatic step yet in the downturn for what was once a nationally touted municipal telecom model. The decision to suspend bond payments appears to be unprecedented for a local government telecom system in Minnesota.

“Net revenues of the System are not sufficient to pay both operation costs and debt service payments on the Bonds,” according to a June 6, 2012 memo signed by Jeff O’Neill, City Administrator. He also emphasized that the prospectus for the revenue bonds issued for FiberNet included a disclaimer that “Purchase of the Bonds involves a high degree of risk.”

The notification follows a city warning to bondholders in March that it sought to renegotiate the terms of its financial obligations, including interest payments of $882,668 in June and $943,670 in August. The city issued a first quarter 2012 report last month showing a flat-lined customer base and projecting an annual loss of $2.1 million for this year. The city has acknowledged using funds from its municipal liquor store operations to keep the FiberNet system financially afloat since July, 2011.

“After reviewing the financial performance of the System, the City has decided to discontinue making supplemental payments for debt service as of June 1, 2012. There is a debt service reserve fund that is available to make debt service payments for the near future in the event that net revenues of the System are insufficient to fund debt service payments,” according to the city memo.

Last week Hiawatha Broadband Communications (HBC), the company retained to manage and operate FiberNet for a fee of $15,000 per month, gave notice to the city that it was pulling out of the project in 90 days. “HBC had concerns about being able to continue to manage the project in accordance with HBC principles,” said Gary Evans, HBC President and CEO.

Evans has acknowledged that questions about FiberNet Monticello’s downturn could have an impact on other projects. In an interview with the Freedom Foundation of Minnesota last week, Evans said he had reached out to the proponents of RS Fiber, a $70 million project under consideration in Renville and Sibley counties. Sources say the joint powers board of RS Fiber will be meeting with Evans tonight in Winthrop to discuss HBC’s role in FiberNet Monticello.

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“I cannot confirm there was an eagle found,” said Chuck Traxler, spokesman for the USFWS.“We want to do a thorough investigation and get the facts as to what’s going on. We are not absolutely certain of anything right now but we are looking into it.”

The case was reported on Sunday to authorities by Mary Hartman, a member of the Coalition for Sensible Siting, an organization opposed to wind farms.The incident was forwarded to theMinnesota Department of Natural Resources(DNR) and US Fish and Wildlife Service (USFWS).

There are few, if any, known cases of bald eagles, a protected species under federal law, being killed at a wind energy site in Minnesota.Yet the potential danger to bald and golden eagles from wind turbines has become an increasingly contentious and politically divisive issue in the siting of wind farms. Approval for a 48 turbine Goodhue County wind farm owned by billionaire T. Boone Pickens was delayed recently by Minnesota regulators, pending a comprehensive study by the developer on the potential impact to eagles and bats.

An FFM inquiry about the investigation at the offices of a wind producer in the area, Pioneer Prairie Wind Farm, was referred to corporate headquarters of EDP Renewables in Houston, Texas. Email and phone messages to EDP were not returned by the time of this post.

“As far as I know, if this is confirmed this would be the first reported case of a bald eagle killed at a wind energy site in the state of Minnesota,” Hartman said. “But if the AWA Goodhue wind project goes in, I do not believe it will be the last.”

The Minnesota Department of Natural Resources says Minnesota has approximately 1,300 active eagles nests, the third largest breeding bald eagle population in the country.While bald eagles were removed from the list of threatened and endangered species in 2007, they remain under the protection of the Bald and Golden Eagle Protection Act and Migratory Bird Treaty Act. That law prohibits “thetake, possession, sale, purchase, barter, offer to sell, purchase or barter, transport, export or import, of any bald or golden eagle, alive or dead.”

.              Tips or comments? Contact Tom Steward at 612-354-2192.

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Now the Minnesota Department of Transportation (MnDOT) has announced another round of $768,000 in taxpayer-funded grants dedicated to paving the way for more “walking school buses”, “bike rodeos” and Fire Up Your Feet activities in 92 Minnesota schools.

“These projects will help communities increase opportunities for kids to walk and bike to school,” said MnDOT Commissioner Tom Sorel in a news release. “More kids walking and biking means less traffic on the road and in front of schools, improving safety and promoting healthier kids.”

MnDOT promotes the program’s “holistic approach" to prodding kids to go to school the old-fashioned way. The Minnesota Department of Health offers a 24-page handbook with guidelines and strategies for walking and biking to class for the 200 or so schools now participating statewide. The Rochester school district’s 33-page manual features an equipment checklist and other accessories for students and parents alike.

Most of the 2012 grants will be spent on planning and evaluation, clearing the way for 70 schools to come back and request even more funding from the feds (via MnDOT) to actually implement their plans. The other 22 grants will be spent on ”education, encouragement, enforcement and evaluation activities”. Some examples:

·         McGregor schools were awarded $10,000 for bike rodeos, Fire Up Your Feet and Walk to School Day programs
·          Detroit Lakes schools will receive $5,000 to participate in International Walk to School Day and publicize Bike/Walk to School week and other activities
·         Cook County schools will receive $27,000 to establish a sustainable walking school bus program and expand its bicycle safety rodeo.

This year, however, there’s additional government red tape for grant recipients to deal with. The new requirement follows an embarrassing backlash against a $282,000 grant awarded last year to Goodview, Minnesota. Many residents of the southeastern Minnesota city strongly opposed the idea of the state and federal government taking charge of paving their sidewalks.

“The federal government said we have all kinds of money, let’s give it away. But in reality, we know better than that,” said Greg Gabbert, a Goodview resident who still opposes the project.

Although the Goodview City Council eventually accepted the funding, MnDOT now requires a resolution of support from the local governing body that receives the grant.

Since the inception of SRTS in 2005, more than $11 million of taxpayer funding has been awarded to communities in Minnesota. MnDOT began requiring school surveys last year to track the program’s effectiveness. It’s not yet clear how many, if any, Minnesota school children now walk or bike to school as a result of the $11 million in federal largesse.

Ultimately, the Safe Routes to School program may be subject to the same fate as one of its biggest champions—former Minnesota Congressman James Oberstar. Even though Oberstar was retired by voters in 2010, the cost of the former House Transportation Committee chairman’s legislative legacy continues to add up for taxpayers through programs like SRTS.

In fact, applications are currently being accepted for the 2012 James L. Oberstar Safe Routes to School Award to “honor his dedication to American schoolchildren as the pioneer for the federal Safe Routes to School Program.”

The future of the Oberstar Award may hinge on the outcome of House-Senate conference committee negotiations on the transportation bill. If conservatives in the House of Representatives prevail, SRTS will ultimately go the way of its sponsor and be retired. Senate conferees still hope to salvage the program.

Schools interested in applying for what could be the fourth and last Oberstar honor are also running out of time. The deadline for applications is midnight June 28, 2012.                    

                                     Tips or comments? Contact Tom Steward at 612-354-2192.

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The news just keeps getting worse for the troubled Monticello publicly financed telecom system.  Recent news reports and events continue to confirm that Mayor Clint Herbst was right when he admitted “we shouldn’t be in the telecommunications business at all”.

Following up on the heels of FiberNet’s 2011 loss of $2.6 million (in spite of receiving a one-time $1.5 million legal settlement), the city notified bondholders that it needs to renegotiate the terms of $26 million in bonds that were used to construct the telecom network.   Soon after notifying bonders of its desire to renegotiate the bonds, the city reported first quarter 2012 results that showed a stagnating customer base and a projected annual loss of $2.1 million in 2012.

On May 25th, the company retained to manage and operate FiberNet gave notice to the city that it’s electing to terminate its $15,000 monthly management contract in 90 days.

“Many matters regarding FNM (FiberNet Monticello) are in flux and in the midst of those changes HBC had concerns about being able to continue to manage the project in accordance with HBC principles,” said Gary Evans, HBC President and CEO. “This seemed a prudent time to end the agreement with FNM and free the city to negotiate with other prospective managers.”

Earlier in the week Monticello City Administrator Jeff O’Neill had told the Blandin on Broadband blog “the system is performing well with FNM staff and HBC getting great reviews from customers…Monticello is fighting the good fight and doing what it can to enhance financial viability through cost cutting and development of new resources.”

FiberNet’s prospective budget cuts were expected to include HBC, though it’s not clear that was a factor in the Winona-based company’s decision to part ways.  “HBC understands discussions about refinancing the system and discussions with other potential prospective managers are underway to help assure the continued growth of the network,” Evans said in a news release.  HBC also expressed pride in launching FNM and in meeting subscriber projections for the system.

In an interview with the Freedom Foundation of Minnesota, Evans acknowledged reaching out to supporters of the proposed $70 million RS Fiber Network underway in southern Minnesota.  “We’re looking forward to working with the people in Renville and Sibley Counties and have informed them of our decision,” Evans said.  “We’ve told them if they have questions, we’d be happy to meet with them and discuss it.  But we haven’t heard back from them.”

FiberNet officials say the network faces bond payments of $882,668 in June and $943,670 in August.

                                 Tips or comments? Contact Tom Steward at 612-354-2192

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  ST. PAUL—A first of its kind report concludes that dozens of state licensing laws make it harder for low-to-middle income Minnesotans to find a job, forcing them to waste valuable time and resources obtaining a license that may not even be required for the same job in another state.

License to Work, a study by the Institute for Justice, analyzes license requirements for 102 occupations in all 50 states and the District of Columbia.  In the 1950s, just one in 20 workers needed what the authors call “government permission to pursue their chosen occupation”, compared to nearly one in three today. (See video here).

As a result, the average US worker spends nine months in training or education, takes one exam and will spend more than $200 in fees.  Minnesotans, on average, must take two exams, spend $164 in fees and 290 days in training or education.

“We weren’t measuring doctors and lawyers, we’re measuring occupations that are ideally suited to people who are entering the economy or re-entering the economy,” said Dick Carpenter, the study’s co-author. “Much of our economic growth comes from entrants on the first few rungs of the ladder.  So if we’re imposing burdens on these people, we’re in essence imposing a drag on our economic growth.”

Minnesota requires licenses for 36 of the 102 occupations covered in the survey, making it the 36th most extensively licensed state.  A handful of Minnesota’s licensing laws were singled out as among the most stringent in the country.  State requirements for installing fire and security alarms are about twice the national average, barbers must train nine months longer than the average, while horse trainers are required to train for 700 days compared to an average of three months in other states.

Just 15 of the occupations in the study are required to be licensed in 40 or more states. Most of the 102 occupations are not required to have a license at all in at least some states.  For example, Minnesota is one of just two states to license electrical helpers who hold materials or tools and clean up a work site, one of seven states to license packagers who hand pack products and materials, and one of six states to license title examiners who search real estate records, according to the License to Work study.

“It undermines the supposed need for licensure.  If licensure were really necessary, you would see an occupational license in all states and consistently so across all states,” said Dick Carpenter, the study’s co-author. “The fact they don’t suggests there is no real significant threat to public health and safety.  Shampooers, for example, are licensed in a number of states. Is there really a threat to public safety in states that don’t license shampooers?”

Excessive state licensing laws result in a loss of 15,000 potential jobs, according to research by University of Minnesota professor Morris Kleiner.  The trend also costs Minnesota consumers $3.6 billion more for services annually, while also stifling $1.1 billion in economic growth each year, according to Kleiner’s work.

Legislation was introduced in the 2012 Minnesota Legislature to reform occupational licensing regulations “to shift the burden from entrepreneurs to the government to justify restrictions on Minnesotans’ right to pursue an occupation.”  Proponents expect the bill to be reintroduced next legislative session.

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                                             Tips or comments? Contact Tom Steward at 612-354-2192.

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Two northern Minnesota projects were singled out in the hearing memo for the House Energy and Commerce Subcommittee on Communications and Technology: a $1.7 million grant to the Leech Lake Reservation Business Committee and $66 million in federal loans and grants to Lake County, Minnesota.

Congressional investigators noted in the memo that the Leech Lake project was among a number of initiatives that “never got off the ground or have been halted. The Leech Lake Reservation Business Committee in Minnesota declined its $1.7 million grant on the grounds that it would not be able to meet its grant requirements.”

The Lake County project was highlighted as an example of a project that has raised industry concerns about possible overbuilding of existing systems instead of extending service to unserved areas as required by the terms of the federal funding agreement.

“Indeed, the Energy and Commerce Committee’s Subcommittee on Oversight and Investigations is already investigating recently publicized allegations by cable company Mediacom that the Lake County government in Minnesota is not only using $66 million in BIP funding to overbuild Mediacom, but committed fraud by misleading the RUS in its application,” according to the subcommittee staff memo.

The subcommittee will be examining why less than a dozen of the 233 “shovel-ready” projects awarded $4 billion by the National Telecommunications and Information Administration have been completed to date. Congressional investigators will also focus on the $2.5 billion Broadband Initiatives Program (BIP) administered by the Rural Utilities Service (RUS).

Among government officials expected to testify is Jonathan Adelstein, Administrator for the Rural Utility Service, a key player in the Lake County project.

The hearing on “Broadband Loans and Grants” will begin at 9 a.m. CDT in room 2123 of the Rayburn House Office Building.

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The City of Monticello has put bondholders on notice that the municipal broadband network once hailed as a national model is unable to meet its financial obligations with revenue generated from FiberNet Monticello customers. Instead, city leaders now will discuss how to restructure payment of $26 million in revenue bonds to save the faltering broadband network.

A financial report prepared for the Monticello City Council meeting on May 14th acknowledges that FiberNet “continues to operate at a loss. For the quarter, FiberNet lost around $100,000, not including its 2012 debt payments.”

A blunt letter sent to Wells Fargo Bank in March indicates the City does not have an obligation to continue making up the losses incurred by FiberNet. “Revenues of the System are not sufficient to pay both operation costs and debt service payments on the Bonds,” Jeff O’Neill, city administrator wrote. “The City has no obligation to make supplemental payments and is considering whether to continue making supplemental payments after June 30, 2012.”

At current rates, the city projects that FiberNet’s red ink will climb to $2.1 million for 2012 with the inclusion of June ($882,668) and August ($943,670) debt payments on the once highly touted network. Meantime, the total number of customers for the video, phone and broadband services offered by FiberNet remained flat —3,484 subscribers, one more than the previous reporting period.

While Monticello is considering implementing additional steps to improve its bottom line, “none of the potential changes are likely to result in sufficient Net Revenues in the near term to fund required debt service payments,” according to the letter to Wells Fargo Bank.

In March the Freedom Foundation of Minnesota reported that FiberNet ran a $2.6 million loss in 2011 with cash from the profitable liquor store enterprise fund used to subsidize operations. Some city officials have raised the issue of alleged “predatory pricing” by private providers as a factor in FiberNet’s failure to capture more subscribers. From the outset, the city said its triple play service would be priced 15 percent below the competition.

FiberNet bonds are currently being traded on the market at approximately 32 percent of their initial issue price, according to Electronic Municipal Market Access (EMMA). In the last five weeks, FiberNet bonds have lost about 50 percent of their value. A proposed call with bondholders set for the end of March was postponed temporarily, but is expected to be rescheduled. “The City is interested in engaging in discussions with Bondholders regarding a possible restructuring of the Bonds. Development of a restructuring plan is likely to have a bearing on whether the City determines to continue supplemental payments,” according to O’Neill’s letter.

FiberNet Monticello’s $26.4 million in outstanding bonds contributes to total city debt of $55.1 million, a debt of about $4,600 per resident of the Twin Cities suburb. The city’s financial report acknowledges that the per capital debt is “high for a City of our size” but “does not mean the City is in bad financial health.”

FiberNet Monticello is closely monitored by those in the telecom industry and local government, due to the publicity and expectations that accompanied the network’s debut.

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Twelve Minnesota child care providers take union drive against their businesses to federal bench 

A little publicized federal court case being heard on Tuesday in US District Court in St. Paul, however, takes the divisive issue away from state lawmakers and propels it to the national level, with the potential to end or embolden what some call compulsory unionization, once and for all. 

 

*Minnesota enjoined from holding unionization vote by court rule pending a possible appeal by the State.

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Tips or comments? Contact Tom Steward at 612-354-2192.

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A Freedom Foundation of Minnesota analysis of Lobbying Disclosure Act filings finds that Minnesota’s local governments spent more than $1.1 million to lobby the federal government in 2011, and at least $3.7 million since the start of 2009.

The biggest spenders in 2011 were the City of Minneapolis ($180,000), Hennepin County ($140,000), and Anoka County ($116,000).

The controversial practice of using taxpayer money to lobby for additional taxpayer money is nothing new in Minnesota. In fact, local governments and their associations are required to report lobbying expenditures to the Office of the State Auditor (OSA), which prepares an annual report on local government lobbying activities. OSA’s most recent report found that local governments spent $8.25 million in 2010 on lobbying at the State Capitol.

However, the state law requiring local governments to report lobbying expenditures to the State Auditor does not apply to federal lobbying.

Consequently, Minnesota’s local governments are able to spend a great deal of taxpayer money on Washington lobbyists, largely out of public view.

“Taxpayer-funded lobbying is a self-perpetuating problem that encourages higher spending and the expansion of government at every level,” said Freedom Foundation of Minnesota Vice President Jonathan Blake. “Millions of tax dollars are being used to lobby for millions more. ”

Blake continued: “When taxpayer money is used to lobby at the State Capitol, it’s reported to the state. Yet when the same money is used to hire DC lobbyists, taxpayers are kept in the dark. The double standard makes no sense.”

Notables from the Freedom Foundation’s analysis:

- Scott County discontinued federal lobbying in response to a previous FFM investigative report. That report found that Scott County consistently spent more on DC lobbying than any other local government in Minnesota.

- Anoka County has dramatically curtailed federal lobbying under the county board’s new leadership.

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Taxpayers already pay a high price to subsidize wind energy through billions in federal grants, loan guarantees and tax credits that prop up the “windustry”. Now the bill for state renewable energy mandates is coming due with hundreds of thousands of Minnesota electric co-op and utility customers picking up the tab.

Going green cost rural electric ratepayers in Minnesota more than $70 million last year, according to the Minnesota Rural Electric Association (MREA). The MREA represents about fifty mostly small, rural electric co-ops and utilities which serve more than 625,000 Minnesota homes and businesses.

“It’s an enormous subsidy. You have to add wind power, whether you need it or not,” said Mark Glaess, MREA executive director. “Right now we’re paying for wind we don’t need, we can’t use and can’t sell.”

The Renewable Energy Standard (RES) passed by the 2007 Minnesota State Legislature directs electric utilities to ramp up their percentage of renewable energy sales to 25 percent by 2025. Put another way, one of every four kilowatt hours must come from renewable energy by 2025. Unlike many other states, Minnesota does not exempt coops and municipal utilities from complying with renewable energy standards.To meet the state’s escalating demands, rural electric co-ops and utilities locked in long-term “take or pay” contracts to purchase power from wind farms.

The economic downturn, however, has led to a marked decline in energy demand and corresponding drop in energy prices. The sudden abundance of natural gas on the market put further downward pressure on energy prices.

The RES exists in a sort of price vacuum. No matter that coal-generated power costs considerably less than wind. Dozens of Minnesota co-ops are stuck with higher, pre-recession prices for surplus wind power which must be bought and distributed. The difference between what the wind power costs and what it resells for now adds up to tens of millions of dollars a year statewide with rural residents caught in the middle.

“It’s a well-intentioned law that did not contemplate the inexplicable law of unintended consequences because it neverconsidered resource planning to meet energy load and demand. What happens when the load goes down? Our members still have to buy it,” Glaess said. “And we’re going to have to increase rates to pay for our incumbent coal generation, which is getting smacked by the EPA (Environmental Protection Agency).”

The Minnesota Public Utilities Commission (PUC) directed electric coops and utilities to report the cost to ratepayers of complying with the RES. The top three wind loss leaders in 2011 were Great River Energy ($35 million), Minnkota ($27.5 million) and Dairyland Power ($18.1 million in Minnesota and Wisconsin combined). That’s a steep increase from 2010, when Great River Energy (GRE) reported a $22 million loss on wind energy sales, while Minnkota reported a $28.2 million loss the previous year.

“Until market prices increase, Great River Energy will likely see continued negative effects from RES compliance costs. Great River and its 28 member cooperatives urge officials to weigh the impact of further costs when considering additional regulations related to renewable energy so that our rates remain affordable,” according to the Great River Energy website. GRE expects losses to increase again in 2012 to $35 million.

The Minnesota Division of Energy Resources downplayed the financial impact on ratepayers and appeared to question the process in its RES filing. "The reports filed by utilities provide some information about the effects of renewableresources on rates. However, the rate impact of the RES is best determined through the resource planning process rather than through a simple comparison with market prices. To date, theDepartment’s IRP analyses have indicated that RES compliance is generally cost effective for theutilities subject to Minnesota’s RES Statute."

The 2007 Next Generation Energy Act allows the state to delay implementation of the RES under certain conditions, but there appears to be no appetite for that—yet. Still, even large utilities that are better positioned to meet the RES mandate and absorb the costs have warned about the uncertainties facing wind power production and prices. The key concerns include competition from natural gas, rising wind generation costs and the expiration of the federal wind production subsidy at the end of 2012.

“Even a small shift in our current expectations for gas prices, carbon regulation and wind cost could result in significant future cost impacts to fulfill the RES. In addition, individual wind projects may result in rate impacts that in aggregate could be significant,” Xcel Energy said in its 2010 report on the renewable energy mandate costs.

In Greater Minnesota, coops and utilities say it’s already hard enough for some customers to pay their utility bills in this skittish economy without the mandate. With MREA coops and utilities just halfway toward implementing the 25 percent renewable mandate, a few dollars a month on electric bills now could add up to much more.

“What’s awful is the percentage of customers who are late in paying their electric bills,” said Mark Glaess. “The average percentage that poor people are spending on energy has increased by a great deal and then they’re throwing more of this on us? It’s regressive energy economics.”

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ST. PAUL, MN—Thousands of CenterPoint Energy ratepayers will receive refunds after being overcharged on their heating bills under an experimental natural gas pricing system unveiled in 2010 by Minnesota environmental groups and state regulators.  The politically correct pricing program--designed to penalize ratepayers for using more than a pre-determined allotment of natural gas--was the focus of an April 2011 Freedom Foundation of Minnesota (FFM) investigation.

The Minnesota Public Utilities Commission (PUC) this week finalized a decision ordering CenterPoint to begin making adjustments to ratepayers’ bills for “problems arising from elongated billing periods.” Precisely how many of CenterPoint’s nearly 800,000 Minnesota customers were overcharged and by how much remains to be determined.

This development is the latest embarrassment for the “inverted block rate pilot program” drafted by environmental groups in collaboration with state regulators. Under the pricing scheme, the more natural gas a customer used, the more the customer had to pay for each unit of natural gas—a penalty for using more than the average ratepayer. Some critics have compared the system to “charging a Prius driver $2 per gallon for gasoline, while charging an SUV owner $5 per gallon.”

The pilot program, however, backfired within months, turning into a public relations nightmare for the utility company. Hundreds of irate CenterPoint Energy ratepayers revolted over skyrocketing heating bills. The PUC was deluged with complaints from the elderly, day care providers, large families, low-income individuals and even conservation-conscious customers, all concerned about the financial impact this pricing scheme had on their heating bills. The controversy led to the suspension of the pilot program and the 2011 legislative repeal of this controversial provision from the 2007 Next Generation Energy Act.

As it turns out, what state regulators now call “unintended consequences” arose not only from the price structure itself but also from the utility’s habit of billing some ratepayers for much longer periods than others. “As a result, two customers with identical consumption patterns might pay different amounts depending upon when CenterPoint chose to bill the customers. In particular, bills that covered an unusually long period would be more likely to cause customers to pay higher rates—and the record reveals that CenterPoint sometimes billed customers for periods exceeding 35 days,” according to the PUC’s April 3, 2012  order.

Despite the program’s deep unpopularity, the Izaak Walton League and Minnesota Center for Environmental Advocacy are urging the PUC to reinstate the variable pricing system which they helped develop and implement. The environmental groups insist the program’s premise will be effective in reducing energy consumption “with exemptions for customers who cannot make adjustments to their energy usage.”

The Minnesota Attorney General, however, has urged the PUC to permanently end the troublesome program. In papers filed online, the attorney general’s office stated the program “has not been shown to encourage energy conservation or to assist lower-income people” in any measurable way. “The program’s ‘solution’ may be worse than the first attempt.”

The pilot variable energy pricing pilot was originally intended to run for three years. While the Minnesota Legislature has abolished the program, the PUC still has to decide whether to revamp and resume the program for the final year of the original pilot timetable.

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Tips or comments?  Contact Tom Steward at 612-354-2192.

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