State Auditor battling Stillwater over unauthorized $80,000 "donation"

Categories: Politics
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Rebecca Otto: Stillwater made unauthorized TIF expenditure.
The State Auditor has referred Stillwater to the county attorney's office in a fight over an $80,000 tax "donation" gone wrong.

In July, the city "donated" $80,000 to a non-profit, the Coalition for the St. Croix River Crossing, a group lobbying for a new bridge over that river. After receiving complaints from "multiple sources," state auditor Rebecca Otto decided to investigate. In an August letter Otto concluded that the city had "no authority" to make its donation. Otto forced the nonprofit to return the money and ordered Stillwater to turn the donation over to her office for redistribution.

The city has, so far, refused to comply with her order, so Otto has referred them to the Washington County attorney's office.

When a city makes "unauthorized use" of tax increment financing, or TIF money, the cash has to be turned over to the state auditor for redistribution.

If the city does not delay, it receives a portion of the money back as part of the redistribution. Because Stillwater has been fighting the auditor for months, however, they might lose every penny of the $80,000 in question.

There were numerous problems with Stillwater's donation. Local governments "are not generally authorized to become members of, or donate funds to, independent organizations," according to the auditor's office. The city didn't sign a contract with the coalition, either.

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Mayor Ken Harycki should've disclosed his membership to "avoid even the appearance of impropriety."
Complicating matters is the fact that Stillwater Mayor Ken Harycki is co-chair of the nonprofit that received the donation. City attorneys advised him that he didn't have to disclose that because it was "not a business relationship, but a political relationship," and he wasn't making money from the group.

But the state auditor disagreed, recommending that to "avoid even the appearance of impropriety" Stillwater officials should "disclose any official position [they] may hold with any organization receiving City funds."

Last week, Otto sent a "final notice of noncompliance" to Stillwater informing them that she was turning the matter over to the county attorney's office for resolution.

If the city gives the money to the auditor within the next ten days, they'll receive a portion of it back, which Stillwater city administrator Larry Hansen estimates at about $40,000. If they don't resolve it within the next ten days, they'll get zilch.

"I think it's very unfortunate that the auditor's office has taken this stance," Hansen said. "But I guess it is what it is."

The city council will meet soon to determine how Stillwater will handle the issue.

For her part, Otto is confident in her office's view of Stillwater's donation.

"The staff here is very professional," Otto said. "They know this work."

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