Last week’s meeting of the Iron Range Resources and Rehabilitation Board in Eveleth covered some rather groundbreaking territory with relatively little fanfare. So, let’s take a look.
First, the required primer. The IRRRB is a state-run agency, but is funded with revenue raised from mining production taxes. Mines in northern Minnesota pay production taxes instead of property taxes. The IRRRB was formed to administer this money fairly across the region determined to be affected by past and present mining — a region called the Taconite Tax Relief Area, which is the legal, political boundary of “The Iron Range.”
Funds from the IRRRB pay for property tax relief for residents in this area, and also directly fund local cities, townships, school boards and counties for certain functions. Additionally, funds are marked for specific purposes, such as reclaiming and mitigating lands damaged by mining, public works for the entire region, and — here’s the one that causes the most controversy: economic development.
As you can imagine, an entity formed to hand out money is beset by political rivalries, gamesmanship and rancor. That’s been true of the IRRRB over its history. And when it comes time to fulfill its mission of “creating jobs,” the agency has had some notable, expensive failures. But nonetheless, the money is locally generated and owed to the people of the Iron Range. Economic development (and diversification … someday, we hope) is an important function of this money, and it has served this purpose time to time.
One of the central pots of revenue dedicated to job creation is the Douglas J Johnson Trust fund. Yes, it is a fund named for a living former state senator turned lobbyist who was among the people who secured its creation. And whether it was the name of the fund, or merely its existence, this pot of money has been targeted for raids by the state general fund under several governors, most notably and most recently by Republican Gov. Tim Pawlenty.
On Thursday, a task force presented the IRRRB two options on how to protect this local money from future raids. Here they are, in summary:
- Extract the agency from state government and make it a local authority. Members of the board — local legislators — would hire the agency’s leadership. This would give unprecedented power to a specific group of state legislators and would require a very unlikely act of the state legislature and governor.
- Spin the Johnson fund itself into a nonprofit foundation in which a nonpartisan board would distribute its earnings into worthy job-creation projects across the Iron Range. This is the option that board members seemed warmest to in the meeting last week.
IRRRB commissioner Tony Sertich told the board he’ll be working up a plan based on some of the task force recommendations for the board’s consideration this summer.
The IRRRB remains the paradoxical hub of Iron Range politics. On one hand its importance can’t be ignored, and the mining revenue entrusted to state government alone certainly wouldn’t be returned to local communities (See Kentucky and West Virginia). The IRRRB builds and maintains many important public works on the Iron Range. And some business development has been directly related to IRRRB loans and grants.
On the other hand, the IRRRB becomes both the scapegoat and patron saint of local community development. Local governments can get away with all manner of bad planning, because the agency will fundamentally bail them out if it gets bad enough. And the IRRRB itself can make very bad, politically-motivated decisions (like the funding of Excelsior Energy more than 10 years ago) that get kicked down the road like a snowball of wasted money. It’s hard to reform any of this when a board of partisan rival legislators has de facto veto power, a governor is technically in charge but seldom overly concerned, and a commissioner is actually in charge, but sitting on the notion that he or she is expendable and whose works with be almost wholly undone by their next appointed successor.
It’s a mess. But that fund should stay on the Iron Range. So, let’s see what Commissioner Sertich comes up with. And let’s hope local leaders and citizens get more engaged.
CORRECTION: An earlier version of this post incorrectly stated that a $4 million loan to PolyMet was issued at Thursday’s meeting. The IRRRB did issue such a loan in 2011, which is what the story I linked referred to.
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