Last month, the non-partisan State Legislative Auditor issued a critical report on the Iron Range Resources and Rehabilitation Board (IRRRB).
That acronym (pronounced Eye-Triple-Are-Bee) is used somewhat loosely. It could also stand for Incumbent Range Re-election and Reward Board.
Begun in 1941, the good intentions behind the IRRRB were to help diversify the economy of northeastern
Minnesota in preparation for the day when the iron mines are exhausted.
As became evident this winter, when the Legislature approved extra jobless funds for miners devastated by the shutdown caused by plummeting global steel prices, the Iron Range is still dependent on mining.
The IRRRB has an annual budget of about $35-$40 million. The revenue comes in mostly from taxes that the mining companies pay on taconite production. Lesser amounts come from loan repayments and investments.
The Board makes 100-125 grants per year. Some of the grants are significant. In 2014, the last time it issued a biennial report, the IRRRB contributed $450,000 to a $1 million project to complete the infrastructure and site work for an emergency services facility in Coleraine/Bovey. It also gave Hibbing a grant of $600,000 to do the infrastructure for a rerouting of Highway 169. The largest grant, $1.3 million, went to Ironworld, located in Chisholm and the largest museum in the state outside of the Twin Cities. The grant was for operating expenses and capital improvements.
But about 10 percent of the grants are under $10,000. The IRRRB gives numerous grants to demolish buildings: $13,000 to raze a laundromat in Cohasset, $46,000 to get rid of the Dollar Barn building in Cook, $11,000 to remove the Spur gas station in Nashwauk. Hopefully, all the demolition aids in redevelopment.
Meanwhile, it loaned Delta Airlines $5.9 million to expand its reservation center in Chisholm, adding 107 jobs. It also loaned $20 million to Segetis for its $105 million biochemical project in Hoyt Lakes that is expected to create 245 temporary construction jobs, 140 supply-chain jobs and 50 direct jobs now, and an additional 230 supply-chain jobs and 20 direct jobs in 2018 when the plant becomes operational.
Reading through the annual report, the suggestion is that not much happens on the Iron Range without the approval of the IRRRB. Therein lies the issue.
Critics say that the IRRRB is actually a slush fund for northeastern Minnesota legislators. The Board is made up entirely of state legislators from the Taconite Assistance Area (TAA), all DFLers.
The state agency is run by a commissioner appointed by the governor. Former House Majority Leader Tony Sertich was appointed by Gov. Dayton to that job in 2011, but left recently.
The State Legislative Auditor found that politicians don’t necessarily make good bankers, saying the IRRRB evaluation of loans and grants was “inadequate.” In 2014, for example, it claimed that it created 1,140 new jobs, but most loan and grant recipients didn’t report the number of jobs actually created, and the IRRRB accepts as true such information provided by the remainder. The Legislative Auditor reviewed 15 loans, and determined only two met job creation goals.
Worse, since 2006, the IRRRB-owned Giants Ridge, a golf and ski resort, has been sibsidized on average $1.9 million annually, as operating losses increased by more than 500 percent. Belatedly, the Board is looking for a private operator for the facility.
What makes it even more oily is that, unsurprisingly, the board of politicians has dabbled in politics.
In 2006, Meyer Teleservices of St. Cloud opened a call center in Eveleth with IRRRB loans. Last year, Meyer folded, still owing the IRRRB $250,000.
However, the call center equipment that was collateral for the loans was bought by a new company called New Partners, headquartered in Washington, D.C. Its CEO is Jerry Samargia, a Gilbert, Minn., native, who worked for Meyer Teleservices from 2007 to 2012. Meyer Teleservices was the lead phone vendor for both of Barack Obama’s presidential campaigns. A full explanation as to how that $250,000 disappeared and what kind of pennies-on-the-dollar deal New Partners got would be in order, considering that the Obama campaigns raised over $700 million for each election.
The Legislative Auditor also questioned whether the IRRRB as constructed today, is even constitutional. Under the state Constitution’s separation of powers clause, legislators are prohibited from holding another public office.
In response, Rep. Tom Hackbarth, R-Cedar, has a bill to change the Board’s make-up to six legislators from all over the state plus three Range citizens. Then, last week, Senate Majority Leader Tom Bakk, D-Cook, and Rep. Tom Anzelc, D-Balsam Township, north of Grand Rapids, introduced companion bills giving the commissioner authorization to spend the money — not with the “approval” of the Board — but on the “recommendation” of it. Either way, they may get around the constitutional objection, but politically it still sounds like it will at least be the Iron Range Re-election and Reward Board.
The recommendation here is to have the Legislature approve the board members like they do the U of M Board of Regents, specifying that three of the nine have business financing backgrounds, all live in the TAA, and none be legislators. The IRRRB needs a perspective that goes beyond the next election.