Donation to lobbying group has been surrendered by city.
Hoping to end months of controversy, the Stillwater City Council voted on Monday to surrender money that it had donated illegally to a lobbying group promoting a new St. Croix River bridge.
The 5-0 decision came during a special meeting to respond to a final state auditor's report, issued last week, that concluded Stillwater was wrong to donate $80,000 in tax-increment financing (TIF) money for a proposed bridge in neighboring Oak Park Heights.
Stillwater's quest to give the donation to the group, which is pushing for a four-lane bridge that would divert interstate Lift Bridge traffic from downtown city streets, lasted three months. In that time the state auditor issued three reviews critical of Stillwater's transaction and, in what amounts to a penalty, the city has lost half of the money.
Soon after the meeting, the city delivered the entire $80,000 to the county auditor for redistribution to other taxing authorities, as state law requires. About half the money now will be divided among Washington County, School District 834 and the Browns Creek Watershed District. The other half will be returned to Stillwater's city government, said Kevin Corbid, the county's taxpayer services manager.
The city had to forfeit the money by Tuesday -- a deadline set in the auditor's review -- or risk losing all of it, said City Attorney David Magnuson. The lobbying group, the Coalition for the St. Croix River Crossing, had returned the donated money to the city weeks ago after the auditor's office released its first review.
State Auditor Rebecca Otto's office came under sharp criticism from Council Member Jim Roush during Monday's short meeting. "I think their office is out of control and has exceeded their authority," he said.
After the meeting, Roush said he thought the auditor's review strayed beyond reporting facts to adopting a tone that to him was "politically motivated." He declined to elaborate.
Otto said that despite the bridge debate being "highly political" in Stillwater, her agency's review examined city finances, not its politics. State law clearly defines the auditor's responsibilities, she said.
"It's a little bit like blaming the dentist for a cavity in your mouth," she said of Roush's comments.
Magnuson, who has publicly stated his support for a new bridge, also depicted the auditor's findings as being political in nature.
But Micky Cook -- the only council member to oppose the donation when it was made in July -- said it was unfair to draw such a conclusion when state law requires the auditor to make such determinations, she said.
"We made a mistake. We need to cut our losses," said another member, Doug Menikheim.
After the meeting, Menikheim said that council members "may or may not have received good legal advice" about making the donation in the first place.
Magnuson has argued that the donation was a lawful use of TIF money because the $690 million bridge project includes conversion of the Stillwater Lift Bridge to a pedestrian trail and would relieve the city of interstate traffic congestion.
But the state auditor's most recent review said that "such an expansive use of tax increment for activities outside a city's boundaries would be unprecedented."
The review, as well as two earlier ones, said Stillwater erred in failing to secure a legal contract that would inform the public how the bridge coalition intended to spend the money. Mayor Ken Harycki, who with a Wisconsin banker serves as a coalition co-chairman, has said only that the money would be spent for lobbying and public relations.
Monday's action also means that Washington County Attorney Pete Orput will end his consideration of a possible lawsuit against the city. "As far as I'm concerned, it's over," he said after learning of the City Council vote.
Kevin Giles • 651-925-5037 Twitter: @stribgiles