Iron Range officials will shield a $139 million trust fund from being raided by outsiders — namely the Legislature — by spinning it off into a new nonprofit.
At a Thursday meeting, the Iron Range Resources and Rehabilitation Board unanimously backed a plan to create the so-called Range Trust, a nonprofit corporation that would control $100 million of the state agency's rainy day fund, guaranteeing that it's spent locally, rather than as a state budget fix.
The "monumental decision" was a final victory for outgoing Commissioner Tony Sertich, who said he has wanted to safeguard the nest egg since "Day 1" on the job. "We shouldn't wait another day to protect this money for the future," he told the northeastern Minnesota lawmakers who make up the board, known as the IRRRB, at the meeting in Eveleth.
Created in 1977, the Douglas J. Johnson Economic Protection Fund is bankrolled by taxes on taconite production and bolstered by investment income. Because mining companies pay those taxes in lieu of property taxes, the area's lawmakers argue that the funds must remain in the region, supporting projects that create jobs and diversify the economy.
The new nonprofit would focus on financing private-sector projects, Sertich said, leaving schools and infrastructure to the IRRRB.
But its seven trustees, bylaws and relationship with the board must still be nailed down. Before voting for the proposal, Rep. Jason Metsa, DFL-Virginia, said he had hoped it would have "a little more detail."
For years, Iron Range legislators have dealt with "veiled threats" from other lawmakers tempted to tap the fund, Sertich said. Conversations about protecting the nest egg gained urgency in 2011, after state GOP lawmakers passed a tax bill that used $60 million from the fund to help balance the state's budget shortfall. Gov. Mark Dayton vetoed the legislation.
"That money could have been gone in the blink of an eye if not for the veto by Gov. Dayton," Sertich said.
While Iron Rangers have long held key positions at the Capitol — including Tom Bakk, who is Senate Majority Leader, as well as a member of the IRRRB — they make up just 3 percent of legislators, Sertich said.
If the fund remains in its current form, "it's not a matter of if the money will be taken," he continued, "it's a matter of when."
"The threat is way more real than you know," Bakk added.
In a December 2013 report, a 17-member task force recommended two options to shield the trust fund, which was created with an eye toward the eventual slowdown of taconite mining. The first was to turn the fund into a nonprofit, overseen by local citizens. The second, which proved less popular, would have required legislative action: Separating the IRRRB itself from state government and turning it into an autonomous, regional authority.
The incoming commissioner of the agency will be able to create the new 501(c)(3) nonprofit organization without legislative approval, Sertich said.
The resolution passed Thursday approves transferring $100 million into the fund — after six steps, including electing trustees and holding another board vote. (The other $39 million would remain in the existing trust fund.) The nonprofit would enter into a contract with the IRRRB to manage the money. The board could "clawback the funds transferred in the event Range Trust commits a material breach" of conditions in that contract, according to the resolution.
At Thursday's meeting, board members began to suggest who should be represented on the board that would control the nonprofit. Metsa argued that the IRRRB representative ought to be from the district where the largest taconite producer sits. Another proposed including the president of the local United Steelworkers union.
Bakk praised the legislators for voting for a change that will put a different board in charge of funding popular projects — and getting the credit.
"This is a legacy vote for all of us at the table," he said.
Jenna Ross • 612-673-7168
