After a Prior Lake City Council vote nixing an agreement with the Shakopee Mdewakanton Sioux Community, city leaders are uncertain how to move forward with a crucial utilities project that the agreement would’ve helped pay for.

The March vote against a cooperative agreement with the tribe divided the council, with some members clearly for or against the agreement and others falling somewhere in the middle. Now, they’re not sure how to pay for and maintain the project. They’re anxious about the thousands of developable lots that are waiting for utilities. And they’re worried about how this decision might impact their relationship with the powerful tribe.

“We’ve got to get this done,” Prior Lake Mayor Ken Hedberg said. “And my hope is to get it done in a way that does not damage our relationship with the SMSC.”

The Stemmer Ridge Road project is the last piece of a multi-million-dollar utilities puzzle intended to serve an annexation area in Spring Lake Township — one of Prior Lake’s last developable areas. It’s included in long-term development plans created by both the city and the Metropolitan Council.

“We developed this orderly annexation agreement for the explicit purpose of providing geography needed for Prior Lake to continue to grow,” City Administrator Frank Boyles said.

After buying a parcel of land surrounding the road, the tribe offered to help build and maintain the Stemmer Ridge Road project in exchange for a letter supporting its application for trust status: a federal designation that takes the land off the tax rolls and allows the tribe to keep it forever.

The tribe currently owns nearly 4,000 acres total, about half of which are in trust. This particular parcel has been earmarked for residential development to house the growing tribal community.

In a winter report to the City Council, Prior Lake staff warned that opposing the trust application could harm the city’s relationship with the tribe — a relationship that includes cooperation on a number of fronts, in addition to tribal financial contributions for city projects and services.

Still, some council members and other local leaders have pushed consistently against the letter of support, raising concerns about lost tax revenue and the possibility of setting a precedent for future land trust transactions.

Council Member Annette Thompson, who opposed the agreement, said she’s concerned about how the land will be used once it’s in trust.

“The tribe has stated that they want to build residential homes. I have no reason not to believe them,” she said. “But when the land goes into trust — if the land were to go into trust — they could put whatever they wanted there. A casino, a bingo palace. I don’t know.”

Conversations between the tribe and the county are ongoing. Scott County Commissioner Barbara Marschall, long a vocal opponent of putting land into trust, said the intent has always been to make the road a public roadway, regardless of the developer. But with the tribe as the developer, the land trust issue affects the project timeline.

“If we don’t get that finished before it goes into trust, we will lose the ability to make it a public roadway,” she said.

‘A turning point’

Prior Lake has already spent millions of dollars on utilities infrastructure — including pipes and two lift stations — to serve the Spring Lake Township annexation area. Without that space, the city has just over 1,800 remaining developable lots.

“I think the key thing is that we’ve known for over two years that this project is a turning point for the future of the city,” Hedberg said. “There’s a legitimate and real expectation that this annexation area will provide sustained, orderly growth of not only Prior Lake, but northern Scott County, over the next 10, 20 years.”

Without help from the tribe, though, the Stemmer Ridge Road project could cost the city about $10 million — money that would have to come out of the property tax levy or trunk infrastructure funds. If trunk funds are used, fees would increase for new developments.

“It will have a dramatic chilling effect on development and may impact the ultimate size of Prior Lake as a city,” Council Member Richard Keeney said. “It may never get developed. And in fact, that may make that land that much more attractive and that much more affordable to be purchased by the tribe.”

Hedberg said the tribe has indicated that it would be willing to help pay for the Stemmer Ridge Road project, despite the lack of an agreement. But there would still be a lot of unknowns, including cost, design and road access for non-tribal members.

“If they end up prevailing — which I think they will — in getting it brought into trust, maybe there’s something to negotiate at that point,” Council Member Mike McGuire said. “But we surely aren’t negotiating from a position of strength at that point.”