The fate of a proposed Nov. 3 ballot question to address the possible elimination of the Princeton Public Utilities Commission will come down to a special meeting.
City leaders will meet at 3 p.m. Friday, Aug. 21, to consider a ballot question.
Meanwhile, PPU commissioners will be meeting in a study session at 1 p.m. Wednesday, Aug. 19, to discuss water rates, a water reserve fund and capital expenditures that have become a point of contention with council members.
Prior to Friday’s afternoon meeting, a Princeton City Council Payment in Lieu of Taxes (PILOT) subcommittee will meet at 10 a.m. in closed session.
All three meetings will have an impact on the council’s decision to call for a ballot question.
Princeton City Administrator Robert Barbian confirmed last Tuesday afternoon that Mayor Brad Schumacher had instructed him to add the Nov. 3 ballot question discussion to the Thursday, Aug. 13, regular city council meeting agenda.
History of Dispute
Schumacher is at odds with a March 25 decision by PPU General Manager Keith Butcher, former Commissioner Mindy Siercks, Commissioner Dan Erickson, and current Commission Chair Greg Hanson to adopt a resolution to discontinue city financial support through an established payment in lieu of taxes mechanism.
The city previously received a payment “in lieu of” tax from the Princeton Public Utilities to offset the taxes that a private electric company such as Xcel Energy would pay if it provided electric to the city.
A private company like Xcel Energy, Center Point Energy and cooperatives like Connexus, East Central Energy and Great River Energy pay taxes based upon the value of the electric infrastructure necessary to operate their businesses.
In 1997, Princeton Utilities agreed to pay the city $4,375 a month or $52,500 annually.
Commissioners unanimously voted March 25 to discontinue payment in lieu of taxes after a lengthy and sometimes tense discussion that included mention of the city’s franchise fee and the PUC’s cash reserve policy.
The resolution approved by PPU commissioners in March to exit PILOT stated the city’s franchise fee was a mechanism to collect funds as deemed necessary.
Furthermore, the resolution stated that PPU wanted to discontinue its PILOT contribution immediately in order to avoid duplication of city funding resources.
PILOT Payment Issue
Before the March 25 meeting concluded, Schumacher stated he was “extremely disappointed” the commission discontinued its PILOT payment.
The following week, at the council’s April 2 meeting, Councilor Jules Zimmer brought up the discontinued PILOT fees during a 2020 budget discussion.
Zimmer asked how the city was going to absorb the loss. Barbian noted it was the PUC’s choice to stop paying the fee, even though it had been in place many years.
Barbian and later Schumacher suggested city department heads should review their 2020 budgets to find cuts to make up for the sudden shortfall.
Finance Director Steve Jackson has previously clarified that the PILOT had been $52,500 annually for more than 20 years. The city had already collected three months’ worth of PILOT money before PPU commissioners took action on March 25, Jackson said. The last payment was received in February. The PILOT payments for the balance of the year would have been $43,750, creating a budget shortfall.
Next year’s budget anticipated an increase not a decrease from the $52,500.
Recent City Meeting
In mid-May, Zimmer proposed establishment of a city subcommittee that would work on communications with the PUC to resolve the PILOT issue.
During the council’s May 14 meeting, that subcommittee was approved on a 3-2 vote.
“I think there’s some confusion by the PUC chairman in stating the city does not have the capabilities to operate the public utility. I find that to be incorrect. This has nothing to do with the working men and women of Princeton Public Utilities and their dedication,” Schumacher said as he started discussion on Aug. 13.
As discussed last Thursday, if the ballot question is placed before voters and approved, it would eliminate the PUC commissioners 30 days after the Nov. 3 general election.
Schumacher said the issue being discussed involved a transfer of responsibilities from the PUC to the city council as a body.
General Manager Keith Butcher would still have a job if the proposed question made it to the ballot and was approved.
“The only persons who would not have a job would be you, Mr. Hanson, and Commissioners Dan Erickson and Commissioner Rich Schwartz,” Schumacher said.
Hanson addressed Schumacher’s statement as well as comments he made in an Aug. 13 Union-Times online story posted in advance of the city council meeting later that evening.
“My words about the city council not being able to take over may have been a bit rushed on my part,” Hanson said. “My concern was that the management of Princeton Public Utilities is overseen by three people on a commission as well as Mr. Butcher. Shifting all of those management responsibilities and oversight onto the city council is a large job. You already have large responsibilities with the city.”
Hanson said he didn’t mean to slight anyone. He contended the council’s primary responsibility was to be responsive to the needs of the community as voters.
“The Princeton Public Utilities Commission is not concerned about getting elected,” Hanson said. “PPU and its commissioners are concerned about running a stable, solid business. That’s been the focus of the commission since I came on.”
Hanson added that commissioners are appointed by the Princeton City Council.
“Your job with those appointments is assigning business people who will protect the integrity of the business, and run it for the benefit of the ratepayers,” he said.
PUC Chair Continues
According to Hanson, once politics are mixed with management of the business, “funny things” can happen. His expressed concerns about the potential for rate manipulation to offset funding needs of the city that would come from taxes.
Schumacher agreed that the Princeton City Council represents the people of the community, but he reminded Hanson about the PUC’s action on March 25 to end the PILOT program that had been in place for more than two decades.
“You did that overnight,” Schumacher said. “That’s what has prompted [what’s going on now]. The city council is accountable to businesses and taxpayers to make sure we aren’t subsidizing the public utilities to the detriment of a retired family who is in our community paying property taxes.”
Schumacher repeated his example of Connexus Energy paying property taxes while providing electrical service to the city of Princeton’s industrial park.
“They pay back a rebate to their customers,” Schumacher said, adding: “They get the concept of rebates. That’s why we have such a great industrial park. They help our schools by providing taxes. Right now, you guys [PPU] are not doing that.”
Mayor Makes Point
Schumacher contended that Commissioner Richard Schwartz stood in front of city leaders 30 days ago and reported he had a plan for reinstating the PILOT program.
“You aren’t willing to listen to what he has to say,” Schumacher said. “He has many great ideas he wants to share. Mr. Hanson, you won’t allow him to have that conversation. [But] you’ve had that conversation with Counselor Zimmer.”
Zimmer is representing the city during PILOT subcommittee discussions with the PUC. “According to this newspaper story, you have all worked it out,” Schumacher said to Zimmer, referencing the Aug. 13 Union-Times online story, adding, “I’m excited to hear what the new amount for the PILOT will be.”
Hanson replied the newspaper online story stated both parties were continuing to work on a complicated issue.
“The notion that we did this as a knee-jerk reaction on March 25 is not entirely accurate," Hanson said. We had a lot of conservation going on before.”
Hanson said the PUC acted because its cash reserve levels were not where they needed to be. He added City Administrator Robert Barbian and Zimmer were working with him to address the city’s needs and concerns about PILOT.
Zimmer said the PILOT subcommittee has had three meetings. He said the biggest accomplishment that’s come out is the establishment of trust among the parties.
“We are moving forward not only with PILOT, but we are working to establish a real partnership with each other,” Zimmer said, adding that Schumacher’s previous comments about the PILOT talks having stalled simply weren’t true.
“When I saw this agenda item [to consider a Nov. 3 ballot question to eliminate the Princeton Public Utilities Commission], I was taken aback,” Zimmer added. “I feel like this is almost an undermining of what I’m trying to accomplish.”
Zimmer said the PILOT program still exists. The only thing that’s gone is funding. “We are trying to figure out what an appropriate PILOT figure will be,” he added.
Schumacher replied he learned more about the PILOT meetings from the Union-Times newspaper than he did sitting in a city council meeting chamber.
“It comes back down to the fact that we have a budget coming up that we need to talk about,” Schumacher then directed this question to Hanson: “The PILOT issue is as simple as this: ‘Are you going to reinstate the amount?’ Are you going to add this to your meeting agenda on Aug. 21? You have the ability to do that.”
Councilor Is Critical
Councilor Jenny Gerold, who also participates in PUC monthly and other meetings as the city council’s liaison, said she had previously suggested ideas for PPU to handle its electric days cash on hand amounts, on ongoing commission concern.
“I have offered up a couple of options, and they have not been seriously considered,” Gerold said, specifically mentioning transfer of extra water fund monies to electric, an idea that is possible according to the PUC’s auditor.
Gerold said the PUC’s preference was transferring funds into capital reserves in case it needs to fund future projects. Instead, she suggested bonding for project, like the city does. “That money doesn’t need to be put into your CIP,” she said.
Additionally, Gerold said there hasn’t been a PILOT payment in five months. PPU’s electric cash on hand is still sitting at the same number of days as it was on Dec. 31. 2019.
Gerold said General Manager Keith Butcher didn’t have a plan for those reserves. “If was me, I would have figured out a plan with dates and deadlines,” she said.
Hanson replied the PUC’s next work study session on Wednesday, Aug. 19 would address that subject. He also said accounting abilities to shift money were a recent change.
“I have extremely mixed feelings about this whole thing we are discussing right now,” Gerold added. “I’m very conflicted about what’s the right thing to do. But I have to be honest here. For the last year-and-a half, I have witnessed the PUC general manager and the PUC board making decisions that were not based on what’s best for the community. It is not the right way to manage a business.”
Gerold said her ideas as a city council liaison were not valued by the PUC nor its general manager.
“This has been extremely frustrating, disappointing and disheartening,” she added. “Perhaps it’s time to let the community decide [the PUC’s fate] or petition the state to allow us to increase our board’s size to five members, with one of those members being a city council member.”
Gerold called for the PUC to immediately stop what she called “ridiculous tactics” with the PILOT program and pay its fair share to the community of Princeton.
Meeting is Suggested
“I suggest holding a special city council meeting on Aug. 21 after the PILOT subcommittee meeting at 10 a.m.,” Gerold said. “Let’s see if this gets resolved to our satisfaction. We can make a decision about a ballot question after that.”
Schumacher then pulled out a copy of the Aug. 13 Union-Times and referenced this quote from a story about former Commissioner George Freichels’ commission service:
“If everything goes right, you don’t hear a thing,” Freichels said, recalling his years as a commissioner. “If something goes wrong, you hear about it really fast. That’s how it works. And, it takes a lot of listening if you are a commissioner.”
Schumacher said Freichels’ success on the PUC board was because he was a good listener. He directed the quote at Hanson.
“I don’t necessarily think that you are listening as chairman, and I say this because I heard Rick Schwartz stand where you are and tell us the great things he wanted to do. He’s done that and you won’t listen to him during meetings. The city council unanimously approved him.”
More PUC Members?
Councilor Jack Edmonds agreed with Gerold that it might be time for the city to petition the state for a five-member PUC board. “I would be in favor of studying that,” Edmonds said. “There’s more to this than transferring money,” he added.
Schumacher said the current issue was the PUC not coming to terms with PILOT.
“Mr. Hanson, the fact remains your job would be on the line,” Schumacher said. Edmonds replied, “Mr. Mayor, when you appointed Mr. Hanson, you could not speak highly enough of him. Now you are saying that he can’t do his job.”
Schumacher then stated that because Hanson was the first commissioner to be appointed from Princeton Township, he didn’t care about Princeton residents.
“I was already pre-warned about this before I praised you,” Schumacher said. “I don’t take back all the good things I said about you, because all of those good things were true, except you’ve forgotten what Mr. Freichels said. You are not listening to the people. They should not have to pay additional property taxes you clearly don’t want to pay, because you live in the township” Schumacher added.
Edmonds said PPU has tax exempt status. It makes a payment in lieu of taxes, which can’t be directly compared with investor-owned or cooperative utilities. “You are trying to compare apples and oranges. There’s no comparison,” he said.
Councilor Jeff Reynolds said the PUC’s unilaterally ending the PILOT program was a symptom of current discord. Edmonds called it pure politics.
“During the four years that I’ve been on council, I’ve asked for a five-person PUC board,” Reynolds replied. “That’s fallen on deaf ears. Talking about it now is a little too late.”
Hanson said Schumacher’s comments about him represented an “outrageous accusation” and that Schumacher should not hide behind what a citizen told him.
“There’s a difference between listening and doing,” Hanson replied. “I think it’s important for everyone who sits on the commission to listen carefully. Like Mr. Zimmer said, PILOT is not out the window. We have to find a way to get it done.”
Schumacher took Gerold’s suggestion and called for a 3 p.m. special city council meeting Friday, Aug. 21, to consider a Nov. 3 ballot question to abolish the Princeton Public Utilities Commission according to Minnesota Statute 412.391.
City Clerk Shawna Jenkins confirmed that a 3 p.m. meeting would still give the city enough time to report any ballot question decision to county authorities.
Mille Lacs County Auditor - Treasurer Eric Bartusch said the city would have to get the question to him by 4:30 p.m. Friday, Aug. 21.
“Typically, that’s when the county closes down for the day. If I know it’s coming, I will watch for it. But, I’m not going to sit with a stopwatch and say it’s too late after 4:30 p.m.”
Bartusch said the city could send the question in advance. That way he could use a “yes” or “no” update to determine whether or not to add the ballot question.
“Basically, what happens when we hit all of our deadlines and all the things that need to go on the ballot are received, I contact my ballot vendor and we work on ballot design. We start laying out the ballot and make sure everything is spelled right and is in the correct order.” The question, if placed on the Nov. 3 ballot, will have to appear in Sherburne County as well as Mille Lacs County, Bartusch said.
“There is a part of the Princeton city precinct that resides in Sherburne County,” Bartusch said. “That’s something I will have to reach out about and contact their county auditor and give them a heads-up. I anticipate we will have to get this ballot question to them as well. I can receive it and forward it to them,” he added.
Earlier this week, Schwartz confirmed that he had participated in last Thursday’s Princeton City Council meeting via Zoom teleconferencing.
“I did hear the mayor lay into Greg,” Schwartz said, also commenting about Schumacher’s claims regarding his current role and participation as a commissioner.
“The reason why I didn’t say anything Thursday night is because it would have turned into a bloodbath,” Schwartz told the Union-Times Monday.
“The mayor is 100% completely wrong,"he said. "I have not been stifled by anyone, nor has anyone told me to say anything. I certainly am a man of my own thoughts and words. I have great respect for PUC Chairman Greg Hanson and Commissioner Dan Erickson and General Manager Keith Butcher. There is no animosity or dysfunctional action.”
The PILOT committee will play an authoritative role in the issues involving the city and the PUC, Schwartz said, adding he doesn’t think any of the parties involved are withholding any information. He added: “This commission is on a single page.”
Last week the Union-Times received incorrect information from the Minnesota Municipal Utilities Association about the status of the commission that oversees North Branch Public Utilities. North Branch did not abolish its commission. The commission was increased in size from three to five members. The city council voted to not include a council member on the commission. A MMUA representative acknowledged the organization had supplied incorrect information to the paper.
Managing Editor Tim Hennagir