Council, EDA updated on lawsuit

League of Minnesota Cities accepts insurance claim, provides legal defense in municipal campus case

 

Papers

The city has until Feb. 17 to respond to the lawsuit. (Photo by Clint Riese)

Clint Riese
News Editor

Forest Lake’s Economic Development Authority (EDA) and City Council met jointly in a closed meeting Monday night to learn the city’s defense strategy for the lawsuit served concerning the plan to build a $21 million municipal campus.

Apparently, some at that meeting came away less than thrilled with their say in the matter. In the subsequent regular council meeting, Ben Winnick, who is a member of both boards, expressed frustration with what he perceived to be a lack of input sought from him and his peers.

“I’m not happy with how the process has went so far,” he said. “It feels like council’s kind of getting left out of the loop of what’s happening.”

In particular, Winnick referenced the matter of who is defending the city in the lawsuit brought by the Lakes Area Business Association and Cameron and Cassandra Piper.

Dave Hebert handles day-to-day attorney duties for the city, but as administrators strategized upon receiving the summons and complaint Jan. 28, they put the case in the hands of the city’s bond counsel, Briggs & Morgan. That firm, City Administrator Aaron Parrish told the council, in recent years has handled most of the legal work that does not fall to Hebert, including a lawsuit regarding condemnation for the construction of the downtown roundabout.

However, the city also filed a claim with the League of Minnesota Cities Insurance Trust. It was accepted, meaning the league will essentially come to the defense of the city. The league will cover 50 percent of the legal bills the city has already incurred and 85 percent of the case’s fees going forward.

The only catch is the city had to select from a pool of attorneys recommended by the league.

In short, Jim Thomson of Kennedy & Graven is now leading the city’s defense of the lawsuit.

Parrish noted that he informed the council of the attorney changes on a same-day basis.

While acknowledging that it made sense to bring the League of Minnesota Cities into the fold, Winnick said he expected to be in on the decision.

“I think if we’re up here discussing $15 a day for baseball field rental, we should also discuss thousands of dollars in attorney fees,” he said.

Councilman Mike Freer advocated finding a way to involve the council in a proactive manner.

Hebert said that is simply not how it works when it comes to such legal matters.

“You know, every so often the city gets sued,” he said. “…My experience is it’s always been handled administratively. Once they (the league) agree to accept it, we select an attorney, and usually we know who they are and what their reputations are.”

Winnick then commented that it seemed nothing had happened since the suit came before the city two weeks prior.

“We meet [only] every two weeks,” said Mayor Chris Johnson. “…We’ve got 20 days to respond, so in lawsuit time, this has been a normal pace.”

They city’s 20 days expire this Sunday, Feb. 17.

Even so, Parrish advised the council to sit tight.

“You heard the general strategy in the closed session tonight and you probably aren’t going to hear a lot for awhile,” he said. “…There isn’t, honestly, a lot, policy-wise, to talk about.”

The lawsuit, crafted by White Bear Lake attorney and former Forest Lake resident Fritz Knaak, asserts that the city, in conjunction with the EDA, broke the law by purchasing the Northland Mall property without permitting a referendum demanded by citizens. It states that this action directly injured taxpayers by spending public funds for the benefit of individuals rather than the city as a whole.

Among other requests, the plaintiffs ask the court:

• to require the city to receive the petition and, if legally sufficient, conduct a referendum on the bonding

• to stay any expenditure of funds from bond proceeds until said referendum

• to find that the mall property was not blighted or otherwise qualified to receive funds from bonding proceeds.

  • Matt

    If the law prevails, the city will have to hold a public hearing for the issuance of general obligation capital improvement bonds, and a petition for referendum will likely have to be redone and handed in to the city within 30 days of the public hearing. The city will have to pay back all the revenue bond holders – that is what is at contention, the issuance of revenue bonds versus capital improvements bonds. The city should just hold a public vote on the project straightaway if they lose, but I suspect they will behave vindictively and require the petition to be gathered a second time after the public hearing, wasting ever more time and money.

    If this scheme at avoiding state law is upheld by the court, the law means nothing and either needs to be revised or just eliminated, and we’ll just let our betters rule over us with no recourse. If we cannot depend on a common-sense reading of the law, especially when tens of millions of dollars are at stake, we truly do live in a lawless society.

    But hey, you re-elected your mayor, Forest Lake, so I guess you get what you deserve.

    Here’s an idea if the city prevails: no matter what the public project is, make sure there is a private coffee stand in there, paying the city rent. Then you can issue revenue bonds for the project! Build yourselves a giant gym for the city employees exclusively, but have a little coffee shop in there open to the rest of us subjects, paying the city a little rent every month. Perfectly legal, according to the way your mayor reads the law.

    The only positive about revenue bonds is technically the public is not on the hook for paying them back – they carry a higher interest rate and greater risk because the bonds will be paid back with incoming revenue, not taxpayer dollars, and thus are at higher risk for default. That’s why the law is written the way it is regarding general obligation capital improvement bonds, which are guaranteed by the full faith and credit of the city and its taxpayers. A future city council could just decide to default on the revenue bonds. That would be legal. Which just further illustrates how crazy this scheme is, and why it needs to be forced to do the right and lawful thing by the court.

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