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Shakopee Public Utilities wades through allegations lobbed by city officials

Water is again running hot at Shakopee Public Utilities meetings, this time through pixelated computer screens, as commissioners and staffers try to grapple with what to do about several accusations made against the commission by the city.

The Shakopee Public Utilities Commission has long dealt with the city’s dissatisfaction in the way it conducts its business. And it’s not the first time the city felt the need to call out the commission for what it believes is a violation of state statute. The city of Shakopee and Shakopee Public Utilities have long sparred over transparency issues and an inability to meet publicly.

On May 1, the Minnesota Office of the State Auditor responded to a letter from SPUC President Deb Amundson about the way the utility commission calculates its salaries, including that of SPUC Manager John Crooks. The auditor’s office found the commission was misinterpreting how to calculate an employee’s salary to avoid the cap and that Crooks was earning more than the cap allows.

As City Administrator Bill Reynolds has cried foul over several issues within the utility — from water capacity charges to annual payments in lieu of taxes to, most recently, salary cap violations, some SPU commissioners and a Shakopee city councilor believe Reynolds has stepped out of turn, claiming he’s publicly drawn attention to trivial legal questions in order to sway the public into pursuing a petition that would bring the utility back under the city’s jurisdiction. Others, including Reynolds, say this theory is a scapegoat argument that attempts to bury the fact that SPUC isn’t up to par with transparency standards required of a public entity.

The letter

On April 9, Reynolds and District 55A Rep. Brad Tabke, DFL-Shakopee, sent a letter to Minnesota Attorney General Keith Ellison and State Auditor Julia Blaha claiming Crooks, who — according to his 2020 employment contract — is earning more than the state salary cap allows.

SPUC did not respond to requests for comment on the allegations outlined in the letter, citing the ongoing investigation.

The city says the issues with SPUC all center around transparency. In the letter to the attorney general and state auditor, Reynolds notes the weeks it took to get the information he requested regarding Crooks’ salary from SPUC— data that he said is public. Reynolds wrote he eventually needed to get the city attorney involved.

A February email from former SPU Commissioner Terry Joos, following an email from Reynolds requesting the salary and benefits of its employees, said “I think at this point we should run all this harassment by our legal counsel.”

“The pushback that I encountered from my request for information that was undeniably public data was unexpected,” Reynolds wrote in the letter.

Salary cap

SPU commissioners Jody Brennan and Mathew Meyer interviewed several attorneys last month to choose St. Paul law firm Levander, Gillen & Miller to investigate the allegations outlined in Reynolds’ letter.

The state caps government employees at $178,782. According to his current contract, Crooks earns a base salary of $200,000 per year.

According to the statute, benefits such as vacation and sick leave, health and dental insurance and pension benefits should not be included in a government employee’s salary for the purposes of the limitation.

Emails obtained through a public data request show SPUC calculates Crooks’ salary in such a way that subtracts paid time off benefits from the base salary, which would put his earnings beneath the salary cap. The state auditor’s office said this interpretation of the salary cap is incorrect, meaning Crooks’ salary is above the cap.

“Minnesota Statutes… requires statutes to be interpreted in a manner that does not produce ‘absurd or unreasonable results,’” the letter from the auditor’s office said. “This would appear to be an absurd and unreasonable result.”

At the May 4 SPUC meeting, Brennan made a motion for the commission to receive the letter from the state auditor’s office, to adjust SPUC staff members’ salaries in order to comply with state statute and to discuss what it might look like for Crooks and anyone else who is earning above the cap to pay back the salaries they have earned above the cap.

Meyer and Amundson said they were in support of adopting the salary cap interpretation from the state auditor’s office, but they said they wanted to change the motion to direct an outside law firm to look into any legal issues that might arise from altering pay contracts and hold off on changing the salaries.

“I think we could do what we intended to do all along, and work with the outside counsel to resolve these issues,” Amundson said. “So I would not be in favor of the current motion.”

Commissioners Kathi Mocol and Brennan said they would be unwilling to revise their original motion.

Meyer said that “when you affect people’s livelihood, their employment, or their reputation, then what you’re doing is buying into a lawsuit.”

Kayden Fox, a new member of the commission, said “I think we’re doing due diligence on the employees of SPU as well as the customers, because we do have to look out for their interests.”

In the end, the motion carried 3-2, with Amundson and Meyer dissenting.

Crooks and Amundson did not respond to a request for comment on this story.

Still no meeting

From April 1, 2019 to April 15, 2020, the city of Shakopee has spent $9,767 on attorney fees related to SPUC matters. SPUC has spent $16,900 within the same time frame.

The last feud that occurred between the two entities began in January over changes in how SPUC calculates its annual contributions to the city’s general budget fund, or payment in lieu of taxes. The head-butting was not about the numbers, but about transparency, the city said at the time. The city was notified of the change by Shakopee City Councilmember Matt Lehman, who serves as the SPUC liaison. At the time, SPUC posited that because the city had a liaison to represent the city at its meetings, it didn’t need to explicitly notify other councilmembers of the change.

Reynolds said he tried to initiate a conversation about revisiting the PILOT calculation in June 2019 but was met with no show of interest from the commission.

“I think it’s right for the two entities to sit down and lower the water rate and adjust the electric rate,” Reynolds said at the time. “I’m making a plea to SPUC in general. Come to the table.”

In emails obtained by the Valley News, Crooks asked Reynolds at least three times to meet for coffee to talk about that PILOT. One email shows Crooks attempting to put a date on the calendar for the two entities to meet, but that date fell at the same time as a city council meeting.

Assistant City Administrator Nate Burkett said the only setting the city will meet the commission in would be a public setting, which he claims SPUC has been unwilling to do.

“We want the public’s business to be conducted in public instead of behind closed doors,” Burkett said. “The offers they’ve made to meet are just the mayor and (Reynolds), or just (Crooks) and the president. We are trying to make sure that the decisions are being made transparently, both on our side and on theirs.”

Former SPU Commissioner and city council member Steve Clay, whose tenure with SPUC ended recently, said the issue surrounding the PILOT “was so incredibly unimportant.”

“It’s like the city council has lost the ability to be leaders, and they’re just being foot soldiers to Mr. Reynolds… when he says jump, their only question is ‘how high?’”

Clay added that, up until recently, the city council and the utilities commission have gotten along well without any drama. Shakopee Mayor Bill Mars, who is also a former SPU commissioner, told the Valley News that there has been tension between the two entities for a decade.

“Things have gone downhill in the last three, four years,” Mars said. “We’re trying to see more transparency from the utility. While they say they’re transparent, I don’t think the public sees it that way.”

‘Bright light on SPUC’

SPUC was created in March 1951, when the Shakopee City Council passed the measure “by the barest of margins,” according to the SPU Centennial History report.

When the Highway 169 bridge was constructed, it made traveling to Shakopee from the Twin Cities easy, sparking more growth. In order to accommodate that growth, SPUC began to raise its water capacity charges to pay for new water facilities.

“We’re growing like gangbusters now,” Crooks said last summer in an interview with the Valley News. “And we have to plan and make sure our facilities are in place for that.”

One of the most publicized and tense controversies occurred last summer, when a $211,000 water capacity charge (formerly known as a water connection charge) was proposed for a donated Lions Park splash pad.

Eventually, SPUC waived the splash pad fee, but the issue became a poster child for the city’s frustration with the commission. The city council then voted to look into what it would take to move the utility back under the jurisdiction of the city.

Lehman, Meyer and Clay said the letter Reynolds recently sent to the state carries more under its surface, claiming the letter is another pawn to draw attention to the utility so that, eventually, the city can bring SPUC back under its umbrella.

Meyer said he was unsure why Reynolds sent the letter to the state attorney general instead of getting the city attorney involved to work out the issue with the utility’s attorney. Lehman said he believes the letter Reynolds sent to the attorney general was business that should have been conducted between the attorneys of the two entities.

“We need to have our legal people and their legal people, and if they don’t agree, they need to go to the state and sort it out,” Lehman said. “This is where judges are supposed to step in and make determinations on what that means. Not the state attorney general.”

Lehman, Meyer and Clay said at the core of the ongoing conflict between SPUC and the city is a philosophical difference: the utility believes new development should pay for itself.

Reynolds said the city attorney has always been involved in the city’s confrontation with SPUC. In an email he said he has no doubt that some people “might want to deflect attention from the clear state law violations that have occurred.”

“Interesting that the story isn’t about the clear violations of law by SPUC, but an attempt to have that buried by a ‘nefarious plot’ to overtake SPUC,” Reynolds said in an email to the Valley News on May 5.

The letter, Reynolds wrote in the email, “has nothing to do with such discussions; this is fundamentally a question of what does a public official do when they have clear evidence of state law violations? Is there anyone who believes that should be to simply ignore it?”

Mars said the salary cap issue along with other transparency issues addressed in Reynold’s letter simply address the facts.

“I don’t play games,” Mars said. “I think there’s a bright light on SPUC and there has been for a couple years, and I think that’s OK. If they’re really transparent like they say, then a bright light shouldn’t bother them.”

But Lehman and Meyer say that because of philosophical differences between the two entities, the two have incessantly sparred without the ability to meet, with the city looking for reasons to point fingers and the utility constantly playing defense. They used the recent SPU commissioner appointments as the latest example.

On March 4, councilmembers Jay Whiting and Brennan, along with Meyer, sat on an interview committee to appoint two new voting members to SPUC. They interviewed 24 applicants, Meyer said, including Clay and a candidate who had his doctorate in economics from Purdue University. In the end, the interview committee decided to recommend the Purdue graduate and Shakopee resident Kayden Fox to the city council for appointment. City council then appointed Fox and Jody Brennan as the new commission members, against Meyer’s recommendation.

Lehman held the dissenting vote.

“I think the intention of the utility being created separate from the city was to… have political influence removed from it,” he said at the council meeting March 4. “And I just don’t think that’s a good idea.”

“We’ve had voting councilmembers on this board,” Mars said in response to Lehman. “I’m one of them.”

Lehman also said at the meeting that he can’t find a reason why Clay shouldn’t be considered for the appointment.

Each of the newly-appointed commissioners — Brennan and Fox — have openly advocated or mentioned their willingness to dissolve the commission.

At a council meeting on July 2, 2019, Brennan made a motion to move the utility back under the jurisdiction of the city if a rate study determined there was no way to lower SPUC’s water capacity charges. The motion was eventually withdrawn after Shakopee City Attorney Jim Thompson said dissolving the commission could only be done by voters or through a petition.

On June 26, 2019, Fox started an online petition to bring SPUC back under the jurisdiction of the city.

“You’d think we wouldn’t appoint people who have a crystal-clear bias,” Lehman said in an interview with the Valley News. “You’d want people who are educated in finance, accounting or something else.”

Brennan said in no way does her appointment mean she is trying to merge the two entities. She said the council could have made the decision to appoint any council member to the commission — she didn’t lobby for appointment. She also said as a new commissioner, she’d like to enhance the communication channel between SPUC and the city.

“It is our responsibility to ask questions on the behalf of the ratepayers and I have been doing this since day one,” she said in an email, adding that she’s done a lot of work in order for the commission to discuss the current allegations at hand in a public setting. “It’s been very challenging to accomplish this.”

Fox also said it’s untrue that he was appointed to fulfill an overall plan to dissolve SPUC. That claim, he said, shifts the blame away from the investigation at hand. He said that claiming the investigation into SPUC and Crooks is in any way political “easily changes the discussion from fact-based dialog to partisan mud-slinging.”

“If I come to a conclusion, it’s because facts led me there,” Fox said in a written statement. “I do not subscribe to any ideology and my only goal is the truth.”