Fallout

There were no Otsego Council or Commission meetings this week, or for the remainder of the year. The Albertville City Council met on Monday and one item on the agenda hints at the fallout from the decision of the Otsego Council to cancel the fire contracts in 2027.

When (or if) the Otsego Council cancels the contracts, the Albertville Fire Department (AFD) will lose the primary response area of the western portion of the City of Otsego. That will result in a loss of State Aid of roughly 60-70% for the department. The loss of revenue from the contracts will impact the operational costs for all of our neighbors, and these State Aid funds are used to fund a significant portion of the retirement benefits for those volunteer firefighters. When that happens, the costs for the liabilities will exceed the amount of money that is available for the plan for Albertville firefighters.

The Albertville Council discussed a few options for how to proceed. No decisions or actions were taken, yet it was clear that the Council was not in favor of changing the type of plan from a Defined Benefit Plan to a Defined Contribution Plan - which was described as essentially more like a 401k.

The other options are to take money from reserves to make a contribution to the pension fund, and ultimately to increase funding from the property tax levy. All the Council Members present indicated that they realize an eventual levy increase is likely.

During one of our recent Otsego City Council meetings, it was suggested by another Council Member that those who are opposed to cancelling the contracts are somehow in the camp of "defunding public service." It's difficult to take that accusation seriously in light of the consequences of what will happen when those contracts are terminated.

Orono Fallout

I have written about the plight of Orono in prior newsletters because they have decided to start their own fire department after canceling their contract with the neighboring city of Long Lake. Like Otsego, a fire department with a duty crew model has been touted as the solution to all their problems, and the residents have been made promises that were impossible to fulfill. As a result, costs have skyrocketed to almost double what was initially promised, and the response times versus the contract provider actually got worse. Added to this is the fact that the city is locked in a legal battle with their former contract provider and has lost a few key injunctions.

I consider Orono to be a warning of the harsh realities of creating a municipal fire department when better alternatives exist. The lessons of Orono are several months ahead of us, and some of them can hopefully be avoided.

Last month, the citizens of Orono fought back in a significant way: ousting the outspoken (and often crass) Mayor, and an appointed Council Member who had both been very loud advocates for the new fire department. Additionally, another advocate did not seek re-election. The three were replaced with candidates who vowed to return civility and transparency to the Council and to work with Long Lake to explore options for fire service going forward. Long Lake even requested that the judge in their dispute hold off on decisions while negotiations are re-opened as a result of the new Council taking office next month.

This left the lame duck Council with one Member who has been opposed to the formation of a municipal fire department - Council Member Benson, along with the now lone supporter of the project: Council Member Johnson. A week later, Johnson resigned. The drama that unfolded as a result of his resignation is jaw-dropping in its absurdity.

The November 25th meeting saw the outgoing Mayor act in complete defiance of the Rules - ignoring the request from Council Member Benson to have an item removed from the consent agenda. When she requested to have an item around a capital lease agreement removed for discussion, the Mayor treated it as if it were an amendment to a motion and denied it, which is improper: all consent agenda items need unanimous approval. The reason he didn't want the item discussed is because it was for the fire department. He doesn't have that authority, but nobody stopped him, and he ignored the protests of Council Member Benson.

Next, the Council needed to decide what to do with the vacancy. The matter of "urgency" came up during the rather brief discussion - how soon does a council need to act to fill a vacancy? The law doesn't have a timeline, but it is preferable when a Council has only 5 seats to have the vacancy filled in order to ensure that a quorum is more likely. Seeing as the 4 of the 5 members of the Council were either gone or on their way out, perhaps the prudent thing to do would be to wait one more meeting to allow the new Council to appoint the vacancy.

However, that presented a problem for the advocates of the municipal fire department (3 of whom still held a seat for the next few days): whoever was appointed would probably not be friendly to their wishes, and so a super majority would exist that would be opposed to the newly created municipal fire department. As a result, the Mayor attempted to fill the vacancy with his own loyal subject. Although it wasn't on the agenda to actually make an appointment, the Mayor claimed that it was within the law and it was urgent to do so.

His plan initially backfired. One of the ousted Council Members (Veach who, herself had been appointed after a previous Council Member resigned due to disagreement over the new fire department) voted against the motion to appoint a vacancy. She stated that her own appointment had worked against her and it made it difficult for her to be taken seriously and she felt that the voters had spoken and that the Council had an obligation to respect their wishes. That made the vote 2-2, which is not enough to pass, and the motion failed. Later, residents would comment that they respected the "no" vote from Veach, and that one of her last acts would be commendable.

Unfortunately for the residents of Orono, the law on Council vacancies has an unusual twist: in the case of a tie vote, the mayor shall make the appointment. Without an ounce of hesitation, that's exactly what he did - claiming that the appointment would be for the remainder of Johnson's term, which was a little over 2 years. The residents in attendance were not happy, and shouts and boos came from the audience as the new Council Member, Claire Berrett, was immediately sworn in. The frustrated crowd was so loud that her swearing in can barely be heard.

During the open forum (which happens at the end of the meeting in Orono), residents pointed out that Berrett was a hard-line loyalist to the Mayor and already has a reputation of being demeaning and rude to residents - much like the Mayor himself.

Mayor-elect Bob Tunheim also spoke during the open forum. He read Minnesota Statute 412.02 Subd. 2a which states "if more than two years remain in the unexpired term, a special election shall be held at or before the next regular city election and the appointed person shall serve until the qualification of a successor elected at a special election to fill the unexpired portion of the term." In other words, the appointment "for the full term" was not valid. As a result, Tunheim vowed to fix this mistake immediately after taking office.

Learning from the example of Orono, I asked our City Administrator to work with our attorney to see if any recommendations need to be made at the next meeting for an ordinance to address how vacancies are handled in Otsego.

Duluth Holds the Line

During the discussion around the 2025 budget and property tax levy, I pointed out that Otsego was - one again - spending faster than it was growing, and that this presents a risk to the residents. It's a problem I have only come to fully understand after taking my seat, but every city has a massive amount of liability on its books. When you consider all the streets, pipework, utilities, and infrastructure - it boggles the mind how much money it takes to actually financially support the maintenance and replacement of these liabilities. Most - if not all - cities use the revenue generated from new construction to pay for the maintenance of these services.

It's a problem that growing cities don't have to even think about because there's enough revenue coming in on a long enough timeline that the problems of overspending - or over-committing services - don't start to show up for 20 or 30 years. And, even when those things do come up, we'll just refer to them as "unexpected expenses" and go into debt. There isn't a lot of thought put into what happens 20 years from now because if we did have to plan for those things, then maybe a new park or a new fire department or a new city hall wouldn't be as high of a priority. All of those things add to the liabilities in a very significant way and present massive upfront capital costs. Debt on top of debt. Every time you hear a city talk about their "tax rate" - what they're really saying is that is room for them to tax you more.

One way to hold the line is to - at the very least - pull back the spending so it is no more than your growth. On the surface this seems like an obvious no-brainer, but it requires elected officials - politicians - to work against their nature: to promise to scale back services to match the needs of the community and go through the boring process of being fiscally responsible. It's a lot more fun to build a fancy new fire department, get your name on a plaque, and cut the ribbon on a new city hall. There aren't a lot of plaques or brass statues or buildings named after politicians who followed through on their promise not to spend other peoples' money.

This year, at least, Duluth decided to hold that line. The increase in property taxes was only 1.85% - which is almost fully covered by the new growth. It's unfortunate that the way property taxes work mean this will likely still be a tax increase for a lot of residents, but it's a start to curb the spending problem. In a city like Duluth, this is especially difficult given the amount of services that are funded by those taxpayers.

Duluth wasn't the only one - St. Cloud also saw a small increase of less than 1%. There are a handful of cities this year that cut back spending as a result of the decrease in property values. History tells us these minimal increases will be short-lived, however, even if the property values continue to decline.