Discussion:
Since the 1950 vote by the City Council that established the Shakopee Public Utilities Commission, there have been decades of strife and disagreement between the City and the Utility regarding multiple issues. In the past, those disagreements and concerns were able to be addressed. However, in the last three years the City has steadily been made aware of multiple issues that if not addressed would have broad consequences to the health and safety of the community, and to violations of state law.
While researching historical underpinnings of utility decisions, city staff uncovered several apparent violations of Minnesota law, and a culture of manipulation and secrecy at the top of the organization. As an unregulated utility – unlike all private utilities in the state that are regulated by the Minnesota Public Utilities Commission – SPUC only has to essentially convince themselves of something for it to be implemented without any real oversight. In a word, there is no gatekeeper.
There are four general areas of concern at this point: 1) relations between the City and the Utility, 2) the soundness and veracity of Utility finances, 3) past actions by the Utility and its staff in violation of state law, and 4) public health and safety concerns. All of these areas are well known and the subject of much discussion and review in the past few years – most at the council level. As such, this memo will only look to put them in the record for the public to understand the reasons for moving forward with this action.
City/Utility Relations
Although relations have often been a struggle, recently the utility has chosen to make decisions without input or consultation with the City of Shakopee on issues important to both entities, including the unilateral action to change the City payment in lieu of taxes (PILOT) against history and legal precedent, and their unilateral submission of the City’s 2019 water comprehensive plan to the state absent any input/review by city staff. Since the Commission’s actions are unregulated by any reviewing body (“We are our own regulating authority” was the way one commissioner put it last year) the City can do little but object regardless of how out of bounds the Utility’s actions are.
In addition, the City has multiple issues with the Commission refusing to provide information, including an initial refusal to answer questions posed after a joint meeting called to discuss the utilities’ exorbitant water connection/trunk charges. There was also a substantial (many month) delay in in answering request for records regarding staffing/salary that was needed to review opportunities for combining positions and saving taxpayer/ratepayers money.
Financial Concerns
Financial concerns have been at the heart of the city’s involvement with SPUC with the veracity and soundness of the utilities’ finances being of real concern. There are many issues here, but the two biggest revolve around the Water Connection and Water Trunk Charges (among the highest in the state), and the decades collection of funds for water treatment plants with no plan to implement.
Violations of Law and Ethics
It is clear that under the Utility’s leadership, that at least two employees have received contracts that violate the state law mandated salary cap on public service personnel. In addition, there exists a culture of hiding information from the public (including public personnel salaries) – in violation of the state Open Meetings Laws – with the use of secret “Commissioner Only” packets designed to hold financial and other information from public view. There is also evidence of attempts to alter a state report and manipulate information by Commission staff. As part of the review of the Commission’s actions, the Minnesota State Auditor’s Office called them “absurd and unreasonable.” Currently, the Utilities Manager is under legal investigation for the state law violations noted above.
Public Health and Safety
The most important area of concern is water quality and safety. Shakopee has historically and continues to have long-standing concerns regarding Nitrate levels. The city is the only municipality in Scott and Carver counties that does not have treated water, and one of the few in the metro area. We are the largest city in the state by far without treated water. The utility has no approved plans to address this issue other than to continue their “blending” of more contaminated water with lesser contaminated water to dilute the contamination to get the levels below state maximums. In fact, as opposed to protecting the city wells from possibility of contamination, the utility has encouraged industrial users to drill their own wells – in violation of a sensible wellhead protection program.
All of these issues have been documented in the past few years as the city has struggled to have the Commission be a part of the solution. The Shakopee City Council has spent the last several years trying to get the Commission to work toward common goals, provide more on-target oversight and have a strong review of internal financials. Those efforts have failed.
It is time for the public to have a choice.
If the vote in November where to be successful, staff would recommend that the City immediately order a top to bottom forensic audit of Utility finances and submit a request for qualifications for both a new audit firm and new legal counsel. In addition, the Council should give thought to requesting that the utility be regulated by the Minnesota Public Utilities Commission to ensure that such actions could not occur in the future.