Minnesota Department of Revenue
by Steve Timmer
Aug 31, 2021, 4:30 PM

Mining fun with numbers! – A reprise

Friend and former LeftMN sidekick Aaron Klemz wrote a terrific op-ed that was published in the Duluth News Tribune. If you are interested in mining stories here, you ought to read it.

Aaron mentions an IRRRB economic development fund that has about $160 million dollars in it. I also discussed that fund in this reprised story, too. I called it the “Doug Fund” for reasons that will be apparent if you read on.

As with most things about the IRRRB and money, it’s a long story. I wrote it in 2015, but I think it still has some currency, so to speak.

– o O o –

The events of the past couple of weeks [in January of 2015] regarding Sen. David Tomassoni and his piggy-bag gig at the Range Association of Municipalities and Schools (“RAMS”) have piqued the attention of a lot of people, including Aaron Brown, Michael Brodkorb, well, and me, too. They have both done excellent reporting on this for Your Voices in the Strib, which you can read at the links.

In fact, follow the links, read the stories, and come back here and finish up.

<Syncopated Clock music>

Are you done? Good.

I know there are at least a couple of you who don’t take instruction very well, so here is the briefest summary of the action:

Senator David Tomassoni, a state senator from Chisholm, who served a handful of terms in the Minnesota House and is now in, I believe, his fourth term in the Minnesota Senate, announced recently that he was taking a job as the executive director of RAMS, a paid position, while continuing to serve in the Senate. RAMS is an organization designed to represent the interest of the Range at the Capitol: to influence legislation, in other words.

Representing District 6 in the Senate, Sen. Tomassoni also has a seat as a director on the Iron Range Resources and Rehabilitation Board, the “IRRRB,” where the senator was, and maybe still is, the chair. The Board is essentially stocked with Iron Range legislators, including Tom Bakk, the current Majority Leader in the Minnesota Senate.

RAMS gets its funding from the IRRRB and dues from member organizations (Range cities and school districts). In the last report available, RAMS received a grant of $55,000 from the IRRRB. (RAMS also gets a direct allocation of production taxes.) The Board that Sen. Tomassoni sits on passes on grants to the organization that will pay him a salary.

At the moment, RAMS does not have a lobbyist; it used to have one: its former executive director. Currently, it only has Sen. Tomassoni. Good thing, eh?

The fly in the ointment, perhaps obviously, is that it presents a clear conflict of interest. People are talking mostly about the conflict between a sitting Senator and the lobbying organization RAMS (which the Campaign Finance Board focused on), but I think the conflict of more concern is the one between Sen. Tomassoni, the IRRRB member and chair — a position of considerable influence — and a principal funder of RAMS, and his role as a paid employee of RAMS.

Okay, that’s all you get from me. If you want to know more, you will have to read Aaron Brown and Michael Brodkorb.

My question to RAMS: wasn’t there a single person on the entire Iron Range, other than David Tomassoni, who could do this job? There must be at least one. I don’t think you looked very hard, to be honest. Maybe RAMS even wanted the chair of the IRRRB in its corner.

The IRRRB is one of the greatest slush funds, like evah. Again, according to its most recent report to the Legislature, it handed out $21,000,000 in round numbers, in 2013. The list of supplicants is truly amazing, ranging from youth hockey associations, to chambers of commerce, to large and established mining companies. It’s nine Range legislators who get to be the candy men — well, and woman, too.

The members of the IRRRB (it’s hard to stop at three “r” ‘s) also administer the Douglas J. Johnson Economic Protection Trust Fund, a slush fund’s slush fund, so to speak. Note that it is not the Douglas J. Johnson Memorial Economic Protection Trust Fund. Doug is still very much around, and you’d never guess: he’s a lobbyist these days.

I knew you’d never guess. Among Doug’s clients, by the way, are Twin Metals, which is pronounced Antofagasta, as in the Chilean sulfide mining giant that wants to bore holes in the earth around Ely to bring a sulphurous Hades to the surface. It wouldn’t have hired Doug if it didn’t believe he had some pull.

If you look at the IRRRB site, though, you won’t find any reference to Doug or his fund. That’s because the IRRRRRRRRB is hiding it. It is hard to hide $140,000,000, though, even if you are Willie Sutton.

Doug Johnson? Never heard of him.

The IRRRB wants to bury the DJJEPTF so deep that even the Legislature can’t find it, and make it even less accountable to the Legislature than it presently is. It proposes to do that by burying Doug and his fund in a separate non-profit corporation, a vault to which only the IRRRB has the key.

After all, says the IRRRB, it’s only mining production taxes that we’re talking about, which are collected in lieu of local property taxes.

Regrettably, my friends, we have to go into the weeds on this one. I know we’re already nearly 800 words into this, but it can’t be helped. I’m sorry.

If you are an operating mining company, instead of paying local ad valorem property taxes, you will pay a production tax, based on the tonnage of ore that you mine. The tax is collected by the state, just like the general sales tax. Unlike the sales tax, however, which the state just puts into the general fund, the mining production tax collections have several ready-made homes. These homes on the Range include cities and townships, schools districts, counties, and, tra la, the IRRRB. Oh, and the Douglas J. Johnson Not-Memorial Economic Protection Trust Fund. Just rolls off the tongue, doesn’t it?

You would not be mistaken if you thought this sounds like an economic fiefdom administered by the IRRRB.

But it’s just local property taxes! you say; what’s it to us? The production tax only for operating mining companies, though, not the three-bedroom rambler you own in Hibbing, or even the Bob Dylan Museum. On top of that, the production tax distributions get topped off by the general fund. You and I are the general fund, my friends.

For example, in 2013, the general fund contributed $8,428,275 to taconite production tax distributions to the parties identified above, and $5,017,442 was contributed to Doug’s fund. The state’s general fund contributed about 8% of the funds distributed as “production tax” distributions.

For 2012, the general fund kicked in $6,684,588, and Doug’s fund got $1,214,783. The state’s percentage contribution that year was about 8.3%.

In other words, in each of those years, the general fund contribution was greater than the contribution to Doug’s fund. I haven’t gone back to do an analysis from the time of the establishment of Doug’s fund during the Perpich administration, but it would be an interesting exercise.

In still other words, my friends, we all have some skin in this game, and we ought to find it objectionable that the IRRRB wants to bury our nut. Mixed metaphor; sorry.

Range politics and accounting are wondrous things. I really do think they believe they are in a separate country.

– o O o –

Update 2 – 1: The ink was barely dry on this story, and now there are a couple of new ones in northern Minnesota newspapers that are called to my attention.

The Duluth News Tribune reports that the IRRRB and Minnesota’s DEED took a big haircut on their investment, that is, former investment, in Twin Metals, which, as I wrote earlier, is pronounced Antofagasta. Anto used to be a joint venture partner with its friend Duluth Metals (a Canadian company, by the way), in Twin Metals, but decided recently to take its marbles and go home. Anto proved to be false friend, indeed. The junior mining company Duluth Metals couldn’t continue, and Anto said, Wait, we changed our minds; we’ll buy you out! For 45 cents per share:

When the Chilean copper mining company Antofagasta bought out Duluth Metals on Jan. 20, they paid 45 cents for every share of the foundering company’s stock.

That’s better than the 7 cents per share that Duluth Metals was trading for on the Toronto Stock Exchange when the deal originally was announced last fall.

Still, the buying price was way down from the $3 per share Duluth Metals flirted with in 2011 and 2012. And many stockholders who purchased Duluth Metals in recent years took a big hit — including a more than $500,000 combined loss for the Iron Range Resources and Rehabilitation Board and the Minnesota Department of Employment and Economic Development.

Here’s how the IRRRB and DEED became shareholders of Duluth Metals:

In unusual moves for both state agencies — and maybe for any public agency — economic development officials had purchased outright stock in the fledgling Canadian mining company.

Mark Phillips explained it this way:

Newly appointed IRRRB Commissioner Mark Phillips (who is a former DEED commissioner) said the risk was calculated at a potentially lucrative reward if Duluth Metals had struck it rich.

He sounds like Humphrey Bogart in the Treasure of the Sierra Madre, doesn’t he?

Anyway, the IRRRB said, Let’s take some chips out of the Taconite Area Environmental Protection Fund and play the stock market! And so they did.

In some circles, this would be called pissing away your rainy day fund. Personally, I would never be that crude. Note: Duluth Metals would never have been confused with investment grade securities.

But this gives me an idea, sauce for a goose being sauce for a gander and all. Remember the Douglas J. Johnson Not-Memorial Economic Protection Trust Fund? (It up there; just scroll up to find it.)

Since the IRRRB is so hot to open non-ferrous sulfide spewing mines, putting landowners, riparian interests, birds, fish, wild rice, and recreational water users (I’ve undoubtedly forgotten some) at risk, the IRRRB should pledge the entire Doug Fund to be available for cleanup of a tailings dam breach or other environmental disaster. That would be “economic protection,” wouldn’t it? Of course it would! I know I’d feel better if there was another $140 million in the cleanup kitty.

It would also be the IRRRB putting its money where its mouth is. Sen. Tomassoni was the chair of the IRRRB when it decided to bet the marbles on Duluth Metals. What do you think, Dave? I know you have other stuff on your mind right now, but drop me a line when you have a moment.

– o O o –

And the indefatigable Aaron Brown had an op-ed in the Hibbing paper noting that Tomassoni’s move pushes the frontier of Iron Range cronyism:

It’s hard to find someone close to the situation who thinks this is a good idea, though some shrug in passive shock. The comments sections of major newspapers in the state — usually viper pits of arguing partisans — seem frighteningly united in scorn, not just for Tomassoni, but for an Iron Range that would allow this.

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