Tony Sertich to step down as IRRRB commissioner

IRRRB Commissioner Tony Sertich speaks before Vice President Joe Biden rallied at Hibbing Community College on Oct. 23, 2014. (PHOTO: Aaron J. Brown)

Later today, Tony Sertich, commissioner of the Iron Range Resources and Rehabilitation Board, is expected to announce he will step down before the second administration of Gov. Mark Dayton. Sertich will succeed the retiring Tom Renier as President of the Duluth-based Northland Foundation.

The change means Gov. Dayton will need to appoint a new leader for the unique state agency that acts under state law to distribute the much of the iron ore production tax revenue paid by Northern Minnesota mines in lieu of local property taxes.

For those unfamiliar with the IRRRB, that’s an important point: this is not “extra” money and it doesn’t come from the state’s general fund. This is local money that would otherwise be considered property tax. The Taconite Amendment of 1964 created this system so that mines would not have to pay enormous sums for property taxes when the price of taconite was down.

The IRRRB is like no state agency in the country. It’s executive leadership comes from the governor, but its operations and budget are overseen by a board of lawmakers from districts with active iron mining. Additional lawmakers from the region are then appointed by the Speaker of the House and Senate Majority Leader, respectively.

The IRRRB has two jobs, and oftentimes they conflict with one another. On one hand, the agency is entirely funded by mining and it uses those funds to support communities, schools and businesses in its jurisdiction, the “Taconite Tax Relief Area.” So, in this capacity the agency often becomes the public relief aspect of the mining industry — funding public works projects and education initiatives like a big city council would.

But the IRRRB has another charge as well, to diversify and strengthen the economy of the region so that it is less dependent on the very industry that funds the agency. This is where the agency often ends up in tricky territory. Because the mining industry remains a strong part of the region’s economy and political structure, the leaders who end up pulling levers on the board or inside the agency often have an immediate interest in sticking with the golden goose — mining — and less incentive to push the region into new economic territory.

In the worst scenarios, the agency ends up funding massive failed industrial projects pushed by developers or lobbyists with Iron Range ties. One only needs to look at the Mesaba Energy Project debacle in the early 2000s in which the agency pumped millions of dollars into a shell company, Excelsior Energy, which then directed the funds to a labyrinth network of law firms with lobbying wings. The result was many millions more dollars lobbied from the federal government, but ultimately total failure when Excelsior could not convince the state PUC to force Xcel or Minnesota Power to buy their overpriced “clean coal” electricity.

The project’s origins were essentially borne of personal and professional relationships among IRRRB board members and these developers. As a practice, this sort of thing is unsustainable, improper, and ferociously ineffective in accomplishing any of the IRRRB’s stated goals. This way of thinking and acting with public funds must end, and I think most (though not all) Iron Range lawmakers understand this.

So, the commissioner has to contend with old time Iron Range grudges and power plays, a turbulent local economy, a need to diversify amid aging local leadership that wants very little to change. Nevertheless, he or she will lead during a healthy streak of iron mining revenue, and with a flexible funding source for small business development and public works that most regions would envy.

One of the big challenges awaiting the next commissioner is what to do with the Douglas Johnson Economic Trust fund, a pool of mining dollars designated for economic development that had been the target of GOP budget raids in years past. Several different ideas for how to use the money to help areas businesses and generate growth over a long period of time are being discussed. One of the more interesting concepts has the money going to creating a foundation that generates annual business development grants.

For my part, I’d like to see an even bigger commitment to the educational initiatives Sertich began during his run as commissioner. The next commissioner has a limited window to lead our Iron Range communities toward ways of modernizing our shared economy, interdependent localities, and cherished educational traditions.

The goal of diversifying the Iron Range economy made incremental but tangible progress during Tony Sertich’s stint in this job. Let us continue forward.