Audit shows lack of clarity, transparency in mining taxes

PHOTO: Lucas Hayas /

PHOTO: Lucas Hayas, Flickr CC,

UPDATE: Post amended to reflect corrections from conflating IRRRB with genteral practice of mining taxation.

Yesterday, Minnesota’s Legislative Auditor released a highly anticipated review of the financial practices of the state’s mining taxation system, which funds loval governments and the Iron Range Resources and Rehabilitation Board, the unique state agency that distributes funds from the Taconite Production Tax, which mines pay in lieu of property taxes. Among the audit’s chief findings, the legislature should do much more to develop consistency and clarity in how it distributes funds from taconite mining to cities, schools and projects.

The entire Minnesota Legislative Auditor’s report about the IRRRB and legislative taxes is available online. The audit findings were presented to legislative committees yesterday, after which Iron Range lawmakers made some comments detailed in a Duluth News Tribune story this morning.

Essentially the report says something that anyone who tries to cover the IRRRB and mining taxes already knows: The fiscal procedures are extremely difficult to understand and track. Most of the chief recommendations by the auditor relate to developing clarity and consistency in how the state metes out the revenue generated by iron mines to the communities it serves, and explaining how it all relates to the agencies goal of supporting new development and job creation in the Taconite Tax Relief Area.

The audit meticulously explores the fiscal practices of taconite taxation. In this, we find that IRRRB and other state staff did a fine job balancing the books with very few errors found. But that does not refer to the politics of the board, or the large scale complexity of the IRRRB which is probably the bigger issue. The report finds that it’s very difficult for individual cities or school districts to predict the taconite funding they’ll get in a particular year. Speaking from first-hand observation, I’d add that the process of requesting grants for infrastructure development often has the feel of game of Hungry, Hungry Hippos. The auditor is essentially saying that there might be a better way of determining fair priorities for the distribution of funds.

The general nature of the review does not dive deeply into large, controversial past economic development projects done by the IRRRB like the Meyer and Associates loan to support a Democratic-leaning call center (a relatively small project) or the Mesaba Energy Project (the biggest Iron Range economic development failure of our time). Past reviews of these projects show that laws were followed, but it’s plain to see that crucial strategic judgement was lacking and political arm-twisting ruled the day. More reporting on this will come later.

Unfortunately, an audit can’t fix that. Only leadership can.

You’ll want to read the source document. But in summary, here are the list of legislative auditor findings:

  • The Legislature should review whether the limited number of accounts receiving production taxes through either guaranteed allocations or allocations tied to inflation are accomplishing intended purposes. (p. 41)
  • The Legislature should take steps to make annual allocations of production taxes more predictable for local taxing jurisdictions. (p. 42)
  • The Legislature should establish a process to improve the use of production tax for one-time legislative grants to local jurisdictions. (p. 84)
  • The Legislature should specify criteria in law for use of surplus funds in the Taconite Property Tax Relief account. (p. 87)
  • The Legislature should remove the prohibition against using Taconite Economic Development Fund monies for certain mobile mining equipment. Further, it should clarify the intended uses of the fund. (p. 90)
  • The Legislature should ensure that outdated mineral taxation statutes are deleted and erroneous statutes corrected. (p. 102)
  • The Department of Revenue should maintain accurate historical information on mineral taxation that is broadly accessible to users and corrected in real time as errors are found. (p. 103)


  1. Ranger47 says

    Good summary Aaron. We’ll see just how willing the DFL’ers are in becoming more transparent, clear, fair and balanced.
    Say…does the IRRRB believe one of the top job creators is high speed internet in all Rangers homes? If so, how much have they invested in getting this done?

  2. I am still amazed that there is not an uproar over tax dollars going to Meyer Associates. I guess when you call $650,000 small potatoes no one cares. Transparency and the IRRRB go together like gasoline and matches. It has been a DFL slush fund for the last 25 yrs.

    • Alex Novak says

      Nepotism-cronyism. This is how Washington/Chicago style politics work. Don’t ask questions , shut up and keep begging. That’s the sum total of transparency in Range Pork Politics.

      • More like Cleveland. I see the Range as similar to Cleveland. Cleveland still doesn’t get it. Pittsburgh is right there, but Cleveland can’t figure it out.

        • Alex Novak says

          This entire region has been so worked over by the labor left politics of failure it hurts. Just ask the 700 to 1000 job losers if it hurts. No more chop stick factories please. The leaders of the region need to ask Washington not Governor goofy why not us. Range politicians have been deceitfull for years. Our iron ore is meaningfull in the worlds market. Stop playing global economic games. Stop trying to create this global economy at our expense.

  3. Did the IRRRB ever deny support to a company who would have done telemarketing more for the Republican party? Does anyone know if Meyer and Associates ever turned down a contract for work with another political party or organization who wanted to use their services? Just wondering …

    I knew quite a few people who worked at Meyers and most were pretty OK with their jobs during the earlier years – the pay was better than minimum and the schedule was flexible. They would have had no problem calling for the NRA or Republicans or Fox News or whoever as long as they we getting paid. It was a job, and for some people, it was their family’s only income in 2008-2010. (Have to be pretty thick-skinned to make all those calls and not take it personal being yelled at, but some people did well at it.)

    I’m about as far from a IRRRB-crony or whatever that you can find, but yeah, on a people-level, Meyers kept quite a few moms working during those recession years. Most people on the east side know someone who worked there for at least a little while. They weren’t all Democrats. It was just a job.

    • Alex Novak says

      You are caught up in the micro and have lost the macro dude. Escape from the mire and understand the stench. It is the entire structure that needs a house cleaning. They are all the enemy. Once they achieve the power they become intoxicated in it’s web. term limits are the only answer. No more public servants only citizen servants for a brief timeline .

      • Dude : ) made me smile. I’m not as “mire-y, stench-y, and they are all the enemy-ish”, but term limits are a good idea, Alex. How would you see that change happening?

        • Alex Novak says

          Would it not be culturally progressive. There I go with that new socialistic buzz word. Anyway I digress, If we as a people were all required to do something serving the people for a given period of time our society would produce a stronger sense of community. We would have developed the needed buy in for youth as well as the general population all the way up to seniors. We don’t need as much stimulation to get us thinking about civic pride. We still remember the good days. But in the polluted paradigm of local pork politics remove the party operatives from decision making process completely. The IIRB needs to be of the people, for the people and by the people. Much shorter term limits and project by project sniff testing. If it doesn’t smell right–it just might not be right.

  4. It isn’t about who worked there, it is about DFL elected officials voting to fund a call center with IRRRB tax money that is working to get them re-elected. A huge conflict of interest. I will contact the board with the idea of setting up a GOP call center with $700,000 of our tax dollars in Mt Iron and see how that goes over. I’m all for jobs and happy anytime the IRRRB helps our area but this stinks to high haven of crony capitalism where political officials benefit themselves with public money. That is wrong… period.

    • Alex Novak says

      Criminals . So many years of corruption and no Grand Juries or criminal charges. Makes us look like rubes. Or are our faces so deep into the trough that it doesn’t matter.

  5. Thanks for your above (above) response, Alex. I think your idea about having people, especially young people, do something positive for their communities is a great one.

    Let’s try to take your idea a step further (remembering that a lot of politically, economically, and socially active people read Aaron’s website here …)

    What could be done this year, so by 2017, there was a plan in place, at least on our Iron Range, if not state-wide, that had people, especially all young people, more involved in their communities to do “something serving the people” to produce “a stronger sense of community”?

    (Anyone else have some thoughts on this, too? It would be awesome if this group of readers started something positive that could actually be implemented.)

  6. Term limits is a start. We need to look carefully at how effective our elected officials are at helping us with actual results, not comforting words and grand plans that sound great but have a slim chance of becoming real. Getting young folks involved is a huge step in changing the current path the Range is on. Teaching them from a young age that YOU are responsible for YOUR success or failure would be a start. I am amazed at how everything that happens badly in your life is someone else’s fault according to many folks now days. Getting High Schools to put an emphasis on welding, electrical, mechanical trade skills and letting young men and women know that you can earn a good living by having a needed trade. College is not for everyone and with the cost skyrocketing (ask yourself why) it puts many young folks in debt for years. Free college is not the answer, affordable college is. The “give me something free” mentality is hurting us as a nation, some one else’s money will not make you happy. Take it from an old man, who learned it from his Dad, work is good for the soul and the pride of earning a paycheck is important to folks well being.

    Everyone agrees change is needed, having an honest discussion as to how to accomplish that change seems to be hard to do up here.

  7. Hi Ken: Thanks for your suggestions. I agree that working and feeling needed and useful is essential to people. I also agree that actual change seems difficult. And lastly, I’m going to agree with your idea about kids not all needing to be pushed through the same “no child left behind” curriculum in high schools. The last ten years of trying to “increase academic rigor” for “all students” has created a system where high schools are forced to place kids in classes that they have absolutely no interest in, but that they all have to take now as mandated by the state. A lot of kids, aged 16-18 would benefit so much from on-the-job experiences instead of sitting through another class they have no interest in. Thanks again for your ideas.

  8. John Ramos says

    I, too, agree that encouraging more kids to work in the trades would be better than holding up college as a magic bullet that will save the nation. For one thing, they wouldn’t pile up as much debt. For another, a background in the trades instills many practical skills that can be used to enhance one’s personal life in a cost-efficient fashion. I would have no problem at all if my kids decided to be mechanics or plumbers. I would applaud that decision. They would make a heck of a lot more money than I do as a journalist, and they would be able to fix my sink besides. It would be a win-win.

    • Independent says

      +1 on the skilled trades. Very hard to find qualified people and has been for a while. Kids have been brainwashed by the education monopoly that everyone in this country just has to get a four year college degree and then they can pass papers back and forth to each other in kaki pants and make $100K+/year. There is a significant number of skilled trade / high tech positions that all pay north of six figures a year and these are not just found working for a mining company either.

  9. Maybe if any of Aaron’s legislator friends read this, they should note that it would be great if local schools and districts had a lot more say in programs. Though No-Child-Left-Behind type policies were maybe good for pointing out inadequacies in the large urban districts, they have not been good for small rural high schools and students. It would be so great to just see the legislature step back for a while.

  10. Hard for many politicians to step back and listen to regular folks. Their elitist attitudes make them believe they know what is better for you and your children than you!!! That has to stop. both parties are guilty and we have to hold them accountable. My beef with DFL is they have controlled Range politics for past 50 yrs with promises not results.

  11. Gerald S says

    Be careful what you wish for with term limits.

    The only source of power in St. Paul for the Range is Tom Bakk. He holds that power due to seniority. That power makes sure that Range issues get a hearing, if not always a happy ending, in St. Paul.

    In a term limit system, the power would end up in the hands of the big blocks: the Metro Area for the DFL, the country club belt, outer suburbs, and the prairie for the GOP. It is quite clear from this year’s dance in St. Paul that the GOP block is at best indifferent and at worst hostile to the interests of Northeastern MN, not surprising given the voting pattern up here. Bakk holds the key to protecting the area.

    With term limits, instead of having politicians whose seniority has made them strong, the Range would be represented by a group of inexperienced and poorly connected neophytes. The GOP could conceivably gain one seat (Dill’s,) but otherwise, as turnover has shown, the Northeast would continue to elect DFLers for the foreseeable future.

    So although term limits are theoretically interesting, they would turn the Range into a region whose seat at the table is in the second deck outfield.

    The same goes for Washington. Seniority made Oberstar, and Blatnik before him, important in DC and allowed them to do a lot for the area. Under term limits, the power in DC would belong to the reps of the large urban areas (Dems) and the rural South and West (GOP,) again with us on the outside looking in.

    It may be worth essentially disenfranchising Northeastern Minnesota for the principle of term limits, but not sure that many people would be happy with the outcome.

  12. Ranger47 says

    I’ve never been a fan of the “seniority” system for determining who gets what jobs. It puts some really incompetent, self-serving people in key positions…for life. I think the merit system has proven to be much more effective in getting skilled people in leadership positions and would come into play if we had term limits. The Range politicians, Bakk’s et al, would still have an equal chance of getting assigned key legislative roles if they demonstrated the right leadership skills.

    • Gerald S says


      However, in other settings, groups with large numbers of members tend to decide to concentrate power for the benefit of themselves and their voters. It is extremely unusual for an elected official to have such charisma and skill as to be able to convince members of large blocks to vote against their own interests. Even giants like Jefferson and Madison rose as much because they were the leaders of the slave holding and plantation block as because of their obvious natural abilities, while Hamilton, of equal talent, fell back into private life.

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