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Conservation groups sue state over use of environmental fund

October 3, 2018

Eight conservation and environmental groups filed notice Wednesday that they will sue the state for tapping an environmental fund to finance $98 million in lake dredging, wastewater treatment and other infrastructure projects in a way that they say violates the Minnesota Constitution and betrays voters trust.

The Environmental and Natural Resource Trust Fund, which receives about $60 million a year in proceeds from the state lottery, was approved by voters in three constitutional amendments in the last three decades. It is dedicated to protection, conservation, preservation, and enhancement of the states air, water, land, fish, wildlife, and other natural resources.

This year the Republican-controlled Legislature passed a bill that allows the state to use nearly $8 million annually from the fund to buy bonds for some infrastructure projects and pay $66 million in interest costs over their 20-year life. The projects include a phosphorus reduction plan for two lakes in Alexandria; a new wastewater treatment plant for Itasca State Park; multiple parks projects for the Metropolitan Council; dredging Lake Orono in Lake Elmo, and a stormwater sewer project for St. Paul.

The environmental groups said such projects are typically funded by state general obligation bonds, and that financing them this way costs twice as much and conflicts with the promise made to voters when the amendments were passed.

This will suck the resources out of the trust fund, said Steve Morse, executive director of the Minnesota Environmental Partnership, one of the plaintiffs. While the infrastructure projects are badly needed, Morse said, this is an inappropriate and expensive way to finance them. Other plaintiffs include the Minnesota Center for Environmental Advocacy, Friends of the Mississippi River and the Izaac Walton League.

The groups on Wednesday notified the Attorney Generals Office and the office Management and Budget, which manages bonds, that the suit will be filed.

State Rep. Josh Heintzeman, R-Nisswa, a co-chair of the legislative and citizens committee that oversees the fund, declined to comment on Wednesday. House Speaker Kurt Daudt did not immediately respond to a request for comment.

The trust fund, created in 1988, is overseen by a 17-member legislative and citizen committee that recommends projects to the Legislature. It has funded studies on invasive species, land and water conservation, environmental education and much more.

State law says that 5 percent of the principal can be used as loans for water treatment system improvements, but not to finance bonds or pay interest on bonds, the environmental groups say. And the law specifically precludes using the fund to pay for water pollution controls, which some of the projects include.

The provision passed in the 2018 session allows about $8 million a year in trust fund money to be used for so-called appropriation bonds, a financing instrument that is riskier for investors and typically carries an interest rate 0.5 percent to 1 percent higher than a general obligation bond. Lawmakers adopted the maneuver, in the final days of assembling their biennial bonding bill, to keep $98 million worth of infrastructure projects out of their $825 million package of general obligation bonds a threshold Republicans saw as fiscally conservative.

Conservation and environmental groups were outraged by the provision, which was passed on the last day of the session without public testimony.

Gov. Mark Dayton signed the bonding bill under protest, saying in a May letter to Republican leaders that tapping the trust fund was a devious move that subverted the normal process governing the trust fund and set a dangerous precedent that could lead to draining it in the long term. He regretted, he said, not being able to veto the entire bill because Minnesota needed the investments.

Nancy Gibson, who co-chairs the citizen and legislative committee that oversees the environmental fund, said all the projects are good in the $98 million package, and some resemble the kind that have been funded by the trust fund in the past.

But she said the projects all first surfaced in the Legislatures general obligation bonding bill earlier this year, and all were taken out, to meet the $825 million cap that Republicans had set for themselves.

Gibson said the lawsuit is an unfortunate sign of failure in the political process, but said the new law would otherwise open the flood gates for draining the environmental fund. Some legislators are already talking about doing the same thing again this year, she added.

In September, Morse presented the committee that oversees the trust fund with a letter signed by 34 environmental groups protesting the new use of the funds. Some Republican members of the committee, including former state Rep. Denny McNamara and Sen. Bill Ingebrigtsen of Alexandra, said that as long as the bill was passed and signed by the governor, it was constitutional.

Unless somebody sues and challenges the constitutionality of it, the bill is constitutional, Ingebrigtsen said.

If the environmental groups disagreed, the legislators said, they could go to court.

Josephine Marcotty 612 673 7394

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