TOWER— The city council here delayed action on a final pay estimate to Hermantown-based Nordic Group for work on the trails project around the Tower harbor until the city figures out how to pay the $449,803 bill.
“We don’t have that kind of money,” Interim City Clerk-Treasurer Ann Lamppa told the council on Monday. “I’m not sure how we’re going to do this.”
The city has struggled with its cash flow in recent months as it has worked to pay off a number of major expenses for various initiatives, including the trails project. Lack of timely grant reporting by now-suspended city clerk-treasurer Linda Keith meant the city has been slow to receive reimbursements from those grants
The nearly $450,000 bill was in addition to $57,000 in two other pay estimates for the trails project, which the council did approve on Monday. “So, what we need to do is find a source to pay about $515,000 all together,” said Mayor Orlyn Kringstad.
Adding to the financial concern is the fact that the city may not receive full reimbursement for the trails project, which was funded by a $679,000 grant from the Legislative-Citizens Commission on Minnesota Resources, or LCCMR. Nancy Larson, an experienced grant writer who has volunteered her time to try to get the city’s grant reporting back on track, said Keith never informed the LCCMR that the city was making changes to the project, including dropping a half-mile section of bituminous biking and walking trail connecting to the Mesabi Trail.
She told the council that LCCMR officials had indicated that the city could not submit reimbursement for that portion of the grant, which amounted to approximately $250,000. “At a minimum, there is $250,000 that may not be reimbursed,” Larson told the council. “Right now, we’re just looking for divine intervention. Or at least some kind of intervention.”
The city could well be stuck with a significantly higher bill. “Linda did not include the engineering fees into the overall project, which is over and above that,” said Larson. “That could be up to $120,000,” she said, adding that SEH had charged about $100,000 on the project to date. “And at this point we don’t know how much is going to be reimbursed because the proper procedures weren’t followed to make the amendments for the project. It’s been a real disaster as far as how it was managed. The budget numbers are way off.” To date, the city has received no reimbursement for any portion of the project due to Keith’s failure to submit timely reimbursement requests.
Kringstad said he had set up a meeting for later in the week with Rep. Rob Ecklund, DFL-International Falls, who serves on the LCCMR board, in hopes of convincing board members to give the city some leeway on reimbursements given that the council now appears focused on fixing the longstanding dysfunction at city hall.
Larson said she’s been making her own case to officials at the LCCMR. She said she’s been assured by SEH engineer Matt Bolf that he could complete the second phase of the project, which could include a shorter bituminous trail connection to the Mesabi Trail, as well as a kayak launch site and trail head, for the $600,000 in grant funding, which would include engineering fees. “If so, all the outcomes of the grants would be met,” noted Larson. “I’m trying to convince the LCCMR of that.” So far, however, the LCCMR has told the city to put that phase on hold until it can review the handling of the first round of funding.
Whether the city is ultimately successful in making its case or not, it appears certain it will be on the hook for at least $120,000, and possibly more. That’s because the total project, including engineering fees, is now expected to come in at approximately $800,000, while the original grant, which was supposed to include engineering costs, totaled $679,000.
The city won’t receive any reimbursement, however, until it pays the bills to its contractors, including the $450,000 bill it tabled this week. “It’s a serious problem, but the bottom line is, we’re working on it,” said Kringstad. “We’ve worked through a lot of problems already and I believe we will work through this.” Kringstad said as soon as a feasible option is developed, he will inform the council. “If we need a special meeting, we’ll call it,” he said.
In related action, the council provided signatures on two vouchers that Keith had never processed for payments to Nordic Group totaling $125,000. “Even though they were approved by the council, vouchers were never given to the council,” said Lamppa. “The checks were written without any vouchers. This needs to be done properly so the payments show up in the city’s books.”

Insurance coverage for destroyed laptop
Lamppa informed the council that a representative of the League of Minnesota Cities insurance trust had recently contacted her after reading a newspaper account of the destruction of a city laptop computer by the now-suspended clerk-treasurer. “He said it’s most likely covered under the insurance we have with them,” said Lamppa. “And he said we can also claim lost data,” Lamppa added, although she said it’s unclear what the value of that loss might be.
Councilor Rachel Beldo motioned to file a claim, which was quickly seconded by council member Sheldon Majerle. But council member Mary Shedd sought clarification. “Does filing for insurance reimbursement now preclude any resolution that we might pursue for the destruction of the government property?” she asked. “I wouldn’t want to narrow our options going forward.”
Kringstad said insurance companies will sometimes seek to recover funds they’ve been forced to pay out based on errors or wrongdoing of others. “I don’t know if they would do that in this case or not. It probably depends on whether we can put a monetary value of the data loss.”
“Five hundred and fifteen thousand dollars,” quipped Majerle, prompting laughs from the room. “I don’t know if that would fly,” responded council member Steve Abrahamson.
After more discussion, Beldo withdrew her motion and the council will review the matter at their next meeting to determine the appropriate time to file an insurance claim.

Mediation set
In related business, Kringstad informed the council that the city will host a mediation session with a representative from the Minnesota Bureau of Mediation to address Keith’s union grievance. The session, which will include Keith and her union representative, is set for 9 a.m. on Wednesday, July 31, at city hall. Kringstad, acting mayor Rachel Beldo, and interim clerk-treasurer Ann Lamppa will represent the city in the talks.
Kringstad said any agreement or options that might emerge from the session would have to come back to the city council for review. “Nothing would be binding,” he said. “What would come out is a recommendation which would come back to the city in an open meeting,” he said. The session could potentially include discussion of a settlement to officially end Keith’s involvement with the city.

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