TOWER- At Monday’s Tower City Council meeting, City Clerk Treasurer Linda Keith brought forward two items recently addressed in the city’s audit, including Keith’s continuing issue with a …
TOWER- At Monday’s Tower City Council meeting, City Clerk Treasurer Linda Keith brought forward two items recently addressed in the city’s audit, including Keith’s continuing issue with a $125,000 loan from the Tower Economic Development Authority for a planned town home project at the city’s harbor. Keith also brought up Mayor Orlyn Kringstad’s alleged conflict of interest given his previous involvement in the project. Kringstad has since divested himself from the project.
Keith has fixed her focus on a single invoice that Kringstad had submitted nearly two years ago for architectural services from Dewey Thorbeck, the original architect on the project. The Oct. 14, 2016 invoice for $29,080, lists time and expense in the creation of “the development concept and obtaining approval from the city of Tower as part of the original development team.” The invoice also references Thorbeck’s termination of interest in the project, suggesting it could be considered a buy-out settlement, which would not have been an allowable expense under the terms of the TEDA loan.
Keith had originally approved the invoice for payment under the $125,000 loan agreement with TEDA but began raising questions about it after Kringstad was elected mayor. Shortly after Kringstad’s election, Keith complained about the invoice and other aspects of the loan to the previous city council and indicated she would bring it up with the city’s auditor.
The auditor ultimately suggested that the city review the invoices submitted for the loan to verify that they were allowable costs.
But Keith argued against that and asked the council for approval to send the question to the state auditor for a determination.
“After further research with the auditor and the IRRR,” said Keith, “it is the best choice to turn the matter to the state auditor for a proper resolution.”
“The invoice stated it was for a partner buyout,” said Keith, “and prior to the proper date.”
Kringstad stated that the invoice was for legitimate architectural design work, and that the invoice did note the architect was no longer going to be a partner in the project but was not payment for a buy-out.
Kringstad said he had discussed this specific issue with the auditor and thought it had been resolved.
“I can guarantee you that [that the architectural work and the partnership agreement] were two separate things,” Kringstad said. “They were just described in the same letter…The documentation is clean.”
Thorbeck, himself, reiterated that point in a May 15 email to Keith, which claims Keith “misinterpreted” an explanation of the invoice that Thorbeck had provided to Keith earlier this year after she had raised questions about it. “I thought I was clear in my explanation that the payment was entirely to cover my firm’s architectural and engineering conceptual design and planning work…There was no money paid for terminating my interest in the development team.”
Thorbeck’s letter came two days after Monday’s council meeting. During the meeting, the council voted 2-1 on Keith’s recommendation to refer the matter to the state auditor. Kringstad voted no.
TEDA had received the $125,000 as a grant from the IRRR specifically for the town home development, to help with preconstruction/planning costs. The loan was originally set up for interest-only payment until the project was ready for sales to begin. The loan, once repaid, can be used by TEDA for future economic development projects.
Conflict of interest
On the conflict of interest issue, Peterson had already addressed the subject in a Jan. 9 letter to the city, stating “where there is a choice, city officials should avoid actions which may appear tainted of impropriety, even though they are legal.”
Peterson noted that state law holds it a clear conflict if a city officer has a direct financial interest in a project that that person should step aside and not be involved in any manner. The city’s charter also has language pertaining to a financial conflict of interest.
Keith told the council that “there is a strong perception that the mayor has a conflict of interest,” though she did not say how she had come to this conclusion.
Peterson noted that if Kringstad does not have a direct financial interest in the project anymore, that “there is no conflict.”
Kringstad has repeatedly stated that he has fully divested himself from the town home project and has provided details to the council. “There is no conflict,” he said.
Peterson also noted that the auditors had determined that Kringstad had no legal conflict of interest.
Keith said because there is a “high perception” of a conflict, this “could land Tower in a lawsuit. He should take the “high road,” Keith said.
But Keith’s arguments did not sway the council.
Abrahamson agreed that Kringstad did not have a conflict.
“He can participate in the discussions,” he said. “And then he can choose to vote if he wanted. We as a council cannot vote to stop him.”
Beldo concurred and said she did not feel the council needed to take any action on the issue.