The latest federal subsidy comes under the little-known Small Community Air Service Development Program (SCASDP), which provides temporary help to small airports to attract and maintain local air service through marketing and revenue guarantees. St. Cloud officials said the taxpayer gift would go a long way toward courting a new carrier, mostly by offsetting the financial risks involved with getting new service off the ground. In other words, the federal government is subsidizing the airport so the airport can subsidize the airlines. “One hundred percent of it will go towards what we call a minimum revenue guarantee. It’s really putting a pot of money somewhere set aside that in the event that airline loses money or has some start up costs or whatever it might be that they’re able to pull from that and make themselves whole,” airport director Bill Towle told the St. Cloud Times.

While increasing St. Cloud’s chances of attracting air service, analysis by the Freedom Foundation of Minnesota suggests the program fails to deliver for communities more often than not. In fact, a federal audit found that half of SCASDP grants failed to meet their objectives or failed to continue to provide air service capable of competing in the marketplace after the subsidies dried up.

Federal auditors have consistently raised questions about the overall lack of effectiveness of the $20 million per year FAA program. An Office of Inspector General 2008 audit revealed that just 30 percent of subsidy recipients were successful in achieving and sustaining their desired results for at least one year. The 40-page report concluded that “70 percent of the grants in our review failed to fully achieve their objectives. Specifically, 50 percent of the grants were unable to achieve any of their articulated grant objectives or were unable to sustain grant benefits beyond the grant horizon.”

On paper, St. Cloud’s bid appears to align well with the audit’s recommendations for maximizing the possibility of success. Airports that woo new air service tend to fare better than airports that attempt to improve an existing air service, according to the audit. Other important variables include offering revenue guarantees, marketing support and high level community involvement.

While there are no guarantees, St. Cloud’s strategy includes all of those key elements, including raising additional financial support from the community. Nevertheless, the decade-old program has been excluded from the FAA Reauthorization bill working through Congress. The subsidy is destined to become a rare example of a Washington program that both sides of the aisle agree does not work, according to House Transportation and Aviation Committee staff in Washington.

In the end, St. Cloud will have secured one of the program’s first and last taxpayer gifts from the SCASDP. FAA records indicate that a $1,000,000 grant was awarded jointly in 2002 to Brainerd/St. Cloud airports during the first round of SCASDP funding. The records do not specify exactly how the subsidy was used to pursue the program’s mission of supporting and sustaining long-term air passenger service after federal funding runs out. A 2005 Government Accountability Office (GAO) report found that $250,000 of the first grant was reimbursed to the federal government. Neither federal DOT nor Brainerd and St. Cloud airport officials responded to FFM’s requests for information.

In fact, three more Minnesota airports received subsidies during the program’s decade-long existence: Duluth in 2003 ($1 million), Hibbing in 2005 ($485,000) and  Marshall in 2005 ($480,000). The Hibbing Airport even received special designation in 2005 under SCASDP as an Air Service Development Zone. GAO investigators, however, could not even determine what qualified an airport for Air Service Development Zone status or any actual benefits tied to the designation.

One official from an unspecified airport told the GAO that “positive local publicity for the airport” was the only effect they could report in connection with the designation. As for Minnesota’s five recipients of SCASDP grants, only Duluth currently offers non-subsidized passenger airline service. Marshall and St. Cloud do not have regular passenger air service, while Delta has tentatively announced plans to drop its subsidized flights to Hibbing and Brainerd.

The numbers in chart form are listed below:

SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM

MN Grant Recipients 2002-2011

2002- Brainerd/St. Cloud   $1,000,000
2003- Duluth                              1 ,000,000
2005- Hibbing                                 485,000
2005- Marshall                               480,000
2011- St. Cloud                               750,000

“This is a law that started in Winona and has spread to other cities in Minnesota and what we need to do is stop this trend before it goes any further,” said Anthony Sanders, staff attorney with IJ’s Minnesota chapter. “The right to rent out your home is a fundamental property right, a traditional and accepted use of your property and Winona is trampling on that.”

The Freedom Foundation of Minnesota reported earlier this year on Dean’s campaign on the home front against the controversial Winona ordinance known locally as the “30 percent rule.” Dean says the ordinance is a double whammy.  By restricting rental properties to only 30 percent of houses per block, it deprives homeowners of rental income. Without a rental permit, houses are also less appealing to prospective buyers. Dean says the ordinance has cost him more than one opportunity to sell his $139,000 house, located in a prime rental area in this college town.

“I don’t really understand how someone believes they have the right to tell someone else how and what they can do with their home, but it is a strange world at times, I guess,” Dean told FFM at the time. City officials view the measure as a way to preserve the single family character of city neighborhoods particularly near Winona State University by regulating the number of houses rented mainly to college students. Complaints over student parties, vandalism and absentee landlords led to the imposition of the ordinance in 2005.

“It’s not ideal, but it’s working right now and it’s helping to address our problem of density of rental properties around the downtown core area and Winona State,” city council member Debbie White told FFM earlier this year. “We’ve been losing residences and homes and trying to keep a balance in our neighborhoods.”

According to the Winona Housing Association, investment and management of certified rental property is the city’s largest private industry, involving more than 900 individuals and families. The Institute for Justice estimates the rental ban affects hundreds more Winona homeowners. Seven of the nine properties on Ethan Dean’s block were grandfathered in when the ordinance took effect.  Until he put his house up for sale, however, Dean said he had never heard of the ordinance. Concerned about paying his mortgage while stationed overseas, Dean rented it out to three students in violation of the ordinance. After learning Dean was working with U.S. troops abroad, the city granted him a waiver for a permit that will expire next spring.  Another homeowner who’s involved in the lawsuit also has a temporary rental permit. Both say they face probable foreclosure under the city’s rental ban.

The Institute of Justice legal team is asking that the ordinance be declared an illegal use of the city’s zoning power and unconstitutional under the Minnesota constitution.  Attorneys filing the case say it may have implications nationally because it addresses the fundamental constitutional issue of whether government may reign in some citizens’ property rights but not others.

“Rental restrictions of various kinds are common across the country and have become more and more common.   But Minnesota is ground zero in this trend of completely taking away people’s right to rent out their homes.  All eyes of policy makers and property rights advocates will be on Minnesota with this case,” said Sanders.

The Institute for Justice describes itself as “the nation’s only libertarian public interest law firm, we engage in cutting-edge litigation and advocacy both in the courts of law and in the court of public opinion on behalf of individuals whose most basic rights are denied by the government–like the right to earn an honest living, private property rights, and the right to free speech, especially in the areas of commercial and Internet speech.”

Thousands of licensed Minnesota day care providers may soon become unionized at the stroke of Governor Dayton’s pen via executive order as an increasingly contentious, yet largely unknown, organizing campaign apparently nears an end, according to opponents.

The effort to organize the approximately 12,000 licensed home-based daycare providers goes back at least five years.  The American Federation of State, County and Municipal Employees (AFSCME) and Service Employees International Union (SEIU) appear to be working in different counties throughout the state to form two separate unions:  Child Care Providers Together-AFSCMEand SEIU-Kids First.  The unions have patterned the drive after similar campaigns in other states that targeted providers with clients that receive state childcare subsidies.

The process does not involve a secret ballot or a vote, but rather a controversial method called card check. Organizers go door-to-door to childcare providers on the job asking them to sign cards that give the union collective bargaining rights.  The unions set out to collect signatures of more than half of the available providers or approximately 3,000 signed cards apiece. After the cards are certified, it is believed Governor Dayton will be asked to sign an executive order designating AFSCME and SEIU as collective bargaining units to negotiate with the state. In addition to personal contributions made by influential union leaders, AFSCME and SEIU PACs contributed  $14,000 to Dayton’s 2010 gubernatorial campaign.

“Just about everybody we have spoken to has said they were not told by signing that card they were supporting a union,” said Jennifer Parrish, a Rochester provider who’s leading opposition to the union. “The main theme seems to be people are being told they can sign up for more information or be put on a mailing list.”

Jackie Seifert said that’s what happened to her when a young woman knocked on the door of her daycare business in Rochester.

“She never said she was a union representative and she had no identification as far as a name badge or jacket or any of that,” Seifert said. “It was lunch time when she came and I was busy getting things ready for the kids and she asked me to sign this card for more information.”

Only later, Seifert said, did she learn the woman was a SEIU organizer.  She was dismayed to find that the fine print on the card she signed grants the union representation for the purposes of collective bargaining on her behalf.

“I about died I was so embarrassed.  I had been had, that was basically how I felt because I was misinformed,” Seifert said.

Seifert demanded and received her signed card back from SEIU.  AFSCME appears to have reached its quota of a majority of signed cards ready for certification, after which “yes” cards cannot be rescinded.

Neither AFSCME nor SEIU union representatives returned repeated calls from the Freedom Foundation of Minnesota. In an online interview with providers opposed to the union and posted at childcareinfo.com, the lead organizers for AFSCME and SEIU defended their volunteers and said they received training in best practices.

In other states, daycare providers are deemed employees of the state for purposes of the collective bargaining process.  Tom Copeland, a Twin Cities attorney and childcare business expert who supports the organizing drive, says the legal step doesn’t mean the self-employed providers would actually work for the state.

“They’re not an employee of the state. They don’t lose their self-employee control, the state has nothing to say about how they operate, what they charge or what rules they adopt,” Copeland said.  “It’s only around negotiating higher subsidy rates and perhaps changes in those regulations and perhaps a better system of grievances and licensing rules, that’s it.”

Licensed providers who oppose unionization have mounted an on-line petition drive to gather enough signatures to present to Governor Dayton before he takes potential action. Governor Dayton’s office did not respond to FFM’s email requests for comment on the issue.

“Do I think he’d sign it?” Copeland said.  “I think he would and I think the unions think he would.”

“As a small business owner it’s my right to have my own voice and not be covered under this union and to not have to financially support a union that I don’t believe is going to benefit me or my business,” Jennifer Parrish said. “I’m very confident that if this went to a secret ballot vote where every licensed provider got to vote ‘yes’ or ‘no’ that we’d prevail.”

Home-based childcare provider unions are operating in fourteen states. Yet the union formed in Michigan by the United Auto Workers and American Federation of State, County and Municipal Employees was recently cut off from receiving mandatory dues by state authorities.  The Child Care Providers Together Michigan union effort led to lawsuits over designating home-based childcare workers as state employees and deducting dues from subsidies for low-income families.  Providers recently reached a settlement to preclude the state of Michigan from tying union membership to state childcare subsidies in the future.  A separate class action lawsuit has been filed against union officials on behalf of childcare providers by theNational Right to Work Legal Defense Foundation, seeking repayment of nearly $4 million of dues collected since 2008.

The University of Minnesota project, which received $2.8 million in federal stimulus funds and $800,000 in local matching funds, was highlighted by FFM in an October 2009 Accountability Alert. In their application for stimulus funding, the University of Minnesota made the bold claim that it will “close the Digital Divide in four Twin Cities poverty zones.” Eleven computer labs in Minneapolis and St. Paul intended for use by “underserved populations” were upgraded and expanded.

The project description states, “the University of Minnesota is uniquely qualified to carry out this project. The Urban Research and Outreach/Engagement Center, Office for Business and Community Development, and Extension Services have decades of combined experience in public engagement, broadband and Internet training, and development of computer curricula for public audiences.”

The KSTP-TV investigation, however, showed that the targeted underserved populations are more underserved than ever with fewer people using the computer labs after the infusion of millions of federal taxpayer dollars than before, according to reports filed with the federal government.

After checking all eleven computer labs, KSTP-TV found “erratic hours, difficult-to-find locations and even closed and locked labs when the doors were supposed to be open to the public.”

In the fall of 2009, The Freedom Foundation of Minnesota, via a Minnesota Data Practices Act request, sought a copy of the State of Minnesota’s “wish list” of broadband projects. These projects were recommended to receive funding under the federal broadband stimulus program administered by the U.S. Commerce Department’s National Telecommunications and Information Administration (NTIA). At that time, Minnesota officials declined FFM’s request to review the proposals and the state’s recommendations, citing state law.

Minnesota was one of a handful of states that refused to make its list of broadband stimulus project recommendations public in advance of funding decisions being handed down by the federal government.  This decision prompted local and national criticism.  The state list of recommendations was not released to FFM until April 2011.  The Broadband Access Project at the University of Minnesota was one of only two projects recommended by then Minnesota Department of Commerce Commissioner Glenn Wilson in the sustainable broadband adoption and public computing center categories.

“This is a matter of transparency in government, plain and simple,” Annette Meeks, CEO of the Freedom Foundation of Minnesota, said at the time. “We were told that the record-setting stimulus spending would be accompanied by record-setting transparency.  Numerous other states have released their recommendations.  It’s not too late to do the right thing and open up the books in Minnesota.”

Ultimately, it’s a case of taxpayers, as well as the intended recipients of the project, being “under-served” by another federal broadband stimulus program.  In October 2009 FFM also flagged a $70 million broadband stimulus proposal in Lake County that subsequently became one of the most controversial in the country.

Tips or comments?  Contact Tom Steward, Freedom Foundation of Minnesota.

The Minneapolis-based nonprofit Center for Energy and Environment (CEE) has marketed residential energy conservation programs under the slogan, “Save Energy, Save Money!” However, according to tax records on file with the Minnesota Attorney General, helping utility customers save energy and money on their monthly bills also pays off for CEE, one of Minnesota’s biggest energy efficiency nonprofit organizations.

“We’ve been remarkably successful beyond our wildest dreams,” Sheldon Strom, CEE president  told the Freedom Foundation of Minnesota (FFM). “We were struggling for quite awhile and all of a sudden every program we were working on turned to gold. We’re trying to enjoy it while we can.”

Total compensation for the five highest paid CEE employees ranged from a high of $275,323 for the president to $175,003 for the director of indoor air quality. By comparison, the governor of the State of Minnesota gets paid $120,303 and the state’s Commerce Commissioner, who oversees some CEE projects, earns $108,400.

CEE officials said compensation amounts are competitive with going rates and not at odds with the nonprofit’s stated mission to make the most efficient use of both natural and economic resources.

“Our highly compensated staff are exceptional,” Strom said. “We didn’t just make up these numbers. We had a big accounting firm do a salary survey. They’re the ones that said these salaries are in the ballpark.”

Founded in 1979, the Center for Energy and Environment has a staff of about 100 and receives millions of dollars in funding from local, state and federal government agencies and utility ratepayers. Programs range from energy-saving audits to airport noise mitigation for the Metropolitan Airports Commission to revolving low-interest home improvement loans for the Minnesota Housing Finance Agency and energy saver rebates for the U.S. Department of Energy.  Among other endeavors, the Minneapolis nonprofit is currently managing a $705,000 federal stimulus residential energy project for the City of Minneapolis, a $2 million grant from the Minnesota Lottery’s Environment and Natural Resources Environment Fund and a $1.6 million energy loan program funded by Exxon Corporation from proceeds from petroleum pricing litigation.

“We have a very large array of programs,” Strom said. “Our primary purpose of these programs is to save people money by saving energy.”

CEE is also on track to receive more than $40 million from Xcel Energy and $588,000 from Centerpoint Energy in 2010-2012 under a utility-run energy efficiency project mandated by state law. Xcel Energy’s funding for CEE has doubled from $7.4 million in 2009 to $14.8 million for 2012. Ratepayer-funded energy programs are currently under review at the state legislature as part of a systematic evaluation of state energy incentive programs.

“We don’t have anything to hide. I think we’re doing a fabulous job,” said Carl Nelson, CEE program and policy manager. “We have people who work hard. We’re trying to save people money on their energy bills and at a good cost to ratepayers.  We’re responsible stewards whether that be government spending or ratepayer money. We’re very committed to maximizing the impact of those dollars and reducing energy bills at the least cost. That’s what we’re all about.”

Sound-proofing and energy-proofing thousands of structures also appears to be recession-proof.  The non-profit has accumulated more than $20 million in assets, including more than $15 million in cash and investments, according to 2009 tax filings.

“We have a lot of money we’ve saved up over the years.  These are retained earnings that we’re going to reinvest in other things we’re doing,” Strom said. “We’ve been working with our board on how we can use this money as effectively as possible.”

CEE maintains a “sizable fund balance” as a reserve against the “adverse effects of political and economic cycles” and plans to use part of the reserve to establish the Energy Technology Center that has been 20 years in the planning, according to Robert Henderson, director of operations.

In the meantime, some of CEE’s financial surplus was used recently to hire an improv comedian to train staff. CEE brought in popular Twin Cities standup comic Stevie Ray—at no taxpayer or ratepayer expense CEE stressed—to help staff learn how to be more effective in their own standup sales routines when pitching consumers at workshops.

“We try not just to have solid technical information but we also try to make it entertaining and that was the reason why we brought in a comedian,” Nelson said. “He doesn’t do the workshops or anything, but helps polish up their presentations off what any marketing company would do to try and make it relevant to the audience.”

CEE also spent $57,600 on public policy lobbying efforts in 2009, according to IRS records. “As a non-profit, CEE believes that an integral part of its mission is to advocate for public policies that are in the best interest of all of society.  With this in mind, CEE has shaped public policy for the most efficient use of natural and economic resources,” according to the group’s website.

***Source:  Office of the Minnesota Attorney General, 2009 IRS filing by the Center for Energy and Environment

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