Lake Vermillion State Park

Lake Vermilion State Park: dead or alive?

By Britt Robson, Special to Capitol Report

Back in 2008, funding for Lake Vermilion State Park was one of the signature accomplishments of Gov. Tim Pawlenty’s legislative maneuvering, a prize for which he had twisted arms and played hardball in last-minute negotiation with legislators.
When the session was over, the governor had agreed not to veto funding for the Central Corridor Light Rail line between Minneapolis and St. Paul. In exchange, DFL leaders approved $20 million in bonding authority for the “acquisition and development” of nearly 3,000 acres of land, including five miles of pristine shoreline, along Lake Vermilion.
It was to be Minnesota’s first new state park since 1979. Today, however, the chances that Lake Vermilion State Park will ever happen are remote, and steadily diminishing. Negotiations between the Minnesota DNR and property owner U.S. Steel over the purchase of the land are, according to both sides, lying dormant.
Since July 2007, when Pawlenty announced that U.S. Steel was giving the state a year “to determine the feasibility and funding of the park,” the parcel has been highly coveted by DNR officials, who saw it not only as a crown jewel in the state’s park system, but the beginning of a new era for the agency.
“Lake Vermilion will give us an opportunity to create that next-generation park, and turn our system into a gateway for new folks to get exposure to the environment,” DNR Commissioner Mark Holsten told me last year.
For its part, U.S. Steel had always regarded the land as fertile ground for a luxury housing development. When the company allowed the state a window of opportunity as the exclusive buyer, they maintained that housing was a viable Plan B for the property. But the housing market had just begun to soften in 2008, and the company apparently wanted to leverage its sprawling wilderness holdings to help shore up its business in other parts of the state.
Just how anxious the DNR was to seal the deal on the land purchase became apparent this summer, when the Star Tribune used the state data practices law to obtain documents related to the negotiations. It had already been reported that the state’s appraisal of the land’s value was substantially lower than U.S. Steel’s.
The DNR was bound by law not to offer a sum more than 12 percent above the state appraisal figure. But according to the Strib’s interpretation of the documents they acquired, the DNR has “offered, or least considered,” a variety of ways to sweeten the package for U.S. Steel. These include approval of 25-year taconite leases on 240 acres of state land, worth an estimated $10 million; $5.4 million worth of free biomass fuels and assistance in helping U.S. Steel convert from coal for its energy needs; and the release of 3,000 acres of wetland anywhere in the state to U.S. Steel, accompanied by assurances that the DNR and Pollution Control Agency would make the company’s needs a priority.
Holsten said at the time that any of the agency’s negotiating options besides cash were conducted within the scope of state rules and regulations, and that any permit requests by U.S. Steel were treated as a totally separate issue. But when Rep. Jean Wagenius was shown the documents the Strib had obtained, she told the paper, “It appears [the DNR] was offering additional benefits, and that skirts the law and that’s wrong.”
Wagenius, the chair of the House Environment and Natural Resources Finance Division, closely questioned DNR assistant commissioner Bob Meier last session about whether negotiations between the agency and U.S. Steel were extending beyond simply the value of the Lake Vermilion parcel, and was assured the dealings were transparent and above-board.
Although Wagenius did not return numerous phone calls, Ellen Anderson, chair of the Senate Environment, Energy and Natural Resources Budget Division, tells Capitol Report: “Representative Wagenius and I will be looking over the documents [regarding DNR-U.S. Steel negotiations], and if there is the appearance of illegality or impropriety, I would expect we’ll be holding hearings on the matter during the next session.”
Meanwhile, U.S. Steel received approval from the St. Louis County Board of Commissioners last April to divide 1400 acres of the parcel into 148 lots, a wastewater treatment plant, and roads and boat launches. “U.S. Steel informed the Department of Natural Resources it is no longer interested in having the state purchase the land,” says Pawlenty spokesperson Brian McClung. “Because state law caps the amount the state can pay above the appraised value, we have the ability to negotiate only up to a point. U.S. Steel feels the land is worth more than what we have offered. We hope they will reconsider but there is not much more we can do at this time.”
Yet even now, the proposed state park has its die-hard supporters, and they remain convinced that the land sale can eventually be completed. They are heartened by the fact that, nearly six months after getting the bureaucratic green light to develop the site, U.S. Steel has not turned a shovel’s full of dirt to further the project.
“I drive by it at least 10 times a week, and I haven’t seen any improvements on the road going in, or any other activity,” reports Mike Forsman, one of the St. Louis County commissioners who voted for the development last spring. “My own suspicion is that the downturn in the economy has made it harder to buy and build housing up here. It certainly is not like it was three years ago. I imagine [U.S. Steel] will wait for the market to improve.”
“The housing market is still incredibly soft and it might make sense economically for U.S. Steel to take the bird in the hand that is the state’s cash rather than wait,” says Steve Morse, executive director of the Minnesota Environmental Partnership, a nonprofit coalition of 80 environmental and conservation organizations from around the state.
A former legislator, Morse thinks there are still ways to prod the state park negotiations along. He says revenues from the Legacy Amendment passed by voters last November could be utilized — “that land would certainly provide habitat” for wildlife, he argues, one of the criteria for using the legacy dollars — as well as further bonding appropriations in the coming session, of which a fifth is typically devoted to conservation and the environment.
As for the apparently intractable problem of not exceeding the state’s appraised value of the land by more than 12 percent, Morse retorts, “The appraisal issue could be changed, anything could be changed, if enough people [at the Capitol] want to see it happen. I understand there is not general agreement that the land is worth as much as U.S. Steel wants.
“It’s a waiting game with very high stakes for our future. The asking price is very high, but this is a phenomenal piece of property.”
One powerful legislator who’s on board — sort of — is Tom Bakk, the chair of the Senate Taxes Committee and a candidate for governor, whose residence in Cook is not far from the Vermilion site.
After noting that “there is little that the state can do right now,” Bakk says, “I strongly support the idea of a park there, and if I am governor I will pursue those negotiations with U.S. Steel. [Pawlenty] has lost interest, and I think some of the negotiations got sidetracked by other things going on with U.S. Steel in the state.
“But I think the $20 million that is currently authorized by state law to make the purchase is adequate. That bonding authority will be around for another three years, so another governor will have time to sit down with U.S. Steel and pursue it. Someday, I think, that park will be a very, very good thing for the state.”
Bakk’s support is bluntly rebutted by Rep. Tom Rukavina, one of Bakk’s rivals for the DFL gubernatorial endorsement, and a fellow Iron Ranger who lives closer to the proposed park site than any other legislator. Rukavina (who didn’t return numerous calls asking for comment about the current status of the land parcel) last year posed the $20 million rhetorical question that goes to the heart of the issue: “Why would the DNR want a new state park when they can’t take care of the old ones?”
State officials estimate that it will cost $100 million over the next decade to pay for all the deferred maintenance accrued at the existing parks around Minnesota. While $20 million of that obligation was funded by legislators two years ago, with more expected to be included in the 2010 bonding appropriations, the fact remains that rising user fees, reduced hours of operations, and fewer personnel still can’t compensate for the declining share of the general fund budget that has gone to state parks. Two years ago, the Minnesota League of Conservation Voters estimated that the percentage of general fund dollars earmarked for conservation and the environment was at its lowest point in 30 years.
Legacy Amendment revenues will probably take up some of the slack, despite statutory language that says those dollars shouldn’t replace normal state funding. But when it comes to government spending, timing is crucial. Right now, the Office of the Legislative Auditor is conducting an evaluation of how well the DNR manages and maintains its current land holdings, including its effect on the diminished tax capacity of areas where public lands are plentiful.
This is particularly relevant in St. Louis County, where fully 62 percent of the land is publicly owned, and where a multi-million housing development on Lake Vermilion would help ease the property tax burden for others. Furthermore, it is almost certain that the auditor’s report, presented right before the onset of the 2010 session, will note the insufficient amount of money available to adequately maintain the existing state parks. All this will be played out against a backdrop of turbo-austerity, as the state grapples with an unprecedented $5-$7 billion general fund deficit.
The land along the shores of Lake Vermilion remains among the most unspoiled and beautiful wilderness to be found in Minnesota. But enjoying it from the vantage point of the U.S. Steel land parcel is likelier to cost Minnesotans the price of a million-dollar house rather than a $20 camping site in the years ahead.

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