Shannon Stassen, City Administrator for the City of Crookston, gave the Crookston City Council an ultimatum in an email sent to the Crookston City Council on Friday, November 1 to remove the Crookston Housing and Economic Development Authority (CHEDA) Executive Director, Craig Hoiseth, and reform CHEDA, or to give Stassen a separation agreement. Stassen followed up with an email Monday, November 4, to the CHEDA Board of Commissioners regarding a Minnesota Department of Agriculture (MNDA) grant to Epitome Energy claiming Hoiseth gave the board false information. Both emails, in addition to other documents, have been obtained by KROX through public record requests to both the City of Crookston and CHEDA.
In the email to the Crookston City Council, Stassen says CHEDA Executive Director Craig Hoiseth, and CHEDA (CHEDA Board members are Kurt Heldstab, Craig Morgan, Paul Eickhof, Steve Erickson, Betty Arvidson, Tom Vedbraaten, and Leon Kremeier) as a whole of lying, misinformation, deception, obstruction, manipulation, a lack of integrity, a source of attacks against Stassen and staff, a lack of accountability, a lack of transparency, a lack of ability to follow procedures, statutes, and city policies to name of the acquisitions.
Stassen’s email goes on to say he cannot be associated with this any longer and, “A change must be made at CHEDA. Crookston deserves better. If the City Council is not willing to act to remove the CHEDA Executive Director and reform CHEDA, then I am asking for a Separation Agreement from the City of Crookston. My attorney will consult with the City Attorney and Assistant Mayor to craft the terms.”
Stassen includes multiple examples of the transgressions he claims Hoiseth and CHEDA have made over the past 18 months. He also writes he and his staff are under constant attacks that can be traced back to Hoiseth and CHEDA. “I and my staff have been under constant attacks, both subtle and overt in nature. The source of these attacks, insinuations, and misinformation always has a trail back to the Crookston Housing & Economic Development Authority and its Executive Director. Surrogates that often times have received loan interest loans or other incentives from CHEDA are the ones making accusations about the City Staff.”
EPITOME ENERGY $1 MILLION GRANT
What Stassen calls his most egregious concern is the matching funds for a $1 million grant from the Minnesota Department of Agriculture (MNDA)to Epitome Energy having a 4:1 match rather than the 1:1 match it was hoped to have. The CHEDA Board of Commissioners agreed to a $250,000 loan, which was presented with a $1 million match presented 1:1 to match from MNDA in August. Stassen said in his email that he, along with the City Attorney and City Finance Director, were told that the match might end up being 4:1, which Hoiseth confirmed took place.
STASSEN WROTE –
“at a meeting with the CHEDA Director, City Attorney [Corky Reynolds], City Administrator, and Finance Director [Angel Weasner] later in August, the CHEDA Director stated that he was told the match might be 4:1. Meaning, the $250,000 from Crookston would only leverage $62,500 from the Department of Ag. This was of great concern to the City Staff.
Since that information was presented to City Staff, I have continually pressed the CHEDA Director to clarify and confirm the matching ratio. I never did receive that information.
On October 22nd, the CHEDA Director informed the CHEDA Board that it had recently been “revealed” that the Dept of Ag had changed their match to 4:1
On, October 29, 2019 the CHEDA Director stated: ‘he first heard about the 4:1 match requirement from Dennis Egan’s mouth the first week of October.’
Attached is clear evidence that above statement is a lie. The CHEDA Director received this email from Dennis Egan on September 13, 2019 that contained language describing the 4:1 match. During the time frame from September 13th to October 22nd, the CHEDA Director withheld that critical information at a CHEDA Board Meeting, a CHEDA Advisory Committee Meeting and 2 City Council Meetings. Then proceeded to lie about the timing of his knowledge on October 28.”
WHAT KROX HAS FOUND
KROX has been at every meeting during this timeframe and the change to the match from the MNDA was presented to the CHEDA Board on October 22 (for the story from the meeting click here), who sent it for review to the advisory committee. The CHEDA advisory committee was notified and weighed the change on October 29 (for the story from the meeting click here) before recommending to the board to proceed with the loan. The board then approved the disbursement of funds on November 5 (for the story from the meeting click here) to Wenck and Sunde Engineering for air permitting and environmental assessment work, after the new match requirements had been reviewed.
The quote of the October 29 statement made by Hoiseth, that Stassen uses is incomplete. Hoiseth’s complete comment taken from the KROX recording of the meeting is, “We did all of our work internally here as an advisory committee, as a council, as a CHEDA Board at the end of July and August,” said Hoiseth. “We got notification of that there might be a 4:1 I think at the end of August. But we didn’t hear it from Dennis. I kept pressing him; is it going to be 4:1, is it 1:1, because we need to know that until finally, Dennis told me the first week of October it’s going to be 4:1, and we just need to move forward in that aspect. When I found that out, my first meeting was the CHEDA board meeting last week, and I made that known clearly to everybody.”
Hoiseth stated during that meeting that he told Dennis a 4:1 to match might be a problem and would need to go before the CHEDA board before proceeding. “We indicated it was going to be 1:1,” said Hoiseth. “That’s what Dennis and I talked about from the beginning. We sold it to you guys – advisory board, CHEDA Board, City Council – as it was going to be 1:1. And when Dennis told me I don’t know if we’re going to get that I said – that’s going to be problematic, we’re going to have to bring that back because the creation of leverage is what sold this loan agreement.”
Both Egan and Hoiseth said during the November 5 meeting that Egan was still working with the MNDA trying to finalize a 1:1 match into October when the invoices were issued. Emails between Egan and Hoiseth show that the Sunde Engineering invoice was received on October 10, and Egan wrote the work needed to be done before a freeze. Hoiseth’s response was, “As I mentioned on the phone Dennis, I do have some work to do on this prior to my next board meeting on the 22nd, but I will certainly do what I can to assist getting this done.”
The match of 4:1 was then discussed at the next meeting on October 22. In his email to the City Council, Stassen also referenced a September 13 email from Egan to Hoiseth showing a 4:1 match on the $1 million grant for uses, including the environmental assessment and air permitting work, which was collected in the records request from CHEDA.
REDACTED DATA
Stassen told both the City Council and the CHEDA Board in a separate email that the email in question from September 13 was discovered while the City of Crookston was redacting data for a Grand Forks Herald data request. Joe Bowen of the Herald told KROX via email that he has been receiving chunks of emails from the City of Crookston as they review them, but that he was offered to go on the computer at CHEDA to review emails as well.
BOWEN WROTE –
“I made two requests: one of the city proper and one of CHEDA.
So far CHEDA has let me look through the documents I asked for and I’m working to find time to go through the emails I asked for in person – Hoiseth, if I recall correctly (a big “if”), offered to let me hop on his computer and shift through them. But I’m not sure if any documents or correspondences are or would have been redacted or withheld beforehand.
And so far the city has been sending me the correspondence I asked for, which includes those sent or received by CHEDA people, in chunks as they review them. I imagine at least some have been withheld because the state’s Data Practices Act deems personnel stuff as non-public, and I figure some of what I asked for is about personnel stuff.”
That document Stassen refers to in an email from Egan to Hoiseth states, “The State’s total investment in this project is up to $1,000,000.00 and is no more than 25% of the total eligible costs. The grantee must spend at least $4,000,000 of the approved budget to access up to $1,000,000.” The total approved budget for all tasks, which also include items such as engineering, site plan, and equipment layout, is $14,044,299.
STASSEN QUESTIONS HOISETH’S TIMELINE
Stassen also questioned the timing of the 4:1 match during the November 5 CHEDA Board special meeting, with Hoiseth laying out the timeline during the meeting. In his interview with KROX immediately following the meeting, he again explained the timeline as he had during the meeting, “At my board meeting on the 22nd of October, I told people that we had heard about this back in August, and we reaffirmed that with the advisory committee,” said Hoiseth. “We didn’t know it was going to be a fact. We did see a document show up on September 13. However, Dennis Egan, with Epitome Energy, thought we could still work it out with the Department of Ag to get a one-to-one match. Unfortunately, these invoices started coming and needed to get paid to get this environmental work and air permitting underway, so what we did the first week of October was resigned ourselves to the fact we were going to go with a four-to-one match. And I was quick to put that on the agenda for the October meeting of the CHEDA Board. So, everything has been waiting for that match, but everybody in the room, again, just like the last couple of weeks knows fully, this is a four-to-one match, not a one-to-one, unfortunately.”
In the Stassen email sent to the CHEDA Board of Commissioners on Monday, November 4, Stassen called the handling of the $250,000 loan to Epitome Energy his most egregious concern regarding Hoiseth. Although according to what Crookston City Attorney Corky Reynolds told the City Council on September 9, it appears that the action following a change to the documentation followed the correct steps to this point by going through both the Advisory Committee and CHEDA Board, which should then be followed by going to City Council for approval. “Under the business subsidy agreement, one of the conditions is that the lender who is going to be CHEDA, has to receive evidence that the Department of Ag is contributing $250,000,” said Reynolds. “If it isn’t, and it’s a lesser sum. Then it has to go back to the CHEDA Board to see if they are going to recommend it and then it comes back here to see if you are going to make the changes consistent with the amount less than the $250,000. It’s gotta be two-fifty or it can go back to CHEDA. They can look at it again – decide yes this is what we’re going to do, or no we’re not. If they approve it comes back here and you as a group decide are we going to do this or not, at the different level.
EPITOME ENERGY $1.25 MILLION LOAN REQUEST
In his email to the council, Stassen also references a request from Epitome Energy for a $1.25 million loan, which would need $5 million in collateral. He writes that Hoiseth said the $5 million from the MNDA for the Soy Innovation Campus could be used as collateral, which he goes on to say has been confirmed as not possible because the money was for the campus and not Epitome Energy, indicating that Hoiseth’s statement that the grant was collateral is why the City Council and CHEDA Board voted in favor of providing the loan.
STASSEN WROTE –
“The City Council and CHEDA Board voted in favor of providing a $1.25 million interest free loan to Epitome Energy.
The City Council and CHEDA Board were told that $5 million from the state could be used as collateral on a loan to Epitome Energy of $1.25 million.
The CHEDA Director told me directly on more than one occasion ‘there is no risk to the City, because the loan is secured by the $5 million from the state.’
July 2, 2019 – CHEDA director stated for the first time ‘he was waiting for a letter from the state to confirm that’
The loan request for $1.25 million was dropped from consideration after this meeting.”
WHAT KROX HAS FOUND
What Stassen didn’t state was that in both cases, the vote was in favor, provided the due diligence panned out for the collateral, and the appropriate paperwork was completed. The CHEDA Board voted to continue work on the loan on June 11, and the Way & Means Committee voted to continue that work on June 24. As the loan never materialized and was replaced with a much lower $250,000 loan agreement. Hoiseth has said he never got the necessary collateral. Additionally, that $1.25 million request was lowered to a $250,000 request with a $1 million grant from the MNDA. That grant process is dated to have started June 21 according to the Encumbrance Worksheet from MNDA.
APG DEVELOPMENT
Stassen’s email to the Crookston City Council puts the entire blame for the delays on the APG Development on Hoiseth, stating, “from the very beginning, the CHEDA Director was not engaged fully in the APG Development. This project failure falls directly to the CHEDA Director. The developer deserves better service.”
STASSEN WROTE –
“there was a Variance request from APG regarding setbacks. This was approved at the Planning Commission.
**Prior to the purchase, sale or conveyance of property, a Land Use Determination must be approved by the Planning Commission. This was not brought forward by the CHEDA Director and no discussion of the timing of any sale of land was shared.
** The Business Subsidy Requirement has been known for quite some time, by City Staff and the CHEDA Director. City Staff is not kept apprised of CHEDA deals or potential incentives being offered, or of other details of development agreements or work that is promised to be done by City employees or resources. City Staff has been instructed to pass all that responsibility on to CHEDA, except for the cases when developers specifically request City Staff rather than CHEDA staff.
Therefore, the CHEDA Director should be the one informing potential businesses of the need for variances, conditional use permits, public hearings, business subsidy agreements or land use determinations. That is quite literally his job.”
WHAT KROX HAS FOUND
Nearly two months later, during the September 9 (for the story from the meeting click here) Crookston City Council meeting, the procedure required by State Statute for land sale with a comprehensive plan was discussed. And the following week, when the land use was determined at the planning commission meeting on September 17 (for the story from the meeting click here), Stassen seemed to indicate that the statute was unknown until after the variance meeting during an interview with KROX that night when he said, “We always had a comprehensive plan. We had one from the 80s, so this particular State Statute would’ve applied in the past, we just weren’t aware of it. Once you become aware of it, you have to comply, and that’s what we’re doing.”
GIFT OF PROPERTY FROM OTTER TAIL POWER COMPANY
Stassen also notes another land issue in his email to Council, the acceptance of a small portion of land from Otter Tail Power Company surrounded on three sides by the Colborn Property.
Stassen wrote –
“CHEDA has taken ownership of a parcel formerly owned by Otter Tail Power adjacent to the Colborn Property. (land intended for Epitome Energy project)
No public meetings took place that City Staff is aware of to approve this acquisition. Also, the Planning Commission is required to approve a land use determination on any such transactions, which has not taken place. This land acquisition did not follow proper procedures.
The documents to acquire this parcel were signed by the CHEDA Director and CHEDA Chair [Kurt Heldstab] on April 22nd, 2019.
This land acquisition must be investigated.”
WHAT KROX HAS FOUND
While it appears that there should’ve been a hearing, this predates that APG Development issues by three to five months. Given there were questions regarding the process on APG Development being answered by City Attorney Corky Reynolds to the City Council on September 9 (for story from the meeting click here), it is entirely possible this acquisition took place prior to the City of Crookston learning about the statute and the various additional steps that must be made in compliance with it.
EPITOME ENERGY FINANCIAL DOCUMENTS & FEASIBILITY
Additionally, Stassen claims that Egan and Hoiseth are intentionally delaying the City of Crookston from looking at the financials and feasibility information of Epitome Energy over a non-disclosure agreement.
Stassen wrote –
“On August 20th at a CHEDA Advisory Board Meeting, Dennis Egan (Epitome Energy) made an offer for anyone that wanted to look at the financials and feasibility information of Epitome Energy could do so. The City Finance Director [Weasner] asked for that information. As of today, November 1st, 2019 she has not received that information. It was made clear that the Finance Director was willing to sign a Non Disclosure Agreement provided by Epitome Energy. This request was made in September to the CHEDA Director and again to Mr. Egan at the CHEDA Advisory committee meeting in September. There has been an intentional delay in this process of 2 months.”
WHAT KROX HAS FOUND
According to Hoiseth, Egan at the initial request asked the City of Crookston to craft the non-disclosure agreement for the information they wanted that he’d have his lawyers review. At this time KROX is not aware of any evidence that either the City of Crookston or Epitome Energy has taken further steps towards resolving who is creating that document to release that information.
VALLEY TECHNOLOGY PARK OFFICE EQUIPMENT
Stassen wrote-
“Transformation of Valley Technology Park into an open meeting space with high end coffee and other amenities took place this year. The cubicles and office equipment are no longer at VTP. Nothing has been reported to the City about the whereabouts of this property. There is a process for surplus property to be declared and disposed of. This process takes place quite often in the City and the CHEDA Director should be well aware of the process after 9 years on the job.”
WHAT KROX HAS FOUND
Because of the funding source for Valley Technology Park, the equipment can’t be declared surplus or disposed of for 20 years. There is currently one year left before that declaration can take place. The equipment is loaned, on a one-year loan agreement, to the Warren EDA.
COFÉ/CHICKADEE DEAL
Stassen wrote –
“It is shameful to know that a new business owner was advised to invest $115,000 with no return other than $40,000 or less in equipment and furnishings. On October 16, 2018 I shared my deep concerns with the CHEDA Director. This was a one sided, terrible deal for the new owner. He should have never acquired the previous owners debt.
Bankers and other residents in town recognized this from stories in the media and shared those concerns with me. No primary lender was included in the arrangement, which allowed such an unethical deal to be crafted. The new owner certainly bears the majority of the responsibility, but someone with a background in development should have raised questions.
A feeble attempt to prop up Chickadee Coffee was made by CHEDA in purchasing an $800 coffee maker and $400 worth of supplies.
The owner of Chickadee Coffee was publically shamed and slandered by the CHEDA Director. This goes against all of the CHEDA Values of “Respect, Integrity and Professionalism”
WHAT KROX HAS FOUND
In an email to Hoiseth after the Cofé deal was approved Stassen wrote, “Personally, I am very pleased that Mr. Snow has taken on this venture. My family truly enjoys Cofé and we have also eaten at Roasted in DL several times.”
Hoiseth commented at the CHEDA Special Board meeting on November 5 recently expressing the deal was one CHEDA probably shouldn’t have entered as it let the previous owners off to easy. Also, the resolution to approve the purchase paid after a 4-3 vote in favor of the purchase at the April 8 Crookston City Council meeting (for the story from the meeting click here). Upon review of the City of Crookston Charter, KROX believes that payment for the coffee maker and supplies shouldn’t have been made as Section 3.05 of the Charter states that, “an affirmative vote of five Council Members, or four Council Members and the Mayor or Assistant Mayor in the event of a tie, shall be required for the adoption of all ordinances and resolutions.” A public data request has been made to determine if any other ordinances or resolutions have been adopted without the required five votes.
