MN businesses can buy place on leadership council, but does it mean favored status at taxpayers’ expense?

By Tom Steward | Watchdog Minnesota Bureau

ST. PAUL, Minn. — For $11, 500, Minnesota businesses can buy a premium membership with the Business Leadership Council, part of the Business Alliance Program.

The membership “provides unparalleled visibility and access to city officials and staff,” according to a November 2013 League of Minnesota Cities email to businesses statewide.

But does that money buy favored status, as well?

Membership perks include two receptions with top city officials on the LMC board, quarterly meetings and briefings on hot topics, request for proposal alerts, access to the LMC member mailing list, recognition in LMC publications and website, social media promotion, opportunities to share content and expertise with LMC staff and member cities and more.

“As a Business Alliance member, we have access to the latest city news and exposure to current and future municipal customers,” Brian Stavenger, a partner with Eide Baily, a CPA firm, says in the program’s promotional pamphlet.

So far this year, 39 companies have joined the Business Alliance Program: seven at the level of the Business Leadership Council — it costs $11,500,$9,500 for nonprofits — 10 Business Partners ($6,500) and 22 Business Associates ($1,650). The program contributes $180,000 toward the LMC’s bottom line, plus more revenue for a la carte sponsorship opportunities for businesses, such as $4,500 for a three-minute introduction of the keynote speaker at the league’s annual conference.

The program amounts to a powerful professional and lobbying association funded largely by taxpayer dollars from 830 or so cities. LMC has ramped up a marketing campaign for the sponsorship and advertising program, promising “no other opportunity can position your organization more closely to Minnesota cities.”

“If a city were doing this directly, there’s no question it would raise questions about favoritism, there would be questions here about treating some vendors potentially more favorably than others,” said David Schultz, past president of Common Cause Minnesota and political analyst and professor at Hamline University. “It seems to be saying that we are promising, for a fee, you will get special access to the decision makers who are critical to making purchasing decisions, whatever they may be.”

In 2012, the League of Minnesota Cities reported $610,098 in lobbying expenditures, according to a state auditor‘s report. The league also offers training seminars, policy research, insurance and other services to its members to promote “excellence in local government.”

Faces of familiar mayors on the LMC’s website underscore the century old association’s reach and influence — Betsy Hodges (Minneapolis), Chris Coleman (St. Paul), Dave Kleis (St. Cloud) and Ardell Brede (Rochester).

The Business Alliance Program’s promotional campaign includes elected officials who tout the LMC. “Since the League is my main resource for all my city needs, it’s where I look first for trusted partners to help with municipal projects,” Mary Hamann-Roland, mayor of Apple Valley, says in the program’s brochure.

“I’ve been on the board maybe five years or so, and I’ve never felt like when I’m visiting with folks on the Business Council that either party is seeking or asking for undue influence,” said Dave Osberg, city administrator in Eagan and first vice president of the LMC board.

Yet to political analyst Schultz, the league’s sales pitch gives the impression of offering a potential advantage in the marketplace to companies competing for government business.

“If the language is seeming to suggest getting special access, then it does raise red flags for exactly that,” said Schultz, whose employer, Hamline University, belongs to the business alliance. “Are they encouraging some type of pay to play, are they trying to serve as a conduit? It runs the risk of creating an unfair playing field because what it does is say that some businesses that can afford to pay to get more access than John Doe’s plowing company or a small start-up that can’t afford to do that stuff.”

LMC’s top official acknowledged the marketing pitch can be confusing. In practice, he says, the program is more about access in a broader sense through advertising than to personal access to politicians and public employees.

“I don’t know if it’s a poor choice of words, but it isn’t access in the pejorative sense, where if you’re a business alliance member somehow you’re able to … meet with mayors in a back room somewhere and cut some kind of a deal,” said Jim Miller, LMC executive director. “I mean, all cities are going to go through whatever process they have to hire a financial consultant or an engineering firm or a law firm or whatever the case may be. The fact they’re a participant in our program, I would be incredibly surprised if it had any impact whatsoever on them being selected.”

Firms in the program provide a cross-section of services — public finance, engineering, bond issuance, economic development, grant writing, energy and legal counsel, among others.

Hamann-Roland cited an example of how taxpayers benefit from the Request for Proposal, sealed-bid procurement process. ”There’s a man that has seen me for 15 years at those conferences, and he’s from a company that a lot of governmental units work with. But every RFP that we’ve ever put out has never chosen that company. So I would say the firewall is that we use RFP’s.”

Said Schram, “We are being regulated by the SEC and the Municipal Securities Rulemaking Board, so we have very specific rules about pay to play, and we just can’t do that. Many of the vendors are competitors, but we all sit on the committee planning boards where we figure out the best content for the conference attendees.”

Still, local government officials interviewed for this story agreed the marketing campaign needs revamping.

“’Unprecedented opportunities to reach key city decision-makers?’ We maybe want to reposition that a little bit on how we word it,” said Osberg, the Eagan administrator.

In response to Watchdog Minnesota Bureau’s inquiry, the League of Minnesota Cities plans to review the program’s promotional materials.

“I can see, given your comments about it, how someone could misconstrue that and say what does this really mean and at least raise a question about it,” said Miller. “That’s not in our interest and it’s certainly not in anyone else’s interest to convey that message. So I think we need to find a way to be clearer, more accurate about what it really is.”

Yet Schultz, the Hamline professor, points to a larger issue that might require a legislative fix.

“One of the biggest flaws in state law is the fact that we have minimal statewide conflict-of-interest law that would apply to local governments to start with, and the same thing would be true here,” he said. “Since there’s not a lot that applies to local governments, then what applies to a professional association representing those local governments? Probably not a lot in terms of explicit state law, unless you get to the point somebody actually does bribe somebody.”

Contact Tom Steward at tsteward@watchdog.org

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