Ink by the Teacup

Dodie Shallman doesn't look like a bomb thrower. Settled into a booth at the Northern Lights Family Restaurant in Cambridge, a town of 5,400 a quick 40 miles north of downtown Minneapolis, what Shallman looks like is your grandmother dressed for church: a frosty-coiffed, seventysomething matron done up in a purple blazer over a paisley blouse, with a brooch pinned to her lapel just so. She orders coffee, a BLT, and a cup of clam chowder for lunch, and complains to the waitress that the cup, when it arrives, looks suspiciously like a bowl.

The Complaint--or to put it in more dignified terms, the Critique--is pure Shallman. Bombs, no, but for the past year she has been lobbing a small arsenal of inflammatory words into the heart of Cambridge, where she and her husband had been living for several years. Last December she bullied her way into Isanti County's fourth estate by launching the Cambridge Observer, a four-page, take-no-prisoners newspaper that has issued a series of sporadic editions and ticked off just about everyone it has set sights on--city council members, municipal bean counters, civic honchos, and pillars of the business community.

Shallman started the Observer in response to a refusal on the part of the two other local papers--the Star ("Since 1905 your primary source for community information") and the County News ("Your community newspaper since 1900")--to print letters she'd sent them. That, and she figured on influencing, to whatever small degree, the impending local elections--mainly for city council--which were held last month and which, alas, the Observer did not influence much at all. Still, what has come to be known as Cambridge's "alternative" (or in some quarters, even "underground") newspaper has struck nerves.

After the first issue, all hometown printers refused to produce the subsequent edition. So editor in chief Shallman and her band of volunteers--six, maybe seven folks at most, who together write, edit, design, and distribute the Observer--started making the two-hour trek up to Brainerd when press time rolled around. The paper sells few ads--not on principle, it seems, so much as because of a uniform refusal of the Cambridge business cartel to support the upstart; according to Shallman, "One businessman said, 'I like your paper, I read it from beginning to end, but if I put an ad in your paper I would be blacklisted and I wouldn't have any customers." Rather, it is paid for out of pocket by Shallman and her cohorts.

In the four issues published to date, the Observer has spent most of its ink disparaging council votes, carping about municipal policies, bemoaning the bureaucracy, caterwauling about budget decisions, roiling up conflict of interest questions, and lambasting the bulk of the sitting city council as "good ole boys." The latest edition was its largest, a full eight pages of newsprint, bolstered by a few campaign ads from Observer-endorsed candidates. It included everything from hard-news tidbits--one item noted that the Minnesota Taxpayers Association had ranked the city's property taxes the third highest in outstate Minnesota--to candidate responses to questions posed by a reporter (although the only hopefuls to respond also happened to be endorsed by the paper).

Critics of the gazette (and there are many) have dismissed it as an opinion-riddled tract that's loose with the facts, prone to specious judgment, and under the command of a scandalmongering quidnunc who couldn't tell scuttlebutt from true news if it came up and licked her. And that's the generous view. Mayoral candidate Bill Weinreich, for instance, sent out a mailing before the November 2 elections that included this dig: "The two legitimate newspapers in Cambridge have done a good job of the facts. Then we have the 'alternative newspaper' which creates more confusion and anger." Such an assessment bothers Shallman not a bit. A self-described independent who says she inherited her parents' interest in politics, she has taken a few writing courses at the local community college over the years, and has dabbled in writing nonfiction and poetry. "My pencil," she declares, "is never still."


A still Shallman pen would be a welcome irregularity for Assistant Isanti County Attorney Stoney Hiljus, who was appointed earlier this year to the city council and was up for election in November. The Observer's most recent issue, whose 3,500 copies were visited upon Cambridge the week before the election, featured a story (under the byline Catherine Williams) that asked voters to determine whether Hiljus's position constituted an ethical predicament, given that the County Attorney's Office, his day job, handles prosecution services for the city. Among the article's contentions was that "Mr. Hiljus has already had to abstain from several votes because he had a conflict of interest."

Hiljus promptly demanded a retraction, strenuously arguing that he had done no such thing. (A review by City Pages of council meeting minutes since Hiljus's appointment came up with not a single vote from which he'd abstained. Hiljus says he did decline appointment to the Isanti County Human Rights Commission because he believed that would create a conflict.) Ultimately, Hiljus prevailed over the Observer-endorsed candidate (a retired psychologist who makes a hobby of singing folk songs, including several about local politics, which are available on the cassette Cambridge Blues). Because the Observer hasn't had a fifth issue, Hiljus's lengthy letter of protest ran in both the Star and the County News, though not until the day after the elections.  

So much for the heat of the battle, which in Cambridge might be said to resemble more of the lukewarm smolder of the spat. Asked if she has any plans to issue an eventual retraction, Shallman downs a sip of coffee and primly shakes her head: "The next move is his if he wants to keep dinging away at it," she shrugs. Nor does she deign to alleviate Hiljus's suspicions that Catherine Williams is not an actual person ("Ever heard of Mark Twain?" she asks, by way of suggesting that noms de plume have celebrated historical precedent).

Cambridge, it seems, has more pressing concerns. For one thing, it is a still-small community with the future at its doorstep, in the form of a Wal-Mart, a planned Target store, and a new Perkins restaurant on the west side of town along Highway 95, which skirts the perimeter and whose current big-box spree has renewed discussions about maintaining the livelihood of Main Street establishments. If the denizens of Cambridge can agree on one thing, it is that managing the vagaries of small-town growth and the encroaching Twin Cities metro area are in the forefront of everyone's mind, no matter their political inclinations.

To that end, on November 17 a forum was convened by the panel working on the city's comprehensive development plan. Attendees were asked to rank the "strengths/opportunities" and the "weaknesses/threats" of their hometown. Topping the list in the first category were its greater-metropolitan location; its broad economic base; its size ("small enough to be connected, large enough for opportunity"); its main natural resource, the Rum River; and its relative safety. Much to Shallman's dismay (though likely not to her surprise), the Observer topped the "weaknesses" list, along with traffic bottlenecks and the treacherous railroad crossing on Highway 95. Ranking, too, were the city government's inability to "create vision;" the town's increasing number of low-pay jobs; and its enormous debt load. In other words some of the concerns raised mirror those found on the pages of the Observer during the past year.

Shallman takes a bite of her sandwich, chews for a moment, then wonders aloud: "I don't quite understand why we should be a threat to anybody in Cambridge."


The Observer likely never would have been possible were it not for a few key events in recent Cambridge history.

For starters, in March 1997 a citizen group headed by a man named John Krueger petitioned the Office of the State Auditor (OSA) to review the city's books after local officials expressed reluctance to involve the state in Cambridge's money woes. The OSA's damning report seven months later deemed Cambridge's financial condition to be "perilous" and found that it had "steadily deteriorated" from 1989 to 1995. Among the host of problems enumerated: several funds had negative cash balances; the city had exceeded its budgets and hadn't raised enough in property taxes to pay operating costs; a number of development projects had significant cost overruns; and the city had failed to levy assessments against many property owners for improvements.

The OSA also underscored the fact that Cambridge was carrying the highest debt per capita of any town in the state with a population of more than 2,500 and was roughly five times the average for cities of comparable size. At the end of 1995, the OSA calculated Cambridge's long-term debt at a staggering $33 million (city staffers claim that figure counted some debt twice), at a time when its annual budget was barely $2 million. The auditor's office charged that the cost to local taxpayers for outright financial mismanagement was more than $8.4 million, not counting lost earnings from interest. At the time State Auditor Judi Dutcher told the Star Tribune, "I've never seen anything like this."

How had things gone so wrong? In essence, the city had set an extremely ambitious course for development beginning in the late 1980s--a new wastewater treatment facility, pricey street and utility upgrades for residential developments, and other projects--and had in turn taken on a wild amount of debt; it had not, however, secured the money to cover those ambitions. Property taxes started going toward paying down debt, and the city began to borrow short-term cash at higher interest rates to pay for routine operations. Meanwhile, the council wasn't incrementally raising taxes to cover the shortfalls. Simply put: Cambridge was spending more than it was taking in--millions more. The low point came in 1997, Heitke says, when the city had to borrow $2.1 million just to meet its day-to-day expenses.  

The OSA blamed former city clerk-administrator Scott Larson, who held his job for nearly 20 years, for the mess, as well as the city council for its "lack of adequate oversight." There were no fines in the case, and the state declined to pursue any criminal investigation of the matter. Instead, the OSA simply made a slew of recommendations on how the city could best improve its fortunes.

By the time the auditor's report came out, Larson had left the city and had been replaced by Gordon Heitke (whose title is city administrator), who has taken to preaching the gospel of austerity measures long and loud. City staffing was initially cut by a third, some projects were put on hold, and more money was directed to debt repayment. A big chunk of Cambridge's annual budget is now devoted to reducing its debt, and it will be for many years to come. Cambridge residents are still paying the price; in early 1997 public utility rates immediately rose more than 30 percent and the city's property-tax rate was hiked a full 40 percent.

Heitke says that the city is assiduously sticking to its financial recovery plan. Whereas long-term debt stood at $22.35 million at the end of 1998, he estimates that it will be down to $21.14 million at the end of this year--not a huge decrease, but a city the size of Cambridge can only do so much at a time. The city's tax base is increasing with rising property values and development (both business and residential), and revenues collected in 1998 were more than 60 percent greater than they had been in 1995.

But because more than half of all tax revenues is going toward debt, there isn't as much to go around for public services. Just ask the Cambridge Observer. In its current issue, Shallman's paper ran a story under the headline "Money for Mistakes or for Streets," which charges that the city's proposed budget for 2000 has "not one dime for patching the streets or sidewalks or fixing anything." Heitke says he couldn't agree more that many of the streets are in dire need of repair, but says the "not one dime" claim just isn't true. Rather, the city's proposed budget for next year includes more than $400,000 for "street maintenance," two-thirds of which is for salaries. Still, the story does give voice to a commonly heard gripe around town: the debt is sucking up an intolerable amount of the good citizens' cash that used to go for such necessities as sidewalk repair.

Under fire lately too in the Observer has been Heitke's personal expense account. Graced by the none-too-subtle headline "Should IRS Investigate?," the paper maintains that Heitke received $475 monthly for expenses, without being required to submit a single receipt. He has countered that the allowance was part of a compensation package negotiated when he took the job, and says, "That is not an uncommon practice in cities." He also notes that on August 1--soon after the issue came out--his expense allowance was scaled back to $350 a month.

While Shallman's brainchild may not be shaking the foundations of Cambridge City Hall, it is attempting, in its way, to keep a singular eye on money matters in the wake of the OSA's call to alarm. And the paper has, all agree, managed to put the kibosh on at least one city policy Shallman and Co. found distasteful. A two-paragraph item that appeared in the third issue made note of the fact that city employees enjoyed a ten percent discount at the municipal liquor store in Cambridge. In short order Heitke put a stop to the age-old practice.


Attorney Clyde Miller is reclining in the conference room of his law office in downtown Cambridge. Miller is something of a political animal, having just run and lost under the Reform Party banner for the late Janet Johnson's senate seat. He drew about 14 percent of the vote, but did better within the city limits of Cambridge, where he garnered 25 percent. He likes to follow city politics, and he sits on the town's Economic Development Authority, the city's industrial and commercial development arm.

"The city's paying its debts," Miller says. "But taxpayers are paying a lot more money." It's the sting that doesn't go away for Cambridge property owners. Ever since the initial report in 1997, they've known there was still another shoe set to drop: an Office of the State Auditor investigation into the city's handling of tax-increment financing, or TIF in the parlance of municipal finance junkies.  

Miller doesn't know exactly what will be in it, but he says he's concerned about the big bucks the struggling city has had to spend on counsel in dealing with the forthcoming audit report. "As taxpayers, we'd like to see why we've spent $50,000 to $60,000 on outside accounting and legal fees. If we had our books in order in the first place, we would have never had to spend that kind of money," he points out. "And that money alone could fix a lot of sidewalks."

In lay terms, tax-increment financing allows cities like Cambridge to subsidize development projects--a new manufacturing plant, say--and then to recover its costs by collecting the increase in taxes (the "tax increment") on the property that would typically be divided between city, county, and school board. According to its own calculations, in 1999 the city was taking in more than $477,000 in tax-increment revenues from seven different active TIF districts. The 1997 audit suggested that Cambridge was not gathering enough tax-increment money to pay back its public costs, and in January of that year the OSA sent notice to city officials that they were failing to follow state laws governing the use of TIF. The city disagreed, and a followup investigation was launched.

Cambridge is hardly alone, particularly among smaller cities and suburbs, in coming under scrutiny from the OSA with regard to TIF. In recent years the OSA has raised questions about how several cities--Fergus Falls, Forest Lake, Deephaven, and Pine City among them--have administered such programs. And, observers say, it's no coincidence that the problems seem to occur with small towns, because they tend to have more limited staffs who are sometimes less educated in managing TIF's complicated accounting. There has also been disagreement on interpretations of the law, which is revised almost annually at the Legislature.

City administrator Heitke isn't sure what OSA's verdict will be. There's some buzz around town that the city will be hit with a big fine over the TIF issue; but the OSA has no power to levy a fine. Still, the wait is causing many around city hall a fair deal of both anxiety and weariness. "If it ends up that the city has to return any tax revenue to the county," he says, "of course it's going to be a setback to our recovery and it will delay that recovery." In some cases, cities found to be in violation of TIF rules have gone directly to the Legislature to appeal OSA's findings. For example, when the auditor's office recommended that the town of Deephaven hand $1.2 million in "excess increments" back to its county auditor, the city got special legislation passed in 1998 that allowed it to hang on to about two-thirds of the money.

And where does the Observer stand on the issue? In an article titled "The TIF Tapes," the latest edition argues that council meeting minutes aren't detailed enough to give citizens a decent sense of the discussions on issues related to the TIF audit. Translation: there's a conspiracy going on behind closed doors--wake up, good citizens.

On the heels of the original audit from OSA, John Krueger (who had spearheaded the petition drive to get the city's books thrown open in the first place) was elected to the city council--a sign, no doubt, that a majority of voters shared his concern that their local government was fiddling with public money in funny ways. But his ascension came to an untimely end this past April, when he abruptly resigned with little explanation. Today Krueger casts himself as a casualty of council infighting, saying that his departure can be traced to the shunning he received from his former council colleagues after he and Mayor Marlys Palmer fired off a note to the city attorney asking for a legal opinion on a bond sale matter.

Although the TIF findings are still pending, now that the city elections have passed and the Observer has gone quiet, things might settle down a bit in Cambridge. Shallman figures they have served their journalistic purpose for the time being, and stayed true to their motto, which was borrowed from President John Adams and has run in the banner of all four editions: "Let us dare to read, think, speak, and write."


The most recent meeting of the city council was downright calm: dull, you might say. Cambridge's council chambers--with an American flag tucked into one corner and stacks of architectural renderings leaning against a wall--is the size of a large living room. Some 20 people were at the convocation, including council members, city staffers, and the local press, not including Shallman, who says she didn't attend because the city had not yet acquired new devices to make it possible for her to fully hear the goings-on. (She filed an Americans with Disabilities Act claim against Cambridge earlier this year; the result, through mediation, is that chambers is soon to be equipped with remote hearing-aid devices. Shallman may well return once that happens.)  

Mayor Palmer and the council didn't disagree about anything of note. Every issue that was voted on passed unanimously. They directed staff on the donation of a downtown parking lot. They selected an engineering firm to design the new water tower. They listened to plans for reconstructing sewers, streets, sidewalks, and street lighting that have fallen into disrepair--all for a pretty penny from the public coffers. They spent a full five minutes sorting out when to convene their January meeting. They listened to the manager of the municipal liquor store report that sales were up a robust ten percent in October from the same month a year ago, perhaps due in part to the death of the public-servant discount. And Mayor Palmer touted the upcoming Snowflake Parade, to be held at 6:00 p.m. the following Saturday, and promised, "There's going to be plenty of chili."

Come January the council will have two new members. Former Chief of Police Gary Lambert had the endorsement of the Observer, but his election probably has more to do with that fact that folks around town knew his name. "I ran ads in all three papers. I talked to people at all three papers," he says. "I'm not a political person, so I'm not bought and paid for by anybody on any side." Lambert says he decided to run because of the declining condition of the city's streets and sidewalks--a sad state of affairs the Observer hasn't let go by unchallenged, and perhaps the rationale behind its strategic backing of Lambert.

Also a rookie on the council will be John Schlagel, who runs an agricultural equipment company his father founded in Cambridge in 1957."I wanted to help steer the community in a direction that was positive," he says, reiterating his campaign's upbeat tone. "To me what the city is going through is no different than what a family might be going through in a family crisis: You tighten your belt, you try and make a dollar stretch as far as you can, and you try to work out of it in terms of building up your future again."

As for the future of the Cambridge Observer, editor Shallman isn't sure. It may publish again, it may not: it sounds more likely that it won't. After all, being a small Minnesota town's chief naysayer is no easy feat. On election day Shallman, and by extension her newspaper--moved from Cambridge to a nearby town. Why? For the record, Shallman places the blame squarely on the skyrocketing property taxes she and her husband were paying on their "minuscule little house on a handkerchief-sized lot" in Cambridge. Since then, she has changed her phone number twice; it is now unlisted, and Shallman gives it out only to the most trusted of her allies.

Still, she says, the Observer (which lists only a post-office box as its address) has had an admirable run--afflicting the folks it meant to afflict, raising Cain about the money, and generally making a nuisance of itself. And it earned some degree of notice, if not respect, among its rivals in the fourth estate. Evelyn Puffer, who has been the editor of the County News for more than 15 years, recently turned her attention Shallman's way with the declaration that the Observer is a well-intentioned but misguided attempt at keeping a watchdog's eye on local issues; even so, she adds, "If they're going to be a newspaper, I wish they would go ahead and go about it the right way."

But perhaps it was the Star that best illustrated the welcome the Observer has received around Cambridge. When the upstart publication first landed on doorsteps last year, the Star cleared Christmastime editorial space typically reserved for a holiday poem to denounce it under the headline: "New newspaper is a mean-spirited piece of junk." The verse, espousing "peace on earth and goodwill to all," followed.

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