White Bear Lake mayor files for bankruptcy on auto shop

Auger Garage, owned by White Bear Lake Mayor Paul Auger, filed a bankruptcy petition last week in response to mounting debt to the Internal Revenue Service.

The car repair business owed $186,000 in back taxes to the IRS, plus another $5,000 to the Minnesota Department of Revenue, according to documents filed in U.S. District Bankruptcy Court.

Auger, mayor since 1994, attributed the problem to a "large capital gains liability ... that just snowballed."

The capital gains tax began accruing after he sold his grandparents' house a decade ago but did not pay the capital gains he owed. He used the money to buy out a business partner, he said.

"I've been trying to deal with this quite a while, trying to sell some assets to deal with it," said Auger, reached at the garage Tuesday. "I was not paying close enough attention [to the tax liability] ... It looks like this will cause it to come to a head."

City Hall offices report no phone calls from residents regarding the financial problem. But some local activists say it points to the need for tougher disclosure statements from politicians.

"I've been fighting for several years to have a code of ethics and disclosure in White Bear Lake, and this is an example of something that should have been disclosed 10 years ago," said Tony Feffer, an outspoken former City Council member.

"I don't think people should try to serve [their community] when they have those problems."

But Auger insisted his business' tax problems have nothing to do with his job as mayor, which he says largely involves making sure White Bear Lake residents live in a safe, well-functioning community.

The bankruptcy papers filed in court offer limited information about the financial status of Auger's auto business. The number of creditors is less than 49, it states. Auger says the biggest portion of his debt is to the IRS.

Auger's assets are less than $50,000, according to the court petition, and his liabilities are between $100,000 and $500,000.

Hard to get rid of debt

Getting debt relief from overdue taxes is no easy task, said Kevin Shoeberg, a veteran bankruptcy attorney in Woodbury. Shoeberg did not know details of Auger's case, but said taxes and student loans are among debts that bankruptcy courts generally don't like to erase.

"In general, it's pretty difficult to get rid of debt to the Internal Revenue Service in bankruptcy," he said.

Auger said the bankruptcy experience has made him appreciate the financial strains facing Minnesotans and Minnesota businesses.

"It's given me an understanding that when government raises taxes, it trickles down to small businesses," he said.

Auger said he hoped to sell some property he owns to pay off part of the debt, and to come out of bankruptcy within the year.

Said Auger: "I'm looking forward to starting fresh and getting rid of this stress in my life."

Jean Hopfensperger • 612-673-4511