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STEPHANIE HEMPHILL: The snow is finally gone. On clear days, the sun lights up the Grand Marais Harbor and puts everybody in a good mood. When you stand with Lake Superior behind you, you can see the Gunflint Trail winding up the side of Sawtooth Bluff, heading into the wilderness. Turn around, and you're blinded by the sparkling blue water.

Beside the gravel beach, a new park is taking shape. Shrubs and trees sit in pots waiting to be planted. There used to be a gas station here. The city bought the land to improve access to the beach.

Tim Kennedy points out the brand new sidewalks and light posts. New sewers run under the streets. And here's one of Kennedy's businesses, Birchbark Books.

TIM KENNEDY: This was the old Ford garage. When my wife and I bought it, it was-- had all plywood siding on the front. And the inside of it was grease that was probably a half-inch thick on the floor. And we bought it. And my wife said, what are we gonna do with this thing? And I said, I don't know. But I said, it's a mess.

STEPHANIE HEMPHILL: Kennedy is a busy man. He owns a realty company and some property in town. And he and his wife own two shops.

TIM KENNEDY: That's one of the things you pay for when you decide to live here is if you want to try to make a living, you figure out what you can do to, you know, make a go of it.

STEPHANIE HEMPHILL: In addition to his businesses, Kennedy is a member of the city council, the planning commission, and the Economic Development Authority. Kennedy was land use planner for Cook County for 20 years. That's why some people thought he should have raised an objection when the city council voted to change the definition of a hotel without holding a proper hearing. The change opened the way for condos to be built downtown. Kennedy says it was a technicality.

TIM KENNEDY: It was just a lack of, you know, understanding of what needed to be done. And there wasn't any intent. We did go back and hold the-- the proper public hearing. It was after the fact, but we-- we still went back and held the public hearing. And, you know, the issue was-- was addressed at that time through the proper channels.

STEPHANIE HEMPHILL: There's been a lot of debate about the development process in Grand Marais recently. Workers are putting the finishing touches on one of the condos, the East Bay Suites. Back in the early 1900s, the East Bay Hotel was a home for lumberjacks and fishermen.

For the last 50 years, it was owned and run by a local family. The new owners, based in Saint Paul, tore down part of the structure and remodeled the rest. They're selling vacation condos for up to half a million dollars. Most of the units sold before the work even started.

Another new condo, Cobblestone Cove, is literally a stone's throw from the public beach. Last fall, the developer tore down a house and garage and built 10 condos. John Haluska lives on Artists Point, right across the street from Cobblestone Cove. He says the condos are well built. The architecture is tasteful, but they could have been built anywhere. It's just not Grand Marais. Haluska says Grand Marais is the poster town for Minnesota's sense of place.

JOHN HALUSKA: The Minnesota of the '50s, the '60s, in terms of the look and the feel of the place and the friendliness of the place, and how it's a great blend of both a bit of commerce and a lot of nature and good environmental stewardship. Great vistas and views and something that you'd be proud to pass on to your children.

STEPHANIE HEMPHILL: Haluska says nobody wants Grand Marais to turn into just another tourist destination.

JOHN HALUSKA: There's people who live here, actually, you know? You know, it-- it's-- it a lot of tourists simply because of the people who do live here, and the fact that it is a community that has existed since, what, you know, the late 1800s. And it hasn't lost its spirit or its character.

STEPHANIE HEMPHILL: Haluska says there should be a moratorium on further development downtown until residents agree on a vision for the future. The city just hired a consultant to help create that vision, but the council rejects the idea of a moratorium. Haluska and other critics say the council has been taken over by people intent on development, and they're asking the county attorney to investigate possible conflict of interest.

They point to Mayor Mark Sandbo as an example. He was manager of the East Bay Hotel when the city changed the law to allow it to convert to condos. Now, he works for the company that manages the other lakeside condos, Cobblestone Cove. Sandbo says there's no conflict of interest on his part. He says everyone in town benefits from the increased tax revenue on the two properties.

MARK SANDBO: I have to have a job. I don't know where the conflict of interest would come in. I don't own any of this-- of these things. I just work here.

STEPHANIE HEMPHILL: Disputes about conflict of interest are seldom heard in court. Jeannette Bach is research director at the League of Minnesota Cities. She says each case is unique.

JEANNETTE BACH: A city would need to take a look at its individual situation. And taking a look at how that matches up against what the courts and the statutes have said might be a conflict of interest. And it is a job of interpretation and usually involves an attorney.

STEPHANIE HEMPHILL: The Cook County attorney says he's just beginning to study the matter. Mayor Mark Sandbo says he loves Grand Marais as much as other people do. But he says it's hard to make a living here. Many young people can't make enough to stay and raise a family. He has no hopes that a manufacturer would locate in this remote village, so he says the town has to accept some level of tourism-oriented development.

MARK SANDBO: I don't want to become another Vail, but Vail does draw a lot of people, you know? I-- I don't want to become another Wisconsin Dells. But, you know, we-- I don't want to become those things. And I don't think what we're doing is-- is heading down that road.

STEPHANIE HEMPHILL: But Cook County is attracting a lot of people. According to the 2000 census, it's the fastest growing Minnesota County outside the metro area. It's a magnet for retirees, empty-nesters, and people who can work from home. That's in addition to the people who can afford a timeshare or a condo for their vacations.

The Grand Marais visioning process will start soon, and the consultant promises lots of public involvement. Reporting from Grand Marais, I'm Stephanie Hemphill, Minnesota Public Radio News.