The City of Rushford has been eyeing potential changes to its Revolving Loan Fund policy, looking to amend it to allow the city to use the funds. If used, the funds would be designated for a singular project related to economic development, namely an estimated 100-acre property on the west side of Rushford, along Highway 30.
City Administrator Tony Chladek noted the policy change idea came about as the city attempted to position itself in order to act on any of its Economic Development Authority (EDA) objectives and strategic plans. “We’re giving ourselves flexibility,” stated Chladek. The four main plan goals, identified earlier this year, include downtown vitality, and increase to local workforce, more effective marketing of the community, and fulfillment of housing demand by 2025.
It’s this last item that has the most recent interest. November 20 of last year, the city council approved funding a Bolton & Menk study for conceptual planning for residential development on land located within the City of Rushford Village, abutting the boundary of the City of Rushford. The property is owned by Lorraine Woxland and the intent is to review concepts regarding Rushford zoning and estimates to provide utilities to the area. The study was completed with landowner permission. Estimates did not include opinions or costs related to any annexation proceedings.
The EDA plan for the area, if pursued, would include utility extension and land acquisition. By freeing up revolving loan fund dollars, the city would have the ability to proceed with the project with existing dollars without having to tap into reserves, seek out a bond issue and levy for it, or increase levies or fees in enterprise funds.
The Minnesota Investment Fund dollars that were provided to the city for the revolving loan fund were originally put in place as special dispensation following 2007 catastrophic city flooding. The goal was to aid the city in injecting money back into the community. Currently, it can only be used for business development. At the end of 2017, the fund stood at $1,540,592. “There are nuances in the agreement,” said City Clerk/Treasurer Kathy Zacher. “We may have authority to do it ourselves by changing our policy. Policy change option is valid and doable, but we don’t know 100% for sure.”
If the revolving loan fund policy is amended, it will first have to pass the Rushford EDA board, be possibly subject to a public hearing, and then be approved by council. The city is expecting to hear from legal counsel on whether or not the policy can be amended for city usage by the first week of June.
A surprise legislative change, however, prompted Chladek to make the council aware of viable last-minute option to use the funds, should the policy stand as it is. “A statute approved in 2017 allows us to be able to use revolving loan funds for a one time exception for instances like this; for economic development purposes,” said Chladek. “It does not have to be paid back, but there is a 20% penalty for one-time usage. I bring this up only because there’s a limited window to be able to do this. It ends June 1.”
Chladek stated he’d brought forth the last-minute item due to the rapidly closing three-day window. The council cannot meet again prior to the June 1 application deadline, therefore any motion to move forward with the application for one-time usage would have to be approved at the May 29 meeting.
“From my conversations with DEED, you want to make your window very narrow; very specific,” added Chladek. “This gives us the greatest amount of flexibility to accomplish the mission, if the opportunity arises. If the opportunity arises, we need to be able to act,” stressed Chladek.
According to Zacher, the penalty fee percentage is standard for Investment Fund dollars. If the city proceeds with the application, there is a 30-day DEED review period in which the purpose of the funds is evaluated to make sure it’s consistent with economic development. If the city proceeds with the application, is it not obligated to use the funds. What was unclear at the meeting was whether or not the city is committed to paying the 20% penalty, even if they opt out of using the funds.
“If we can do the policy route, this is moot. If we can’t do the policy route, this is available,” stated Chladek. “I would prefer not to have to bring this to you tonight, but there is a window. This scenario came up and the meeting was tonight. That’s why we’re providing the policy option and this option. Right now, we have no flexibility to use those funds.”
The 30-day review period should give the city enough time to conclude whether or not the policy change is viable, to investigate optimal solution, and to sit down with the landowner to determine the path forward.
The council directed Chladek to confirm that the city is not committing to pay the penalty if it opts out of using the funds. A motion to approve the application, contingent upon the ability of the city to back out of the application, prior to the June 30, 2018, final review, was approved unanimously.
Following the meeting, Chladek clarified that the planning process is still in the works. “Looking at financial options is part of the planning process for any project. As you can imagine, projects that may include expansion involve looking at financing scenarios as well. There are no deals as of yet and there are no clear cut solutions to financing at this time either. It’s possible this project may not occur. However, we want to share our vision, do our homework, share options, and be prepared.”
In other news, the city has received a favorable audit from Smith Schafer & Associates, Ltd. Tom Wente and Kali Olstad were on hand to present the details to the council.
General Fund expenditures were under budget by $87,664 due to a combination of reduced costs for professional services, street lights, utilities, repairs and maintenance, and reduced tourism. Unassigned/Unreserved General Fund balance, as a percentage of fund expenditures, was 91%, or $623,550, in 2017, an increase from 67% in 2016. Audits have previously noted that the city should aim to continue to build this balance, which had been depleted to just 11% in 2011, as the city grappled with rebuilding and several capital improvement projects. Capital Improvement Fund balance, at the time of the audit, was $1,082,764 and is available to future capital project needs.
The report also noted that Water, Sewer, and Electric Enterprise Funds are currently supporting $3.25 million in Revenue Bonds. The improved cash flow has allowed funds to repay interfunds, except an Electric Fund advance which has a set repayment schedule. The Liquor Fund was officially closed out in 2017, after several years as a thorn in the side of the audit.
The next regularly scheduled council meeting is Monday, June 11, at 6:30 p.m., at city hall. The public is encouraged to attend.