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Rushford comes to terms with city hall financing

By Kirsten Zoellner

Mon, Jul 30th, 2012
Posted in Rushford Government

Two weeks ago, after much back and forth debate, the city began to move forward seeking bids for the city hall project. At that time, City Administrator Steve Sarvi had stressed the importance of the council being in some accord over where funding for the project would be drawn from. Presenting four financing scenarios, Sarvi laid out the options for the council this past Monday.

Coming in with the highest recommendation from Sarvi, and likely the most flexibility for the city, is a loan from the USDA through the Minnesota Rural Water Association. The maximum amount sought would be $200,000 on a 40-year, 3.5 percent note. The USDA loan would allow for prepayment at any time, which the city already has in its sights. The payment, if the full amount was financed, would be roughly $9,400 per year through a once a year payment. The loan would originate with the Rural Water Association, but would, in standard practice, be sold to USDA.

However, Sarvi was cautious to note that even though the city would potentially seek $200,000, only the actual amount of the project estimate and bid would need to be financed. In addition, should the city receive the USDA loan pre-approval, it can decline the loan should the project be deemed too expensive or alternate funding be found.

The second scenario involves either a micro or midi-loan through the Rural Water Association. While Sarvi noted the likely lower interest of this type of loan, the term would be either seven or 15 years and would allow no early payment until either three or five years. Higher payments would occur with this scenario.

A third scenario, debated in the past, is existing internal funding by the city. This drawing down of reserves is a risk for the city and is not recommended by Sarvi.

The last scenario, also deemed not effective due to the small scale of the project, would involve putting the issue before the voters on a referendum.

Following recommendations, the council dug into the details of a potential USDA loan. “We would work with city staff to find a way to accelerate payments and mitigate overall impact to the citizens,” noted Sarvi. This could be done two ways; either through aggressive budgeting with the Capital Improvement Fund or using EDA funds, which were noted as being “robust.”

“It’s somewhat political,” continued Sarvi, when asked how the budgets could be massaged to have a zero impact. “Do we raise taxes or cut spending? Maybe a little of both. We have to keep squeezing the turnip to get all of the blood out of it, but sometimes, all that’s left is the turnip.”

“We need to get this out to bid. It’s been going on for far too long,” stressed Councilor Mark Honsey.

Mayor Chris Hallum agreed. “We decided this long ago. Are we going to do it or not? Every agenda it’s, ‘What are we going to do, what are we going to do, what are we going to do?” In a 3:2 vote, with Councilors Vern Bunke and Roger Colbenson opposed, the council approved seeking pre-approval for the USDA loan.

The city has also decided to move forward on two other small projects. The first is a $7,500 water feasibility study from BDM Engineering for the north portion of the city, near Riverbend Electronics and Good Shepherd, but also affecting potential growth in the Himlie Business Park. The water pressure and fire suppression issues were discovered in an earlier study, but further detailing and problem-solving scenarios will need to be looked at and refined.

The second is a storm water issue in Brooklyn, which will deter water from coming entirely into a catch basin and saturating certain properties. 144 linear feet of 14-inch, elliptical pipe will be installed and will drain the water away to the new levee drainage system. Doing the work in-house, through the city’s Public Works Department, savings of at least $7,000 are expected in the $20,000 project.

In other news, police chief Sam Stensgard will be retiring after 30 years with the Rushford Police Department. His tenure ends effective September 1. The city will meet with labor management to discuss filling the vacancy.

The next regularly scheduled council meeting is Monday, August 13, at 6:30pm, at city hall. The public is encouraged to attend.

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