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Grant approved for Preston, Chatfield and Ostrander

Fri, Jun 19th, 2009
Posted in Government

City Administrator Joe Hoffman informed the Preston City Council at their June 10 meeting that the Small Cities Development Program (SCDP) grant was approved in the amount of $474,200. He reminded them that the state/federal grant was applied for last year. The grants involve the state of Minnesota's Department of Employment and Economic Development with the grant funding coming through the US Department of Housing and Urban Development. Mayor Kurt Reicks was absent.

Preston will have the lead position as the legal sponsor sharing the funds with Chatfield and Ostrander. The funds will be used to assist property owners with the rehabilitation of four residential, rental and four commercial properties in Preston.

Michelle Vrieze, Southeast Minnesota Development Corporation (SEMDC) explained that all the rehabs will be done with grant money costing the city of Preston nothing out of pocket. There will be advertisements for bids and applications. SCDP funds are generally targeted to low and moderate income beneficiaries. Semcac will inspect and certify the properties. SEMDC/Semcac will coordinate and administer the program.

A resolution was approved to adopt policies required for acceptance of the grant. Some of the funds will be an outright grant and forgiven and some will be loan monies that will be paid back into a revolving loan fund.

Hoffman declared, "This is great news to bring almost one half million dollars into Fillmore County."

Preston Foods

Hoffman noted that Preston Foods is in the midst of a major remodel and replacement of old equipment with energy-saving equipment. The Preston Economic Development Authority (EDA) recommended the Rural Economic Development Loans and Grants (REDLG) through USDA as a way to help with the project providing 20% of the financing. Cathy Enerson, EDA, said there was a special meeting of the EDA before the council meeting. The EDA recommended a 50% collateral position for the loan and a pass through loan for Preston Foods.

The REDLG program would loan $85,000 to Preston Public Utilities (PPU), which would act as a pass through agent, then loaning the funds to Preston Foods. The PPU had approved the loan to Preston Foods if the EDA/City would share the risk 50-50 with the Utility. Hoffman suggested it was a benefit for PPU to help one of their largest customers with an expansion. The council unanimously agreed to assist the business by guaranteeing 50% of the PPU loan. The EDA was committing itself to $42,500 exposure knowing that if it couldn't cover a default, it would be up to the city to cover that portion of the loan.


Hoffman explained that the council will have an important decision to make by September 1. The Southern Minnesota Municipal Power Agency (SMMPA) board has asked that the current contract, which runs until 2030, be extended through 2050. The contract with the PPU allows the Utility to purchase wholesale electricity from them. The PPU, together with many of the other seventeen SMMPA members, has hired a consultant to determine if extending the contract is in their best interest.

SMMPA was created by its members in 1977 and it generates and sells electricity to its eighteen nonprofit municipality-owned utilities, including PPU. Its main source of electricity is in its 42% share ownership of Sherco 3, a coal-fired generator located near Becker, Minnesota. SMMPA advertises that it has 13.5% renewable sources of electricity including wind, biodiesel and waste to energy.

Hoffman suggested a joint meeting with the PPU to discuss what is best for the city. The decision is whether to continue on with SMMPA or to go on their own. Rochester and Austin have already decided not to continue on. One downside in not extending is the loss of their share of the assets of SMMPA which will be divided up among the members that remain. Hoffman said this could be the largest financial decision of the city council and the utility commission for some time.

Other Business In Brief

• Tom Byrne, representing the Preston Development Corporation, explained the organization is not needed any longer to assist with projects. The last project that it helped with was the Olmsted Medical Center building. Byrne asked the city to accept their donation of $6,867.66 to be put into the Preston EDA revolving loan fund. The donation was accepted and will be available for loans to businesses in Preston.

• The council approved a revolving loan of $5,908.46 to the Sweet Stop as recommended by the EDA. The interest rate is 3% and the term of the loan is 5 years.

• Hoffman said there have been more complaints this year than in years past of lawns that are out of compliance with Ordinance 9238 which requires lawns not to exceed a height of 12 inches. Three properties were cited and the owners will be sent a destruction order. They will have 48 hours to appeal and seven days to have the lawns mowed or the city will hire a contractor and bill the owner or owners.

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