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DEED letter adds more confusion to flood loan process

Fri, Apr 18th, 2008
Posted in Government

RUSHFORD - It was with a grim resignation that about three dozen people gathered at city hall in the council chambers for another regular meeting of the Rushford City Council April 14 at 6:30 p.m..

Some have chosen to be spectators, others have a point or presentation to make, and a large group is there because-well, they have to be.

At three hours and fifteen minutes, this meeting was shorter than the previous one, but still longer than the average person can sit and concentrate comfortably.

The themes for the evening might have been "reversals" and "hesitation." The reversals came in the form of loan applications from the owners of Norsland Lefse and the Windswept Inn.

Hesitation was expressed mostly by councilwoman Laura Deering who felt that the uncertainty created by recent state and legislative attention made a number of the decisions being asked of her "premature."

More Scrutiny

The one-liner last fall was that all the attention from the flood took away Rushford's status as "southeastern Minnesota's best-kept secret." Now, the city finds itself once again in the spotlight as complaints from local homeowners have caused a flurry of questions and opinions at the state level, as well as a "freeze" on all Category 1-A and Category 2 flood relief loans to businesses.

Frustrated homeowners Larry Mierau and Roger Colbenson expressed to legislators their dismay over the two $500,000 low interest loans given for development of two businesses, one of which was not technically in existence at the time of the flood. Why couldn't funds be stretched to cover unmet homeowner expenses?

Do the loans violate the spirit of the legislature? Do they violate the letter of the law? Or is the city perfectly within its right to wish to bolster the local economy with new jobs, as is one of the missions of DEED? (Department of Employment and Economical Development-through which the flood relief money flows.)

The answer to whether funds could be transferred to housing in Rushford appears to be "no", but beyond that, nothing is certain.

There's been no shortage of opinions, and yet many understand that an opinion is not the same as an answer. Windy Block, city administrator, presented a packet of six letters on the subject from legislators and administrators.

On top of the packet was a letter received that day from Paul A. Moe, Deputy Commissioner of DEED. The conclusion found in this letter seems a bit indefinite: "As a result of learning more about some of the businesses under consideration, we would agree if a businesses {sic} was in Rushford and can demonstrate adverse effects from the flood they should be eligible for assistance. If businesses were not in existence and cannot demonstrate an adverse impact, it might be ineligible."

Moe adds that "If a business is determined not to be eligible, we will work with you and the business to determine if other programs can provide some assistance."


City attorney Scott Springer interprets Moe's letter as meaning each business would have to demonstrate adverse effects from the flood-not necessarily monetary.

Block agreed and used Connaughty Industries, one of the two businesses originally in question, as an example.

According to Block, a letter prepared by Connaughty officials "swayed" DEED to declare them eligible for flood relief funds, although this approval is not evident in Moe's letter.

When pushed, Block said he's been given a "verbal" approval for Connaughty in his discussion with Moe. Block agreed that "we should get it (approval) in writing for each business."

Block interprets the current situation as meaning that all businesses approved in the past, and in the future for Category 1A and Category 2 loans (low interest, but not forgivable) will have to make its own case and meet the criteria outlined by Moe.


Last month the council failed to uphold the decision of the appeals committee regarding Norseland Lefse's loan. The business had appealed its original $52,000 Category 1 and asked for instead $133,000 in forgivable money to restore its business to the same 4,500 square feet of space, only moved to the former Tri-County Electric building.

The council on March 24 had difficulty understanding the new figures and changed the amount to $104,000.

Owners Mark Johnson and Scott James came to this meeting to appeal denial of their appeal. They made a reasonable case for their numbers, which appear to have been well-researched, and hinted that they might not be able to follow through with their plans to stay in town in an increased capacity without the Category 1 loan of $133,000.

Finances are "tight", according to Johnson.

Councilman Larry Johnson rescinded his motion from March 24 and the council approved the $133,000 from the appeal.

The council approved loans from Witt Real Estate, Long-term Care Pharmacy; Ladewig Diesel; Eric's Lock and Key; Himle Construction; and Home Street Floral.

Then they examined a denial from the loan committee for the Windswept Inn in the amount of $4,846 (with owner injection of $3,231. Rather than approving the committee's denial, the council voted to grant the Category 1A loan.


Early in the meeting, and several times thereafter, Deering expressed her concern that perhaps the council ought not to continue acting on Category 1A and Category 2 loans until they receive some kind of solid answer from the state.

Block tried to assure her and others that the answer was that each business that received an approval on 1A and 2 loans would have to make its own case to the state, meeting the criteria in the Moe letter.

But short of having that precise answer in writing, Deering remained unconvinced and voted in the negative for any loans asking for money beyond Category 1.

She was also hesitant regarding the issue which required the longest discussion of the night: whether the council was ready to approval purchase of the former Woxland building for $75,000.

The building is part of a group of buildings in a block that includes the former Dreamin' Horses, which the city bought before the flood, where the council has voted to pursue the building of a community center and library, using a generous grant and a pot of FEMA funds.

Recently the price of another building in the square, the Witt Long-term pharmacy, went up to $140,000, well beyond what the city is willing and able to pay, effectively taking the Witt building off the table as part of the new community project.

But Block claims that of all the buildings necessary to complete the project, the Witt building was "last on the list".

"Would the project be better with that building?" Block asked rhetorically. "Sure it would. But can the project move forward without it: yes."

There's a plan for the historic jail building to be moved to the historic depot, leaving the only question mark to be the Litscher processing building.

Deering wondered if it was prudent to go ahead with the purchase of the Woxland building before all the other pieces were in place.

Block again assured that he's been in communication with Mr. Litscher and felt confident that an arrangement to move the business would be possible in the future.

Deering remained hesitant and voted against making the purchase at this time. The motion passed without her vote.

She also voted "no" to two ultimately successful motions to sell land in Rush Creek Business park to Connaughty Industries and to Greg Norstad, dba Rushford Hardware, citing her wish to wait for more clear answers on the Category 1A and 2 loans before moving ahead with projects that will require those types of loans.

The need to "hesitate" was pretty much imposed on Shawn Mrozek, owner of the future Shawnee's Bar and Grill to be established at the site of the former Rushford Bakery.

Construction has been moving ahead on the business but has reached an obstacle in the form of the city's convoluted arrangement with Winona Health.

There is property behind the bakery that Mrozek always assumed was hers, and in fact on which she paid taxes.

She was present to ask if "her guys" could start digging the next day on the section of the property in question.

"The answer is 'no'," said the mayor in a quieter than usual voice.

Springer agreed that Mrozek cannot start digging. He explained that both Winona Health and the city have an interest at stake, and although both are in favor of her business plan moving forward, "each would have a claim for damages against you" if she starts digging before the complicated deal is complete.

According to the mayor and attorney, and explained at previous meetings, the property is owned by Winona Health, who has promised to deed the land back to the city. When that happens, the city will deed it to Mrozek. But until all the "ducks are in a row", the deal is not finalized.

(Springer seemed confident at another time in the meeting that arrangements with Winona Health were progressing as hoped.)

Other business:

• Kevin Timmerman of 5th Avenue Designs was present to report he'd completed the design for the new municipal liquor store-which will have more of a "professional building" appearance-and the council voted to begin accepting construction bids at 3:00, April 24.

• The council voted to allow veterinarian Tom Taggert to acquire a small parcel of unused city land for Taggert to use as he rebuilds his Valley Veterinary Clinic, which was destroyed in the flood.

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