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Rushford City Council Report: Play ball

Fri, Feb 15th, 2008
Posted in Government

This much is clear, the great August flood and six-months of unprecedented public demand for decisions-to-be-made and actions-to-be-taken has tested the capacity of Rushford's small governing council, volunteer-staffed boards and commissions, as well as the administrative, public works and safety departments.

Capacity is a professional term that defines institutional structures and relationships, the ability to function at a given level, and in the case of local government, the depth of its democratic foundation. Public sector capacity is not about good intentions or even good attendance. It's the ability of all the players on all the teams to effectively work-together, to meet objective benchmarks, to achieve specific goals.

Sure as the flood blew-out basement walls and buckled pavement, it has caused visible stress cracks to meander through the bedrock of City government. That said, the regular session of last Monday's, February 11, Rushford City council, with all members present, opened with ballbats a'swinging.

Who's on First?

After approving the agenda, Mayor Les Ladewig asked audience members packing the cramped council chamber if anyone wanted to speak. Former Mayor Ted Roberton expressed concern about a widely-rumored offer from Tri-County Electric to "give" its former office building to the City. Back in early September, word on the street had it that the City flatly rejected an opportunity to purchase the TCE space for one-dollar. "What I want to know," Roberton demanded, "is who made that decision?"

Ladewig stated that the City participated in discussions between Winona Health and TCE about converting the building into a medical facility.

Administrator Windy Block added that WH never officially declined to use the building, but instead expressed interest in developing the Norsquare property into a medical center. "The library board looked at the building," said Block, "and rejected it."

The 9,000-square-foot TCE office building and adjacent warehouse were both heavily damaged in downtown Rushford where floodwater marks reached highest. "It would have taken an estimated $1.7-million to repair the building," explained Brian Krambeer, TCE President and CEO, in a phone interview on Wednesday. "There is a full-basement. The electrical panel's down there. We approached FEMA and said we would like to put the repair funds toward a new facility. That meant we would not repair the old building."

Months earlier, TCE had decided to build a new headquarters because it had outgrown the old one. "We'd been talking to Winona Health about buying the building for year before the flood. In fact, we had a meeting scheduled with them for the Monday after the flood," Krambeer remembered. He said he'd also discussed purchase, prior to the flood, with Gunderson-Lutheran and Semcac, among others. "After the flood," Krambeer continued, "I began to seek-out options [for the building] that I could present to my board. And, I wanted to see this community get back on its feet."

As for the rumor that City officials refused an offer to buy the building for one-dollar?

"I talked to the administrator [Block] about the library using the building," said Krambeer. "I believe the library board looked at it and decided it wouldn't meet their needs. I talked to a lot of different people about purchasing the building." Krambeer stated that discussion with the City never led to formal correspondence. "I never had discussions with the City about buying the building."

Back to Monday night. "Who made the decision?" Roberton asked several times, knowing that the council never voted, up-or-down, on any offer from TCE.

"Five people need to make that decision," said Roberton.

After a bit of back and forth, which included Mayor Ladewig admonishing Roberton for his angry tone, and Roberton apologizing two-or-three times, the former Mayor scolded the current Mayor: "You don't have the authority! Rushford is a weak-mayor, strong-council government."

The mayoral dust-up quickly settled, but only after draping the silhouette of a central but often vague element of institutional capacity: roles, responsibilities and leadership. The specter would remain visible throughout the 2 1?2-hour-long meeting. Ladewig closed the TCE building dossier by reminding the audience that the EDA participated in the whole process. "The EDA is empowered," said Ladewig. "To the best of my knowledge, that's what happened. The issue died its own death."

What's On Second

" Resident Chris Hallum spoke-up from the audience. "I'm here because I'm not happy with the direction of my hometown," he began. First chiding the council for deciding to rebuild the on-off-sale municipal liquor store, Hallum then chastised administrator Block for behavior at recent council-meetings as "reported" in the Journal and Tri-County Record. Specifically, Hallum took Block to task for his conduct during the contract dispute with Winona Health, and the related resignation announcement by City attorney Terry Chiglo.

"You cannot build a liquor store," Hallum said, citing the competitive pressure of a municipal liquor business on existing and proposed on-sale-liquor establishments. "Surely there is a better thing we can put this money to use for." Hallum proffered two suggestions: city streets and tax relief to offset tax increases needed to build a new school.

Hallum moved-on to Chiglo's resignation as reported in the Tri-County Record. "[Terry Chiglo] said he would not leave the City without representation until he is replaced, to the puzzlement of the administrator," said Hallum, who then quoted Block's comment to the TCR, "'Either you resign or you don't.'"

"I can understand your bewilderment, Mr. Block," Hallum continued, "because what Terry has shown here is a word I doubt you are familiar with. Courtesy." Hallum called upon the council to reprimand administrator Block. "This City cannot let the administrator drive away our fine attorney and our clinic. We need Winona Health. We need Terry Chiglo. We do not need a new liquor store. And if the past two meetings are any indication, we do not need Mr. Windy Block."

The crowd applauded.

Nano Giant On Deck


The issue of approving a Category-2 disaster recovery loan application for a start-up business not affected by the flood again appeared on the council agenda. Following council inaction at the previous meeting, Windy Block and Hypersonic president, Dan Fox, drove to the Cities to meet with officials from DEED, the State agency responsible for disbursing Minnesota Investment Fund money to businesses affected by the flood. Their question to DEED, the same question the council asked of them: "Will DEED approve a C-2 loan to a business that did not exist prior to the flood?"

Block briefed council members on DEED's main concerns, 1) Hypersonic's "lack of other funding", and 2) Hypersonic's proposed "sales". Block added that DEED said Hypersonic would qualify for MIF funds, but Block was not clear, whether DEED meant disaster recovery funds from the MIF account, or MIF funds available to all qualified companies in the State. DEED suggested that Hypersonic may qualify for funding from the Southern Minnesota Initiative Foundation. Said Block, "DEED will contact Mr. Fox."

Said Fox a little sourly, "They have not called. They're not trying very hard, sounds like."

Block framed the choice before the council. "Tell Mr. Fox you are not interested and send him away. Or, make him an offer, with conditions."

Fox has enlisted the help of local nanotech enthusiast Kevin Klungtvedt. Since the flood, they've been preparing a business plan, lining-up investors, filling out forms, making presentations and attending council meetings. Hypersonic's proposed, patented, nano-particle carbide coated drill-bit and saw-blade manufacturing business promises a staff of PhDs, a workforce of 40-60 and something on the order of $13-million in sales over 5-years. From Fox's perspective, a $500,000 low-interest, government-underwritten loan is the linchpin to successful recruitment of additional investors and start-up.

"As soon as the City approves, my investors will commit," he said.

Weeks-ago, Fox made a business presentation to the EDA, earning their support. But City council members have not seen the presentation, nor have they studied Hypersonic's business plan. Nevertheless, salient concerns have emerged. The nanotech patent held jointly by the U-of-M, certain professors and Hypersonic, according to Fox, is a big question mark. The council wants details, and they have asked to verify the estimated value of the patent. In addition, the council wants to see the Hypersonic presentation the EDA saw. They want to review the business plan and financial data.

Monday night, as at previous meetings, Fox and Klungtvedt came across as testy, petulant.

"You're gonna set us up to get the funds too late," Fox groused, "What we were told originally? There was $1-million [in the disaster appropriation] earmarked for new businesses. Ok? You need to understand that too. That's why we came here. Ok? There are people living in 76-trailers out there who are going to leave town if they don't have jobs. We want to get them back to work."

Member Robert Dahl asked, "Was $1-million really earmarked for new businesses?"

Block explained, "It's not an earmark. When Pettipiece put together the estimate for the disaster bill, we estimated $1-million for 2-new businesses, $500,000 each. Mr. Fox spotted that and said, 'I have just as much right to apply as someone who needs a Category-1 loan.' He [Fox] offers job growth," Block concluded, "which is not shown on many of the loans. And some of us believe it is essential."

"I have $300,000 tacked-on my rear-end," said Fox, referring to a line-of-credit Hypersonic's received from an unspecified bank. "The agreement was, as soon as I have $300,000, matching funds would kick in. There's nothing not covered in my business plan."

Council member Larry Johnson replied, "Investors' names?"

"You will have the names at the proper time: as soon as the City approves my application," said Fox, whose aggressive style only hardens remarks like his next one: "I shouldn't be running into what I'm running into now. This is not a fly-by-night deal!"

Trying to move the application forward, Block interjected, "What if the council resolved to approve the loan, providing certain conditions were met before funds could be released?"

Fox: "I've got $375,000 in cash. As soon as the City says ok, I'll have the rest." [Fox earlier stated he expects private investment in the next 60-days to total $600,000.]

Block paraphrased loan conditionality, "You bring your check, I'll bring my check."

Councilmember Laura Deering reacted, "I'm not comfortable with that language."

After a few more questions about ownership and valuation of the process-patent, which Hypersonic has offered as security, Johnson told Fox, "We have a lot of questions."

"We already presented the patent to the EDA. Ok? We've already done that," said Fox, increasingly aggravated. "We need a decision."

Ladewig proposed that Fox repeat his business presentation for the council, then told the entrepreneur, "I know you've done what you've been asked. But can't you see? The situation has changed." The Council then voted unanimously to consider Hypersonic's business proposal at a special session scheduled for Wednesday, 20-Feb at 7:30 pm.

Seventh Inning Stretch

Winona Health

Herb Highum, former councilmember, current WH boardmember, president of the "old clinic board" and EDA-member 11-years-ago when the City entered into a lease-purchase agreement with the healthcare provider, read a statement that basically came down to this: "We [the EDA, signatory to the disputed lease-purchase agreement] knew then, that at this time, the building would belong to Winona Health."

Since the previous-two council meetings, when members failed to act either on an official motion or an attorney recommendation to settle with WH, the Mayor and administrator met with WH officials to unstick sticking points. The upshot? WH has offered to "gift" - as WH-CEO Rachelle Schultz put it - the parking lots behind the clinic to the City. Everything else, the questions about insurance, repair of the flood damaged clinic, lease extension and unpaid rent, have been more-or-less resolved, permitting WH to rehab and sell the building.

Two new issues emerged. Schultz requested the City pay for a survey to ensure that property lines are understood, and asked that the City clarify zoning requirements related to businesses and parking-spaces to ensure that a future owner will be able to "count" City-owned public parking spaces toward business zoning requirements.

The council voted unanimously to agree to the proposed terms, with the caveat that the City attorney will look into the need for a survey and report back to the council.

Again, the audience applauded.

Bottom of the Ninth

Other Business

Lastly, Ladewig reintroduced the subject of Chiglo's resignation. "I learned about it in the paper," Ladewig said, explaining that he and Chiglo had spoken earlier. "We had an honest, candid discussion. How can we make this team functional?" Ladewig asked council and staff.

"If we have issues we can't resolve," said Chiglo in his usual to-the-point fashion, "I don't want to be a part of the problem. I want to work to resolve problems, be productive, effective."

For now at least, Terry Chiglo remains legal counsel to the hard-working but arguably tired, fair-minded though increasingly stressed-out City council and staff. I spoke briefly with Chiglo on the snowy street after the meeting. "I wasn't going to abandon them," he said.

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