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Rushford City Council: Rushford and Winona Health at odds over clinic building

Fri, Jan 18th, 2008
Posted in Government

The Rushford City Council, meeting for the first time in 2008 on January 14, immediately swore-in newly-elected council members. Not since former Mayor Ted Roberton resigned 2½-years-ago after only 5-months into his second term have residents enjoyed a full-team of elected officials.

In June-06, the 4-member council appointed Les Ladewig to replace Roberton. Laura Deering won a coin toss, besting 2-other candidates to fill Ladewig's vacant council seat. Then one-year-ago, the council appointed Herb Highum to fill the seat left empty when Ron Mireau passed away.

Last November, fewer than 300-voters went to the polls to reevaluate the local governing body - only 2-of-5 posts filled by elected officials - that intrepidly navigated through uncharted waters after the great August flood.

Ladewig, very much the City's voice during hectic late summer and fall weeks of disaster relief, won a 4-year term.

Laura Deering organized flood relief volunteers. She persistently advocated on behalf of home-owners and renters, taking a long-term approach to recovery when most others were occupied with responding to more immediate needs. Deering led her competitors in a 2-out-of-3-race and earned a 4-year term.

Herb Highum also served his constituents tirelessly, attending continuous meetings and participating in critical decisions that will affect the community for years to come. Highum lost his council seat in close 2-way race won by his next door neighbor, newcomer Robert Dahl.

The Health Business

In August 1996, Rushford-EDA entered into a lease-purchase agreement with Winona Health to create a modern family-practice clinic that has served the City and surrounding communities for more than a decade.

Total clinic financing in the amount of $516,000 was provided through community contributions, City bonds and $171,000 in cash from Winona Health. Adhering to a 10-year schedule, WH repaid bond principal-and-interest in the amount of $379,000, making the final payment in December-2007, 16-months after the lease/purchase agreement quietly expired, and 4-months after the flood caused an estimated $650,000 in damage to clinic equipment and property. Professional cleaning of the Mill Street facility alone cost $92,000. Insurance will cover much of the loss, but WH wants to use the settlement to relocate into the Norsquare Mall building. The plan is to anchor a medical center that offers family practice medicine, dental and pharmaceutical services.

In November, WH-CFO Michael Allen informed the City that WH wanted to exercise its option to purchase the building that has housed the clinic since 1996. Prior to appearing before the City council Monday night to discuss the issue, WH-CEO Rachelle Schultz, in a letter to the City, described the proposed medical center as "a model for a healthcare facility in a small community, and is another example of something good rising out of the devastation of the flood".

But the City administrator is not so sure that WH can simply up and relocate from the flood-damaged, and now gutted, former clinic. At issue are conclusions elaborated in a staff report prepared by Windy Block.

• The report states that WH's option to purchase the damaged building 16-months after the lease expired, "appears to be extremely tardy and without any standing".

• Further, the report asserts that WH must fully rehabilitate the building. "Repair of flood damages is a required responsibility of the Tennant."

CEO Schultz bluntly explained to the council, "We don't want to restore it to a clinic setting." WH wants only to restore the damaged building to meet building code electrical and structural standards, and sell it as-is.

• Finally, the report finds WH in arrears on rent owed the City. "The Tenant should have begun [9/06 when the lease expired] paying the City a defined base monthly rent equal to 150% of the monthly fair rental value of the Leased Property." Estimated proceeds would amount to $32,000-$42,000.

Schultz told the council, "We strongly feel we need to move ahead," reminding members of the strong working relationship between WH and the City that has provided rural health care services for over 11-years. During the flood, WH donated roughly $114,000 in health resources directly to Rushford. More than 3,300 Tetanus, Hepatitis-A and Hepatitis-B vaccinations were made available. WH set up a temporary medical station and a shuttle service was operated between Rushford and Winona.

Stressing that the EDA-WH lease, drafted-and-approved more than a decade-ago, largely by officials no longer active, was "ambiguous" vis-à-vis expiration of the purchase option and scheduled final payment, Schultz pressed the council to transfer ownership of the clinic to WH, thus permitting resale. "We will not be able to rebuild in the old location and move to a new location," Schultz said.

City attorney Terry Chiglo stated that he was reviewing the lease and the staff report. He requested a few days to consult with City officials before getting back with the WH attorney, "to resolve this amicably."

Block insisted that the terms of the agreement are "very clear. This has caught everybody by surprise." The administrator added, "In my opinion, it was a good lease."

Addressing CEO-Schultz, Mayor Ladewig thanked WH for its contributions to disaster relief. "You've accomplished a lot of fantastic things. Now let's take that off the table," he said, then asked Chiglo to get to work on a satisfactory solution.

Councilmember Deering noted the importance of "continuing to have a good relationship" with the healthcare provider.

Added Chiglo, "I will look for a resolution to this. Quickly."

In a brief phone interview on Wednesday, Chiglo reacted to the rather hard-nosed conclusions outlined in the staff report this way: "I've been directed by the council to work toward an amicable solution."

Block, on Wednesday, deferred to the council's decision-making authority, but defended the exigent conclusions in his staff report. "The council has a responsibility to the community. The issue is black-and-white. They [WH] have no right to buy. And they have a responsibility to repair damage to that building, and to pay rent. They point out our proud relationship. They want us to cut them some slack. But I can't overlook City assets. I know it's not popular. How much of a solution is a giveaway?"

Michael Allen, WH-CFO, also commented on Wednesday, first echoing Chiglo's optimism, "I believe we will come to a solution," Allen said. "But it's imperative that it happens fast." Tying recruitment for a family-practice physician to replace Dr. Robert Breitenbach, who left WH in October, to moving out of temporary facilities that have no X-ray machine, among other drawbacks, and into a new and attractive medical center, Allen concluded, "It all ties together."

Barring intransigence, negotiations between the City and WH should result in an "amicable solution" sometime this week.

The Liquor Business

Owner of the former Rushford Bakery building, Shawn Mrozek, appeared before the council to answer any questions concerning her application for a non-sale and Sunday, liquor license to be used for a new 30-seat restaurant to replace the bakery.

Block asked Chiglo to "Clarify rumors circulating around town," by briefing the council on the results of research into the question of how many liquor licenses Rushford can legally issue.

"Rushford is a Home-Rule, Fourth-Class City," Chiglo explained. "We're allowed 7-permits. On-sale permits with conditions, like bowling, restaurants, clubs, don't count toward the limit."

After a short discussion of issues related to the proposed business, the council approved Mrozek's application.

It was going on 9-pm when the council finally arrived at an item member Larry Johnson had amended to the agenda back at 6:30 when the meeting started, the Municipal Liquor Store. Audience members standing in the back the whole time had evidently been waiting for this, as had Tri-County Record editor Myron Schrober. In a TCR editorial last week, Schober picked apart the council's decision to use FEMA funds - which he asserts the City was "pressured" to accept - to rebuild the establishment, and demanded the City reconsider its decision to remain in the on-sale liquor business.

Said councilmember Johnson, "I think we should revisit our decision," referring to the vote late last year to move ahead with reconstruction. "If we thought we might interfere with private enterprise before, with this new license [Mrozek's], we definitely are [interfering with private enterprise]. I make motion that we get out of the on-sale liquor business."

Ladewig pointed to a plan and elevation drawing on the wall. "We have a signed contract with an architect."

Block complained, "Something that has been passed by the council should not be revisited, not every council meeting. We have exposure with the architect and with FEMA. If we change, we'll only have 70-percent of the funding for another project, and you won't have a liquor store."

Johnson shot back that, given the annual revenue generated by liquor sales, it would be "a long time to come" before liquor revenues offset tax revenues needed to build a municipal center.

Ladewig replied, "A consultant report showed that the liquor store generated $450,000 in revenue between 2002-2006. That influenced our decision to move forward. That, and the fact that if we turned down FEMA money, we'd leave $250,000 on the table." The Mayor urged the council to envision the multipurpose building being designed to house the liquor store, clearly implying that if, in the future, through referendum or council decision, the City decided to get out of the liquor business, the new building could be easily reconfigured without structural modification. When asked by Dahl what such reconfiguration would cost, the Mayor replied, "Not much."

Chiglo explained that he would not be comfortable with using the liquor store for other than the stated purpose without first receiving FEMA's blessing. "We need an affirmative reply from FEMA or they could require us to reimburse the funds if the building is used for something else in the future."

"The money we would get for not building the liquor store could be used better elsewhere," said Johnson.

Block jumped-in again, "I don't believe the City is competing with anything. Municipal liquor store is the only bar in town. No bowling alley. No restaurant." He added that the recurring motion to reverse the decision to rebuild the liquor store was "not parliamentary." That led to a brief round-n-round about Robert's Rules of Order and the proper protocol for revisiting previous decisions.

Nancy Benson, who made the original motion to rebuild the liquor store, finally said, "I stand by my motion. The community benefits from the liquor store. Different people go to different places." Formalizing her statement, if a bit uncomfortably, Benson stated, "I disagree with Mr. Johnson."

Mayor Ladewig asked Johnson to repeat his motion. Johnson did. Dahl seconded. The council voted: Johnson-Dahl to get out of the on-sale business; Benson-Deering to remain in the on-sale business. Ladewig broke the tie with a vote to move forward as planned. "Motion failed," he said.

Flood Disaster Loans

The council then considered another dossier of "flood disaster business assistance loan" applications - Category-1, 90-10 forgivable loans - pre-approved by the EDA.

• Approved disaster loan to Roy's Small Engine, not to exceed $151,737.

• Approved Stumpy's Restaurant, not to exceed $469,136.

• Approved Ace Communications (only Rushford), not to exceed $650,000.

• Approved Rushford Chiropractic, not to exceed $23,600.

The council devoted considerable discussion to Category 1-A non-forgiveable, low-interest loans. State disaster aid, through DEED and the Minnesota Investment Fund, offer C-1-A loans to businesses wishing to expand-or-improve beyond pre-flood conditions.

When asked for overall financial details by Deering, who has lobbied from the beginning to retain 20-percent from the State grant to cover unanticipated long-term recovery needs, Block replied, "With these [applications], we're at $13.6-million out of $17-million. Of the 38-businesses who've not applied, I know of 8-for-sure that don't intend to apply, for whatever reason. There may be others who won't. We should be ok."

• The council approved a $169,412-loan to Johnson-James Properties. This loan will go toward rehabilitation of the former Tri-County Electric building, which the owners will use to house their Lefse business and unspecified "other" enterprises. In addition, the council approved a C-1 forgivable loan in the amount of $52,000 for damage to the existing Lefse building.

• The council further established a 1.5-percent interest rate for Johnson/James and all future C-1-A applicants able to provide property as collateral. For C-1-A applicants providing inventory and/or equipment as collateral, the council established an interest rate of 2.5-percent.

Other Business

• R-P superintendent Ehler thanked the City for supporting the school. The Mayor reciprocated.

• Joseph Co. extended to March-08 its bid to construct the new water treatment plant.

• AFSCME Treasurer-Secretary Kathy Zacher notified the City that Local 1944 union dues increased 01-Jan-08.

• Approved selection of the second-lowet bidder to furnish Rushford Ambulance with a demo-model 2007 Ford E-450, 4x4 from Med-Tech at a cost of $137,572. Justification for bidder selection: immediate availability, lifetime transferable warranty and on-site provision of maintenance and service.

• Approved a 3-percent COLA increase for non-union employees.

• Approved a Public Hearing to be held 28-Jan to discuss the proposed Small Cities Program Development Grant designed to assist both owner and renter-occupied housing rehab.

• Acknowledged $150-donation from St. Peter's Catholic School, Forest Lake, for Rushford Ambulance.

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