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County, housing agency to break ties? (03/12/2014)
By Chris Rogers
The Winona County Board discussed a plan that would give commissioners the power to withdraw from the Southeast Minnesota Multi-county Housing and Redevelopment Authority (SEMMCHRA) this week. Concerns about a lack of local control over the agency, and its past financial blunders, drove support from commissioners Steve Jacob and Greg Olson to request special legislation to allow the county to pull out of the inter-county partnership.

Member counties across Southeast Minnesota supply SEMMCHRA with funding and, in turn, the agency helps provide low-income and elderly housing, leveraging federal programs like Section 8 housing.

Withdrawing from the inter-county partnership is not that easy, however. Member counties need approval from the SEMMCHRA board to leave. Dodge County has not contributed to the agency for years and has failed twice to get permission to leave. Now, Dodge County is seeking special legislation to get out. A proposal from Winona County Administrator Duane Hebert suggested that Winona County could piggyback on Dodge County's effort, and that would give the board a choice about whether to stay in SEMMCHRA or establish an independent Housing and Redevelopment Authority.

Commissioners Wayne Valentine and Marcia Ward, who serves on the SEMMCHRA Board, said they were surprised to see this proposal suddenly appear on the board agenda. Hebert explained that with the legislature in a short session, time was of the essence.

Jacob supported the idea. "Whether we do withdraw or not, just because we could, could make SEMMCHRA reconsider their relationship with us," he said. "In any business relationship I've been in in my lifetime, [the relationship] has to be beneficial to both parties and both parties have to be willing. If they're not, it's not the healthiest that it could be," he added.

"I'm just curious where all this came from," said SEMMCHRA Director Joe Wheeler. "I thought our relationship in Winona County was well," he continued. Dodge County refuses to be involved, but the whole point of SEMMCHRA was to save counties money by combining resources, he said. There may be larger legal ramifications from an attempt to leave like this, he suggested. He told commissioners that SEMMCHRA is likely to "lobby strongly" against this legislation.

Wheeler also noted that SEMMCHRA does have the ability to withhold Section 8 funding in uncooperative counties. "I don't want to threaten, but that's what we were talking to other counties about," he said.

Wheeler also contended that there was an avenue for getting out of SEMMCHRA, asking the SEMMCHRA board. However, Ward noted in an interview that the SEMMCHRA Board was unlikely to give Winona County permission to leave if it requested it, because the agency needs partners to spread out its costs. She is the only Winona County commissioner on the board, and there are only three elected county commissioners total, though other elected city leaders also serve along with county-appointed citizens. The lack of elected representatives is somewhat problematic, Ward acknowledged.

In an interview, Wheeler said there is a reason getting out of SEMMCHRA is not easy. "Politics change," he said, but SEMMCHRA has to run long-term projects. The process for leaving helps protect those long-term projects from short-term political shifts in county representation.

"Your anxiety with this really makes me uncomfortable," Jacob told Wheeler. "It's a situation where we're willing participants or if we're forced participants. That sends up a red flag for me. I want to be a willing participant."

SEMMCHRA may have made some mistakes in the past, but it still provides many valuable services, from housing to weatherization, Ward said. Plus, at the moment, they control federal funding for subsidized housing in the area, she noted.

While there have been successes, there is also a history of conflict over funding between Winona County and SEMMCHRA. In 2006, the county first agreed to $152,000 in taxes for the housing agency in its preliminary levy, then reduced the number to $100,000 in its final levy. Wheeler, however, proceeded to file paperwork to receive $152,000 and claimed the county's initial pledge was legally binding. County commissioners balked at the move, and state authorities sided with them. "Take what you get and be happy with it. We're being pushed into this," Ward said at the time.

Meanwhile, business at South Fork Development, the SEMMCHRA subdivision in St. Charles, was slow. South Fork opened 38 lots for homes. Unlike many SEMMCHRA projects, the buyers of the homes did not receive a direct subsidy from the federal or state government. Ward said that SEMMCHRA offered rates for the homes close to what private developers might charge. The plan was for revenues from South Fork to help fund future projects, and to use the taxes generated from the new homes at South Fork to pay back the debt-financed project over years. However, few lots sold. Then the housing crisis came. Now, there are roughly 12 empty lots left in the first phase, according to Wheeler.

The South Fork failure and resulting debt burden contributed to a financial crisis for SEMMCHRA in 2009, when the agency asked Winona County for help. Winona County was and is required to pay $25,000 per year towards the project. Wheeler asked the County Board for another $50,000. The board asked SEMMCHRA to make internal budget cuts to help salvage its finances. The housing agency offered to freeze salaries for its employees, saving $17,000. That did not sway county commissioners. They questioned whether the project would ever succeed and whether the county should bail out what they deemed a speculative business venture. "You seem bent on acquisition, and that's easy to do with taxpayer money," Winona County commissioner Jim Pomeroy said of the agency at the time.

South Fork may still be a long way from being paid off. According to county staff, SEMMCHRA has been paying interest only on the South Fork debt for years. Wheeler said that there have been several sales in the past 15 months, there are only 12 or so lots left in the first phase of South Fork, and things are improving for the project.

Even if the county were to withdraw from SEMMCHRA, it would still be required to help pay for South Fork. Wheeler said that an agreement over bond payments would have to be reached if the county were to leave SEMMCHRA.

"As you wind these projects [like South Fork] down, after these are wound down, do you plan to speculate on land in the future?" Pomeroy asked Wheeler at this week's meeting.

"No," Wheeler said. Perhaps there is a place for projects like this, despite the risk, but not without strong local support, he added.

"I'm comfortable with your comments in regard to wholesale land development in the future," Pomeroy later responded. He, Valentine, and Ward supported a motion to table the special legislation request and ask for legal review of the proposal.

County Attorney Karin Sonneman announced that she had a conflict of interest. Her husband is the attorney for SEMMCHRA. However, she said, she could arrange special counsel from Olmsted County. 


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