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County Board surprised by St. Charles loan (08/13/2014)
By Chris Rogers
The Winona County Board declined to take action on the city of St. Charles' request for $100,000 and a 20-year $1 million loan to finance a new fire department and ambulance service building in St. Charles at an interest rate less than half of what private banks would charge. The project would also include a renovation to convert the current fire department station into a backup dispatch center for the county to use in the event that a disaster struck the law enforcement center in Winona. St. Charles leaders were anxious to get the County Board's approval in order to begin promoting the debt project among voters in advance of a November referendum, but commissioners were broadsided by the request, which they said they had never heard of before.

"I have to apologize," commissioner Jim Pomeroy told St. Charles City Administrator Nick Koverman. "You probably thought that we were all up to speed on this. We weren't."

Commissioner Wayne Valentine said, "I think there was some assumption that we knew more about this, that we were kept in the loop about this, and we weren't."

St. Charles leaders had been in discussion with Winona County staff, led by former county administrator Duane Hebert, for nearly a year developing the proposal. Apparently, the first the board had seen on the specific proposal was in the meeting's agenda distributed late last week. The board was asked to approve the proposal as soon as possible so that St. Charles officials could begin marketing for the referendum.

At the board meeting, Koverman shared an email exchange he had with Hebert in March. Koverman asked Hebert if he had any news on the county's support of the building project; Hebert replied, "The issue of carrying approximately half of the project on a loan/bond purchase basis was discussed briefly at yesterday's County Board strategic planning session. I heard no concerns from commissioners on this agreement and the county's financial condition would allow the county to participate in this way."

After seeing the email, County Board Chair Marcia Ward apologized that St. Charles leaders may have been misled by the former administrator. In an interview afterward, she said that at the March meeting, Hebert had briefly asked if board supported the concept of a backup dispatch center, but did not mention anything about a new fire station or a $1 million loan. Also in an interview, commissioner Steve Jacob said he did not remember hearing anything about the St. Charles project and added, "It's in my district, so I would have been paying close attention to that." The Winona Post was unable to review recordings of the March meeting before it went to press, but notes from the meeting did not include a discussion of the St. Charles loan proposal.

"I think somewhere along the way there was perhaps a misrepresentation of the financial flexibility or the financial muscle of Winona County," Jacob told Koverman at the meeting. He added, "I'll do everything I can to support the $100,000 for [the backup dispatch center]. I think that's our duty here. As far as the loan, maybe there's something we can do between one million and zero."

The county's financial condition might not allow the county to finance the project without raising the levy or changing county policy on cash reserves, Pomeroy said. He stated that by making such a loan, the county might risk cash flow reserves dropping below the minimum balance set by County Board policy: 50 percent of annual revenues.

Ward nodded, adding, "We'd be putting ourselves at risk." Referencing the troubled Southfork housing project in St. Charles, which suffered years of financial woe, Ward noted that the long-term investments made today could affect future Winona County boards for decades to come.

The County Board agreed by consensus that it needed more information before making a decision on whether and how to support the St. Charles project.

Ward said that the fire and ambulance building would certainly be a huge benefit to the residents served by the facility, but questioned whether taxpayers from the entire county should help finance the project. She suggested that St. Charles probe other potential sources of funds, as well, such as grant programs and charging more for townships served by the St. Charles Fire Department.

Pomeroy suggested that St. Charles officials could begin advertising that the project has an opportunity for discounted financing through the county.

The St. Charles proposal requested a 1.5 percent interest rate on the loan. That is slightly higher than the 1.35 precent the county is currently earning on investments, because per board policy the county may only lock up its funds in three-year investments. The proposed rate is probably far less than what St. Charles could get from a bank, though, said Mike Bubany, St. Charles financial consultant. Asked for the going rate, he said a recent 30-year loan he coordinated for a city with a similar credit rating was financed for 3.9 percent interest. Since St. Charles intended to seek a shorter loan, he imagined the interest for the project in the free market would be slightly less than that. 


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