County starts steps to qualify for economic stimulus
New Richmond made the first pitch for a portion of St. Croix County's allocation of federal economic stimulus subsidies intended to help municipalities pay for building or infrastructure projects.
But the county's highway department is eyeing some of the subsidy to help catch up on lagging road work. Other departments and municipalities may also want part of the limited assistance.
Last week St. Croix's finance committee voted to recommend that the county board designate the entire county a Recovery Zone, which is the first step toward qualifying for the assistance.
St. Croix has been allocated $3.36 million in Recovery Zone Economic Development Bonds, taxable bonds that provide municipalities with a federal subsidy equal to 45 percent of the interest cost for qualified projects.
While the subsidy won't directly pay for projects, it will cut the cost of borrowing money to finance them.
New Richmond is asking to use $1.2 million of the county's allocation.
City government representative said obtaining the subsidy would save New Richmond $74,000 compared to the next borrowing alternative.
This taxable debt is more attractive to lenders and the municipality gets the federal subsidy, resulting in a much lower effective interest rate, said Sean Lentz, a financial advisor for the city.
If the county doesn't intend to use the Recovery Zone Economic Development Bonds, it should give its allocation to someone who does, said Joe Murray, a vice president with Springsted, the firm that advises the county on bonding matters.
If the allocation isn't used by the end of 2010, it will no longer be available.
Lentz said plans for the city shop are nearly complete. Construction could begin next spring.
"It's still a zero sum game," said Finance Committee Chairman Daryl Standafer, who has been skeptical of economic stimulus programs in general. "We're not creating new money, we're just shifting it around."
The stimulus money as well as county revenue all comes from taxpayers, he said.
Hudson city Finance Director Betty Caruso said her city is also interested in using some of the bonds.
"Is this an allocation the county wants to use itself?" asked Administrative Coordinator Chuck Whiting. He said the county hasn't completed its 2010 budget and may want to borrow for road work, other building projects or new computer software.
This is the cheapest money the county can get, agreed Murray.
He warned that it may not be in the county's best interest to allocate the subsidy on a first-come-first-served basis because better projects may come in later or the county may want the subsidy itself.
But, said Murray, he's uncomfortable with telling New Richmond to wait to see what other requests are received.
When reached by phone the next day, Highway Commissioner Tim Ramberg said his department has been opposed to borrowing to pay for road work, but now it seems apparent that it can't keep up with maintenance any other way.
"We can't afford to take any more hits," said Ramberg of decreased funding. "Our roads can't take that."
Though no firm plan has been developed, he is tentatively suggesting using some of the recovery zone bonds to start catching up with maintenance, followed by other limited-term borrowing.
By using borrowed money to catch up and implementing "a steady low increase" in tax levy money that goes to highway projects, the county could get caught up with maintenance on its roads, said Ramberg.