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Rochester council approves use of internal funds for DMC budget [Post-Bulletin, Rochester, Minn. :: ]
[February 11, 2014]

Rochester council approves use of internal funds for DMC budget [Post-Bulletin, Rochester, Minn. :: ]

(Post-Bulletin (Rochester, MN) Via Acquire Media NewsEdge) Feb. 11--The city of Rochester will use its internal cash reserves to finance the 2014 budget for Destination Medical Center planning and oversight.

The City Council met Monday in a committee of the whole meeting to discuss the matter. The strategy, suggested by city administrators and finance staff, will be a short-term solution and eventually will be replaced with long-term financing, they said. The city will bond to pay back the internal funds, with interest, and use local-option sales tax money and other financing tools then to pay back the debt from bonding.

City Administrator Steve Kvenvold said the city could, for example, borrow against its $23 million flood control fund, as long as the fund is fully paid back.

On Jan. 30, the DMC Corp. Board of Directors approved an $8.2 million budget to pay for planning activities and operations of the board and the DMC Economic Development Agency. The DMCC also authorized the EDA to begin negotiating contracts with consulting firms that will help create the overall DMC Development Plan. Consulting fees are expected to take up $6.5 million of the 2014 budget.

City officials have been discussing ways to finance the 2014 EDA/DMCC budget for about two months. They also have discussed how to come up with the city's $128 million match obligation over the next 20 years.

Rochester's local-option sales tax extension approved by voters in 2012 will raise $139.5 million for 10 projects, with $20 million dedicated to the DMC. However, City Council members and other city officials have said they believe the $20 million should be used for capital projects, not eaten up by consulting fees.

DMC law allows the City Council to either extend its half-cent sales tax time period or increase it by 0.25 percent to fund DMC public infrastructure projects. The city also can use tax increment financing, tax abatement and other financial tools to meet its $128 million match.

Kvenvold continues to recommend that the City Council increase the sales tax by 0.25 percent, and he had urged the council to act on it soon. However, on Monday he said he now believes the council should wait to make its decision until after the DMC Development Plan is completed. That is expected to happen late this year or in early 2015, EDA officials have said.

The city can count half of its DMC planning expenses toward its match obligation, but it is not allowed to use a DMC sales tax extension or increase to pay for planning expenses. That's what officials from the Minnesota Department of Employment and Economic Development recently told Rochester administrators.

The five City Council members present Monday -- Ed Hruska and Michael Wojcik were absent -- all agreed to authorize city staff to begin using internal cash funds to pay for the 2014 DMC budget. Wojcik said in an earlier interview with the Post-Bulletin that he agreed with the idea. A resolution will come forward to the council at its Feb. 19 meeting for final approval, Kvenvold said.

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