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Cottage Grove scraps plans to bond for City Hall expense

The Cottage Grove City Council last week scrapped plans to seek general obligation capital improvement bonds to repay an interfund loan that financed the $14.99 million City Hall project after City Finance Director Robin Roland cited a lack of time to complete that type of financing.

Last week's regular council meeting was set to be a public hearing regarding the issuance of general obligation bonds, but due to a clerical error an official notice of the public hearing was not published on time, forcing the city to either reschedule the hearing or forgo bonding all together. The council, in a 4-1 vote, decided the latter.

"I walked into this meeting thinking this was just a snafu and we would continue to move forward," said council member Derrick Lehrke, who was the dissenting vote. "The point (of the G.O. bond) was, if we decided to go through with this, it would leave us with another tool in our tool bag."

The general obligation bonds, Roland told the council, would require repayment to the city's four funds -- water, sewer, closed debt and closed construction -- that were tapped to finance the municipal project. Because the bond is backed by a full faith in credit of the city, Roland added, future city councils would be responsible for repayment.

Under state law, the city has 18 months after the completion of the building to request state bonding, a move that would erase interfund loan debt and provide financial flexibility during upcoming budget planning. But with the deadline for preliminary budget proposals due in early September, Roland said there isn't enough to time reschedule a public hearing or, if a reverse referendum is again triggered, hold a special election.

"If we are going to do these bonds we would need assurance that we are going to be able to," Roland said, stating that a reverse referendum would quash any chance of bond issuance.

Mayor Myron Bailey agreed, stating "too much risk" to move forward with seeking general obligation bonds.

A similar bonding plan was proposed prior to the building's construction, but the city switched the financing plan after citizens gathered enough names on a petition to trigger a referendum on the financing.

Council member Justin Olsen, who was absent during the June 19 meeting when the council unanimously approved setting a public hearing date, said cash is cheaper than a bond.

"I have spent time examining various options along with city staff and we felt confident in the plan that was to utilize cash reserves to pay ourselves back with a 1 percent interest rate," he said. "Unless someone is giving bonds away for free, cash is always cheaper."

Lehrke said he was disappointed that the council voted to rescind its decision calling for a public hearing, stating "it's not going to cost a penny" to hear what citizens might have said.

"I'm not willing to wait to find out until mid-September and then frankly, we'd be rushing (during budget planning)," Bailey said. "There are other options. This is just one of many out there. It makes sense that we continue to move forward on the same path."