Bond of $2,045,000 to be paid over 20 years

By Robert Williams

Editor

The biggest item on last week’s city council meeting in Frazee was the approval of the downtown infill financing—the approval of issuing approximately $2 million in taxable general obligation tax abatement bonds to complete the building’s construction and allow two signed lesees to move in and open for business and open the fourth stall to be leased.

Originally, the building was a $1 million project, but design errors done by Goldmark Design Development in 2021, specifically, providing enough water and power to the building have created an ongoing increase in costs due to continued construction.

The plans were eventually approved by an Economic Development Authority (EDA) board that consisted of many different faces than today’s board and a different city administrator. 

Resident Bob Ostermann spoke during Wednesday’s open forum on the actions of that board and did not mince words on how he believes such projects should be approved in the future.

Ostermann’s opening comment was one most of the taxpayers within the city limits want to know.

“Has anybody figured out who is going to be involved in paying for it and how much it will cost us, each one? What’s it going to cost me over 20 years?,” Ostermann said.

The bonds are on a 20-year payment plan and Mayor Mike Sharp and financial consultant Jason Murray of David Drown & Associates both responded to the inquiry.

While the payments have been estimated at the city-level, they have not been determined exactly on how much it will affect an individual taxpayer.

“As far as you as an individual taxpayer, I can’t answer that, as far as the city as a whole, we’ve looked at that,” said Sharp.

There are legitimate reasons why the individual taxpayer amounts are not currently available given fluctuating variables still in play. The proposed bond amount is currently $2,045,000, according to Murray. 

Murray presented a highly detailed breakdown on the borrowing to the EDA in late March and reiterated some of those points later in the meeting on Wednesday during the public hearing on the bond.

“The trigger last month that we approved, we approved some cushion just in case there was still some process and some jump in interest rates, we were concerned about some of that but right now the target borrowing is going to be around $2 million, $2,045,000,” said Murray. “Again, as part of this tax abatement we have to go through and select properties in the city portion of the taxes that equal the annual principal portion of the bond payment.”

There were 136 parcels listed in that selection.

“No ill will comes of those parcels; it’s just a procedural process to borrow those funds,” Murray said. “As the mayor indicated, it’s spread over just like any other levy. It’s spread over all parcels of the city. The abatement does select properties and pledges taxes from those properties, but at the end of the day, it is just a paper pledge. The levy is spread over all parts of the city.”

While the borrowing amount is set and the interest rate is currently known, the building’s operation is the one caveat, according to Murray, that can ease the amount that will be shouldered by taxpayers.

“At this point in time the building is up so we need to just get it performing because at the end of the day revenues from that building can reduce that annual levy pledge toward this debt service,” he said. “We just need to get it financially performing where we can use as much of those revenues from that building to drive down this levy. On the portion of this bond, we’re pledging about $175,000 in annual debt service per year that ultimately is an abatement but we try to reduce that as much as we can from that levy. Based on what we know today, over the next three-to-four years, it’s potentially going to be $20,000-$80,000 based on just those three spaces leased. The variable is getting that other one leased and then controlling cost as much as we can. It’s going to be very important that both the EDA and City ultimately, as this project moves forward, work on controlling those costs as much as we can.”

The interior construction project is currently delayed while awaiting the state’s approval to begin plumbing construction planned to fit two new businesses that operate with commercial kitchens.

Ostermann also questioned the tax-paying status of EDA members that signed off on the building at the time and if they would be assisting in paying back the bond.

“Everyone who owns property in the city would end up having to contribute to the bond payment,” said Sharp.

Ostermann continued wanting specifics on the formation of the EDA and what authority they have.

“To me, there are a lot of things happening in this town that EDA or whoever—they come up with an idea, they just run with it and away it goes,” he said. “If it’s going to come down to the people paying I think the people should have more say, especially on a big project like that in the future.”

Ostermann questioned the approval process of the city council over the EDA.

The two are separate entities with the EDA having two members of city council as liaisons on the EDA board.

“It was primarily an EDA project,” Sharp said. “Certainly, council was aware of what was going on. It wasn’t like they were operating in the dark. We get monthly updates from the EDA on where things are at. But it was an EDA project.”

“I think a lot of people on the EDA back then probably were working in the dark,” said Ostermann. “You look at that building. That’s a disgrace. I don’t know who was all involved or what steps. Somebody should have stepped in and said, ‘This ain’t right,’ whether it was the architect or engineering, the construction people that did it themselves.” 

Councilman Mark Kemper addressed this issue at length during the April 9 council meeting.

“This is just my opinion, but before something like this goes forward again and the city getting stuck for a building the EDA does not get to make a decision if we’re going to build or not,” Kemper said. “It’s a council decision. The money comes from the city and now the city is stuck with this building. We’re going to end up paying for it and the residents of Frazee are paying for it and that’s the bad part.”

Ostermann continued discussing portions of the building he knows were designed and then constructed in a less than perfect manner.

“I mean, good God, ADA—that’s been out there for how many years?” said Ostermann. 

The Americans with Disabilities Act (ADA) requires most businesses and facilities to provide reasonable access and accommodation for all disabled customers, clients, and members of the public. The ADA Standards for Accessible Design cover newly constructed buildings and facilities, alterations, making architectural changes in existing state and local government buildings to provide “program access,” and removing architectural barriers that are easily accomplishable without much difficulty or expense in existing buildings of businesses. The ADA provides specific accessibility standards for building design, construction, and alteration projects undertaken by entities covered under Title II (state and local governments) and Title III (public accommodations and commercial facilities).

“Anyone of those people should have known that that’s now proper,” said Ostermann. “It just seems like somebody comes up with an idea and whether they know what they’re doing or not it just goes through and then we end up paying for it. To me, it makes no sense. Just the accessibility on that building is ridiculous. One corner of the building, the front, right-hand corner, is the only place somebody that would have any difficulty walking or picking up their feet would have access to that building.”

Ostermann closed with a final comment on the actions of the EDA.

“What’s done is done, but in the future there’s got to be more control of what’s going on,” said Ostermann. “You can’t get yourself in a mess like that, a $2 million dollar mess. If you’re going to be on a committee working with stuff like that you’ve got to know what you’re doing or else don’t do it.”

Donations

The Frazee Rescue Department received $11,500 in donations: $10,000 from Burlington Township; $1,000 from the Town of Evergreen; $500 from Hobart Township.

Legislature

City Administrator Stephanie Poegel reported on a senate tax bill in discussion that will cut Local Government Aid (LGA) to cities. The bill, in its current state, would cut approximately $20,000 to Frazee. Mayor Mike Sharp reached out to Senator Utke and others explaining the impact on Frazee and encouraged them to look for other ways to balance the state budget.

Personnel

Small changes to the language were made to the job descriptions of the Rescue Chief, Rescue Assistant Chief and Deputy City Clerk.

The city’s regular hours of operation will be set by the department head and the city administrator.

The Conflict of Interest policy was updated as required to qualify for future grants.

Wannigan Park

According to Poegel, the state signed off on a grant to pay for construction of the two-mile-long, 10-feet-wide asphalt trail that will run through the whole park, with a connection to the Heartland Trail. Design is completed. The council approved the project going to bid in May and likely opening in June.

There is no financial commitment needed from the city. Frazee Community Development Corporation (FCDC) is committed to $24,000.