WILLMAR -- Bethesda Health and Housing is asking the city of Willmar to act as a conduit to issue tax-exempt bonds to finance construction of an expansion project at Bethesda's senior care facilities.
State law allows a governmental unit to issue municipal securities to finance a project to be used by a third party, either a for-profit entity engaged in private enterprise or a nonprofit corporation. The security for this type of financing, called conduit financing, is customarily the credit of the borrower or pledged revenues from the project financed, rather than the credit of the issuer. Such securities do not constitute general obligations of the governmental unit because the borrower is liable for generating the pledged revenue.
City Finance Director Steve Okins says a borrower can obtain a little better interest rate on the bonds by using conduit financing.
Bethesda, a nonprofit corporation, is proposing to construct a 29,845-square-foot addition for an adult day care center, a wellness and therapy center with an aquatic therapy feature, and new and remodeled resident rooms. The project is estimated at $8.5 million. Total amount of conduit financing being requested is not more than $8 million, according to a Bethesda proposal.
The City Council on Monday night approved a Finance Committee recommendation to support the concept of issuing the bonds and set June 15 as the date for a public hearing to formally consider the proposal.
In other business, the council discussed proposed City Charter changes that would remove the council's authority over the operation and maintenance of the city utilities. Another change would direct the utility's general manager to make quarterly reports to the City Council on issues and developments facing the utility.
The changes are among six changes being proposed by the Municipal Utilities Commission for the Charter Commission to consider. Any changes recommended by the Charter Commission to the City Council require a unanimous council vote or a vote of the people.
The discussion came up as the council prepared to approve the minutes of the May 26 meeting when the utility commission approved the proposed charter changes.
Council members Jim Dokken and Bruce DeBlieck expressed concerns about the changes.
Councilman Steve Ahmann said he is not opposed to change, but wondered who would be held accountable. "Right now, we're held accountable as elected officials,'' he said.
Mayor Les Heitke said the Charter Commission has not taken any action on the utility commission's recommendations. "They're still gathering information, and the action will come later with the discussions,'' Heitke said.
He said the council would lose its authority over the operation of the utilities commission if the changes were adopted. The changes could have some significant implications and might affect the utility's annual payment to the city budget. He said the $1.7 million payment is the city's second-largest funding stream behind Local Government Aid, which he said Gov. Tim Pawlenty could cut to balance the state's budget.
"I believe it's important that the City Council maintain control over (the utility payment). If we had no control over the commission, they could in effect whether they would or not say we're no longer going to pay that to the city. If they said that, then the city would have a $1.7 million hole in its annual budget and where would that be made up?'' Heitke asked.
"I would hate to lose control over the funding stream that the city has put in place from the utilities back to the city of Willmar. That is one benefit of the city owning its own utilities,'' he said.
The council then approved the utility commission minutes.