EDC reviews use of reserve funds
WILLMAR — Questions raised at a recent Willmar City Council meeting have prompted a review by the Kandiyohi County and City of Willmar Economic Development Commission of its reserve fund.
Members of the EDC operations board took a closer look Thursday at the organization’s $735,000 in reserves and how the money is designated.
The scrutiny “has been most helpful,” said Steve Renquist, executive director of the Economic Development Commission. “It has caused us to take a much more thorough look at the reserves.”
The reserve fund was questioned at a Willmar City Council meeting last week by Councilman Steve Ahmann, who said it was too large and should be returned to taxpayers in the form of a lower property tax levy by the EDC.
But closer examination suggests this is less feasible than it appears. Just over half of the reserve fund — $405,000 — was allocated to the EDC by Kandiyohi County when the organization’s forerunner, the Kandiyohi County Economic Development Finance Authority, was dissolved.
Some of these former county funds are specifically designated for the EDC’s revolving business loan fund and can only be spent for that purpose. And the entire $405,000 must be turned back to the county in the event the joint city-county Economic Development Commission is ever dissolved.
Frugal spending over the 10 years of the Economic Development Commission’s existence has helped the organization accumulate additional money in its reserves, Renquist said. “We just don’t spend the money unless there is a reason to.”
The EDC has managed to keep its property tax levy flat for four years in a row, using reserve funds to make up the balance of its annual budget, he said.
Renquist said auditors generally recommend that government entities set aside 50 percent of their annual budget in a reserve fund. Reserves that aren’t otherwise designated can be tapped into for unbudgeted expenses that may come up during the year — for example, a request by Burlington Northern Santa Fe two years ago to contribute $75,000 toward a feasibility study of a railroad bypass west of Willmar. That project was later tabled by the railroad but may be moving forward again and the EDC may once again be asked to financially support it, Renquist said.
The Economic Development Commission may in fact shift around some of its reserve funds following a request by the finance committee to boost the revolving loan fund by $200,000.
Members of the finance committee made the recommendation this month, saying it would allow the EDC to participate in larger loans and be more effective as a provider of gap financing to local businesses. Final action is pending while the staff looks at how to properly carry out and designate the transfer of funds.