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Meadow Star Dairy seeks tax exempt bonds through Kandiyohi County

WILLMAR -- Developers of a 9,590-head dairy operation are seeking up to $20 million in low-interest municipal industrial development revenue bonds to help build the large dairy west of Willmar.

If approved, Kandiyohi County would serve as a conduit for the tax-exempt financing for Meadow Star Dairy LLP.

The business, which will be built in St. John's Township by Pennock, intends to use the low-interest money to pay for the solid waste component of the project, like storage and application of animal manure.

The county would bear no "moral or legal" obligation to repay the bonds, said County Administrator Larry Kleindl on Tuesday during the County Board meeting.

The county would "lend its name" to the financing without "any liability" of payments, wrote Carolyn Drude, executive vice president of Ehlers, the county's bond consultant, in a letter. "All obligations for payments would belong to Meadow Star Dairy LLP."

The bonds would present no financial risk to the county, Kleindl said, but would be a tool the county can use to "assist with economic development."

Having a local government obtain bonds for a business is a "financing technique" that's been used for many years, said James Stewart, an attorney from Fargo, N.D., who is representing Meadow Star Dairy. "It allows the county to act as a conduit for financing to benefit a private company," Stewart told the commissioners.

Kandiyohi County has never participated in this kind of an arrangement before.

Swift County used the same kind of bonds to assist East Dublin Dairy LLP, another large dairy located southwest of Kerkhoven.

Stewart said there are only limited private business projects that are eligible for municipal industrial development revenue bonds. Solid waste projects are included, he said.

Bonds obtained by the county on behalf of a business are put into a trust and administered by a trustee.

"There is no liability to the county," said Stewart. "Under state law there is no risk to the county."

All costs associated with obtaining the bonds, including consulting and legal fees the county requires, will all be covered by Meadow Star Dairy.

The commissioners approved a resolution to hold a public hearing at 10:30 a.m. Jan. 6 to discuss the request. It will be the first of many "hoops" the dairy will have to undertake before the bonds are given final approval, Stewart said.

In October the commissioners approved a conditional use permit for the dairy.

On Monday, the Planning Commission will discuss a request by St. John's Township to consider amending the county's zoning ordinance to allow multi-unit dwellings in an ag preservation district.

According to the agenda for the meeting, the discussion will include amending the ordinance to allow housing for up to 40 employees for livestock facilities, such as Meadow Star Dairy.

When the Meadow Star developers first presented their proposal during a public hearing this fall, it did not include plans for on-site housing for employees.

During a brief interview Tuesday, Nate Hultgren, one of the developers, said the future and "face" of agriculture is changing and amending the county's housing ordinance would be a "commonsense" change for the county to make.

If housing is allowed, he said the company would build what he called an attractive one-story unit.

The current ordinance would allow numerous mobile homes to be grouped together in a 40-acre spot, but Hultgren said that's not an option the community would like to see. "Nobody wants to see that," he said.

Carolyn Lange

A reporter for 35 years, Carolyn Lange covers regional news with the West Central Tribune.

(320) 894-9750