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EDC looking for swift end to conflicts, controversy over funding

WILLMAR — The joint powers board of the Kandiyohi County and City of Willmar Economic Development Commission sought to bring an end Thursday to controversies over the EDC’s reserve fund and allegations of conflicts of interest.

“I hope we’re done having to defend the EDC,” Denis Anderson, chairman of the joint powers board, said after a discussion that lasted for more than an hour.

The criticism has dogged the Economic Development Commission for at least three months.

Critics have charged that the organization maintains an excessive reserve fund while turning to the taxpayers to fund its staff and programs. Allegations also surfaced last month that two members of the joint operating board may have had conflicts of interest when they voted to recommend renewal of a year-long lease for the EDC’s office space.

Legal and financial reviews have uncovered no direct evidence of any wrongdoing in either case, a finding that was reiterated Thursday to the joint powers board.

But it led to clarification on how to manage the reserve fund and an agreement by the board to designate the funds more specifically, as well as prompting a reminder about avoiding potential conflicts of interest during votes.

Of approximately $780,000 sitting in the EDC’s reserve fund, approximately half is encumbered, mainly in the form of revolving loan funds and a tourism development fund, explained Jim Ruff, accountant and financial adviser to the Economic Development Commission.

“Yes, it’s your money to be used for your endeavors, but it’s restricted as to purpose,” he said.

The remainder, $350,000, represents the unrestricted reserves over which the EDC has spending discretion. The amount is somewhat over half of the EDC’s annual budget this year of $513,000, consistent with Minnesota State Auditor recommendations calling for a reserve of 35 to 50 percent of the operating budget for entities that, like the Economic Development Commission, rely on property tax payments twice a year for the bulk of their revenue.

Although state statutes provide some direction, they don’t specifically address how much money a political subdivision or local government entity is allowed to have in its reserve fund.

Nevertheless, the joint powers board voted Thursday to specifically designate $50,000 in reserves this year and $50,000 next year to cover budget shortfalls. The use of reserve funds is already built into the 2014 budget, but the board’s action Thursday formalizes this and places an official designation on the money.

It brings the unrestricted reserves down to $250,000, an amount that board member Jim Butterfield said is “not in excess at all.”

Ruff also helped clarify the source of the restricted revolving loan funds, which critics said was lacking in documentation.

“There’s a fairly good history of minutes and there’s a fairly good history of money going in and out,” he said, adding that at least two of the fund’s direct installments are “very traceable.”

Although they declined to mete out any discipline over alleged conflicts of interest by operating board members, members of the joint powers board emphasized the need to remain ethical.

The EDC’s legal counsel found no cause to believe anyone on the board directly benefited from a recommendation last fall to renew a lease at Centre Place last fall for EDC office space.

Joint powers board member Steve Ahmann called it a gray area, however, and urged all board members to strictly follow state statutes prohibiting conflicts of interest.

Even the perception of a potential conflict of interest can damage the public’s trust, he said. “The best thing to do is stay out of it.”

Anne Polta

Anne Polta covers health care, business/economic development and general assignment. Her HealthBeat blog can be found at Follow her on Twitter at @AnnePolta.

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