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Stalled project hurts city's budget

Like a recurring nightmare, the long delayed Vermillion River Crossings development is haunting the Farmington City Council once again.

Originally proposed to be a commercial development that would bring a hotel, a "big box" anchor and multiple stores to the site just south of County Road 50, the project has more or less ceased to be.

The infrastructure is in place, but the businesses that were supposed to pay for it are not.

That means the city council is facing a pretty big problem - to the tune of more than $700,000 - when it comes to planning the 2011 city budget.

In 2006, the Farmington City Council issued $5.5 million in bonds to cover the extension of Spruce Street into Vermillion River Crossing and a reconstruction project in the Hill Dee neighborhood. Five years later, the city of Farmington needs to plan for a ballooned payment of $723,091 in order to keep up with the payments on that bond.

That means that somehow, the Farmington City Council has to come up with levy increase of $645,891 over last year in order to address this one financial need.

What happened?

At the time, the Vermillion River Crossing project was supposed to go ahead. New business there was supposed to generate assessment payments that would have then been used to pay back the Vermillion River Crossing's portion of the annual bond payments.

But that didn't happen. By 2008, the city started to lean on prepayments in assessments, which in turn reduced the amount that was levied to pay the debt service payment. Previous councils continued to levy close to the same amount every year, counting on the construction that still hasn't. Eventually, that plan backfired.

"In 2009 and 2010, they didn't levy enough to cover the bond payments, so we've gone into the negative," Farmington finance director Teresa Walters said. "Our balloon payment is increasing dramatically, so not only do we have to make up the negative from the previous two years, but also the amount of the payment."


Last year, the city of Farmington allocated $77,200 of its debt service fund levy to the 2006 bond. In order to bring that bond back into the black, they must levy $723,091 in 2011.

That means council members have a lot to think about these days. Besides trying to fine-tune the general fund levy and budget for 2011 - they heard from city department leaders on what could or could not be slivered from the budget during a workshop Monday night - the current council has to figure out how to cover that bond payment.

Walters left council with three options, all of which include transferring $300,000 from the city's capital acquisition fund. That would mean the police vehicles that were supposed to be covered by the capital acquisition fund can no longer be purchased this year.

From there, the options include levying for the remaining $296,000 deficit and increasing the debt payment; levy for the increase of the debt payment, borrow the $269,000 from another fund and levy to pay that back at a 3 percent increase over 10 years; or levy for a portion of the increase in the debt payment, borrow the deficit and remaining portion of the payment from another fund, then levy to pay back the higher debt balance owed to the other fund.

Admittedly, all three options sound confusing, Walters said, and all come with pros and cons. It's up to the Farmington City Council to decide which option is best.

Other factors

Though Walters provided a preliminary budget proposal to council members earlier this month, she cautions against getting too attached to the numbers it holds, simply because there are too many things that will change before the actual preliminary levy is set.

Besides the Vermillion River Crossing/Hill Dee bond, there are two additional bonds on the books the coming year - the Walnut Street reconstruction and the Schmitz-Maki Ice Arena projects add $250,000 in levy to the debt service fund.

"Really, we haven't even reached a formal proposal yet. We're at stands right now. I know this isn't anywhere near where it's going to be," she said of the early budget documentation.

The next budget workshop will be held Aug. 23. At that time, council members are expected to come forward with some decisions on what they would like to see in the actual preliminary 2011 budget and levy.

Michelle Leonard

Michelle Leonard joined the Woodbury Bulletin staff in November, 2014, after 14 years covering news for the Bulletin's sister publication, the Farmington Rosemount Independent Town Pages.  Michelle earned her Bachelor of Science degree in Mass Communications: News-Editorial from Mankato State University in 1991. She is an active member of the American Legion Auxiliary Clifford Larson Unit 189 of Farmington, and served as the 2014-15 Third District President to the American Legion Auxiliary Department of Minnesota. Michelle is also the volunteer coordinator for the Minnesota Newspaper Museum which is open annually during the Minnesota State Fair. She has earned Minnesota Newspaper Association awards in Investigative Reporting, Local News Coverage, Feature Photography and Column Writing. 

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