EDA Director Matt Geretschlaeger
A meeting to discuss the fiscal troubles of the Cook County – Grand Marais Economic Development Authority (EDA) was held on Tuesday, January 26, 2010. No immediate solution to the EDA’s financial woes was found and another meeting was planned to bring EDA stakeholders together to decide the future of the organization.
EDA Chair Mike Littfin called the meeting to order and said frankly, “To be honest, I’m a little lost as to where we should go.”
EDA Treasurer Jim Hall said the EDA checking account balance is $2,912. The board reviewed outstanding bills and obligations— including payroll for Director Matt Geretschlaeger and repayment of a $31,000 loan from Cook County— and noted that its debt was much more than its cash on hand. Geretschlaeger suggested arranging a monthly payment schedule for the EDA’s insurance. That lessened the immediate financial burden, but the EDA is still facing a shortfall in the long term.
The EDA has yet to receive the $100,000 Iron Range Resources grant funding. Hall said the money had been released to the township of Lutsen, which was acting as fiscal agent for the grant, so the EDA would be receiving the money soon. However, that money repays a loan to the city of Grand Marais and will not help the EDA fulfill its other obligations. Later in the meeting it was noted that the EDA will still owe the city interest on the loan.
Director Geretschlaeger said another check yet to arrive from IRR for $135,000 will also be going to the city. The IRR grant was originally for a sewer lift station for the Sawtooth Cottages residential development— a project abandoned when it was deemed not financially feasible. The EDA sought—and received—approval to use the money to pay the $1.6 million bond issued by the city for infrastructure in the Cedar Grove Business Park. Geretschlaeger said a bond payment of $41,000 was scheduled for August 2010; $32,000 for February 2011; and $32,000 in August 2011, which will be covered by the IRR funding.
Coverage of the bond payments alleviates some of the city’s concerns, but leaves the EDA in debt. Geretschlaeger said, “We have more invoices than funds and that will be the situation for some time. Do you want to carry on? Do we stay in business?”
Hall asked about the EDA’s wetland credits, another potential revenue source. Assessment of those wetland credits is underway and could improve the EDA’s financial situation. However, the evaluation first creates another expense—probably $1,500 in transaction fees. Littfin also noted that although the wetland credits are valuable, they may not be sold immediately since development throughout the region is down.
Geretschlaeger distributed a list titled “present workload.” Among other things on the list is Cedar Grove Business Park (negotiations with the contractor and engineer over MPCA fines and developing lot prices and marketing); the 2009 audit now underway; a cost-benefit analysis with UM-Crookston; the housing program, with EDA serving as project inspector; golf course employment contracts; the G&G Septic lot purchase proposal; a proposed three-plex development; and more.
The board also reviewed the latest draft of the 2010 budget. Board Member Bruce Martinson said the EDA appears to be facing a $42,756 deficit in the coming year.
Scott Harrison, of Lutsen Resort and a member of the Lutsen-Tofte Tourism Association, reminded the EDA board of the existence of the Minnesota Association of Governments Investing in Counties (MAGIC) fund, which the EDA has invested in. He said the MAGIC fund is intended to be backup if the EDA has difficulty meeting its bond obligations. He asked if that money could be used to meet some of the EDA’s Superior National at Lutsen golf course expenses. The board asked Geretschlaeger to research the MAGIC fund balance and to find out how it can be used.
Geretschlaeger said he would do that, but again, it does not solve the immediate financial problem. He suggested that the board has two options— close the door or develop some sort of voucher system promising to pay the director when it can.
Board Member Jan Sivertson suggested that instead of delaying the director’s payment, the EDA should figure out what revenue it will eventually be receiving and seek a loan for that amount. Sivertson pointed to the workload list and asked what would happen to those projects if the EDA closed its doors. Martinson said, “Some of the tasks would go to the city. The board would have to take on more.”
City Administrator Mike Roth said the city would not be willing to take on these tasks. He added that the situation appeared to be a cash-flow problem, not a long-term structural budget issue.
From the audience, Scott Harrison disagreed. He noted that it will be four years before the Superior National at Lutsen bonds will be paid. He said the net working capital allocated to Superior National golf course has declined by about $40,000 every year. He said marketing of the golf course has also declined. “The golf course is a $50,000 – $100,000 drain. That’s not short-term. There’s a four-year problem here. Thisis structural,” said Harrison.
Roth repeated the question asked throughout the meeting, “So it goes back to this—how can this office work without staff?”
It was agreed that the EDA needs its director, but there was no agreement about how the director would be funded. Board Member Don Davison summed up the board’s frustration. “We have no independent way of raising any money. We are under the city and county. They would never look at planning and zoning or the highway department and say, ‘You’re on your own.’ I think we need to go back to the city and county and say we need a band-aid for this.”
Harrison suggested a three-way meeting between the stakeholders—the EDA, the city, and the county. Littfin agreed, “There are multiple parties at risk here. I don’t know what to do if we can’t come to some sort of resolution with everyone involved. The other alternative is to close doors and divide resources. I don’t think anyone wants that.”
Commissioner Bob Fenwick also agreed. “You can’t make this decision by yourself. No one can do this unilaterally.”
It was decided to set up a committee with two representatives from each entity to work toward some sort of decision regarding the future of the EDA. Fenwick and Martinson will serve as the county representatives. Littfin and Hall will serve as the EDA representatives, with the two city representatives to be named by that board.
Davison said, “This was good discussion. It’s as bad as I thought it was, but we needed to know what we are looking at. We needed to document this.”
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