Facing financial challenges, the Cook County – Grand Marais Economic Development Authority (EDA) took a hard look at its budget on Tuesday, December 10, 2013 and decided layoffs were in order for Superior National at Lutsen (SNL) over the winter months. The EDA also passed a motion not to renew the 2014 contract for Community Fundraising Solutions, its housing administrator.
Golf course budget and bonding
The discussion followed the presentation of a draft 2014 budget by SNL General Manager Bob Fenwick.
Fenwick said he estimated 16,500 rounds (less than the 25,000 rounds in 2013) and extrapolated revenue from that. Fenwick said that he is estimating revenue of $935,180. After expenses he estimates a net of $141,430 for 2014.
Fenwick and the EDA board went through the budget, discussing line items. Fenwick said there are costs for grounds that were not included, such as seeding on the renovated part of the course. Fenwick said that should be part of construction costs and should be covered by the 1 percent sales tax allocated to Superior National.
Fenwick said he and EDA Treasurer Scott Harrison had been working with Bruce Kimmel of Ehlers and Associates both on paying off the existing golf course revenue bonds and on new bonds for the new construction. They noted that $141,430 net revenue will not be enough to cover the golf course’s debt service, so paying off the current bonds and getting a good rate on the new bonding is very important. Harrison said the new bonds would be for approximately $1.9 million. The payment on the new bonds should be about $155,000, less than the current bond payment of $182,000, so the golf course should see a savings of $27,000.
The men said savings on the bonds will help the golf course’s financial status, but Harrison said he is concerned that there is no mechanism in place for the golf course to repay its $175,000 loan to the EDA, so in turn there is no way for the EDA to repay its loan to the county for that amount.
Harrison said that the golf course is looking at three “tough” years. He said not just the first year of construction with only 18 holes in service, but the following years as construction continues.
Fenwick said, “I’m not discounting that it will be tough for two years, but it is important to have a vision of what the golf course will be.”
Golf course layoffs
EDA Chair Mark Sandbo asked if there is anything the EDA can do now to alleviate the current financial situation. He said the EDA should consider layoffs at the golf course. The only people on staff at this time are Golf Course Manager Fenwick, Golf Pro Greg Leland, Grounds Superintendent Mike Davies, and Equipment Maintenance Specialist Jim Zunker. Harrison said he would like to consider layoffs of three individuals—Fenwick, Leland and Davies. He said Zunker needs to remain on staff to keep the equipment going.
Harrison said the layoffs would reduce the EDA budget by $60,000 – $70,000. He also said, “It sends a signal to those watching over us and to ourselves that we need to find a way to make some significant reductions.”
As Golf Course Manager Fenwick waited, there was discussion of when the layoff would be in effect and when people would be hired back on. May 1 was contemplated, but EDA Board Member Bob Spry asked if that would be soon enough. It was agreed to keep the layoffs on the EDA agenda, to be considered each month so the individuals could be brought back on staff as needed. A unanimous motion passed, with EDA Board Member Heidi Doo-Kirk absent, to lay off those three individuals effective January 1, 2014.
EDA Board Member Hal Greenwood said, “It’s a tough decision, but we owe money and we have to pay it back. We have to show that we are prudent commissioners and not popular commissioners.”
Greenwood asked who would handle the bonding process. Scott Harrison said Bob Tofte will be handling the bonding work. Fenwick said, “Construction is an ongoing thing. There will be some questions and discussions regarding construction costs and what can be manipulated. There will be things that I’ll just have to handle.”
Fenwick left the EDA meeting then, telling the board, “Let me know if there is anything you need from me before the first of the year then.”
Later in the meeting, the board discussed what it should do for the day-to-day questions at SNL. Chair Sandbo asked Treasurer Scott Harrison if he could be the contact person for the golf course. Harrison said yes, it would probably be good to appoint him interim manager. A motion passed, with Harrison abstaining, to assign the SNL general manager duties to Harrison during the period of the layoffs.
“With zero compensation,” stressed Greenwood.
Housing administrator contract on hold
Nancy Grabko of Community Fundraising Solutions (CFS), the EDA housing program administrator, gave an update on the EDA’s grant application to the Small Cities Development Program (SCDP). She said the total of the grant application was $614,625. If received, Grabko said, the EDA will receive $63,000 in reimbursement for administration of the grant.
Grabko also said if the grant is received, there may be a requirement to do a housing survey and there will be some advertising. She said she would rather not have to wait until the January EDA meeting to proceed and asked for authorization to make those expenditures—approximately $300 – $500—if the grant comes through. The board directed Grabko to proceed, contingent on receipt of the grant.
Harrison asked the status of current housing projects. Grabko said there is a balance of about $40,000 in housing rehab funds and $53,000 in commercial rehabs pending. The funds have all been committed and the projects are under way. There is some roofing work that cannot be completed until spring. Grabko said about $9,000 in reimbursable administration funds will be coming to the EDA housing program when those projects are completed.
Grabko distributed a copy of a proposed agreement for CFS housing program services for 2014. The contract lists the services CFS would provide for a lump sum of $72,000, of which $64,000 would be paid from EDA levy funds and the remainder contingent on the EDA securing reimbursable administrative fees. Since it did not make it into the board packet prior to the meeting, the board said it would review it and make a decision at the January meeting.
After Grabko left and the EDA board began discussing its budget, Harrison suggested that the personnel committee review the CFS contract. Harrison said that it seems that the EDA is shifting its focus from housing rehabilitations to affordable housing projects, so changes could possibly be made to the CFS contract. He said he wants to look carefully at that and talk to CFS about that transition and to give them a chance to offer a proposal for affordable housing.
Greenwood agreed, reiterating that the EDA has to be prudent. “We have to watch the budget. We can’t do everything. We’re not Santa Claus and we can’t fix the chimney so he can give everyone a present,” he said. Board Member Bob Spry noted that if the EDA is not going to renew the CFS contract that decision needs to be made before the end of the year. A unanimous motion passed to not renew the contract.
Sandbo will contact Nancy Grabko of CFS to discuss how they will proceed. Don Davison said it needs to be clear that the EDA does want to continue to work with CFS in some manner.
In other EDA matters:
. In his update, Superior National at Lutsen Manager Fenwick said the contractor working on the renovation of the golf course left the week after Thanksgiving. He said they accomplished more than expected. One question when they left was how the Lake Superior Water District pipeline would affect the golf course. The golf course and water line engineers met and were able to work things out. Fenwick said it looks like there may be some savings because some irrigation materials may be able to be reused. Fenwick said the golf course opening in the spring is very much contingent on the completion of the pipeline work.
. Abby Tofte reminded the board that it had talked about establishing a recycling program at the golf course. Scott Harrison said the golf course needs to begin recycling, as it doesn’t send a good message when the trash bins are full.
. Scott Harrison asked if the EDA could share its office space with the Cook County Chamber in 2014. He said this would help the chamber and would also mean that there would be someone in the EDA office to greet people. The chamber would have a person in the office at least halftime. The EDA board agreed that it would be a good idea. Harrison will work out the details with Jim Boyd, the chamber director.
. Higher Ed Business Development representative Pat Campanaro returned to the EDA to once again ask for $500 in financial support to offer a “Profit Mastery” workshop in Cook County in January or February. She would like funding to provide scholarships for small businesses that wish to attend. The course fee is $299. Last month the EDA asked Campanaro to work with Higher Ed Director Paula Sundet Wolf to see if there was funding that could be used from the EDA scholarship fund. Sundet Wolf has informed Campanaro that there are no extra funds. Harrison said this is important work and made a motion to donate $500 to the workshop. The motion passed unanimously.
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