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THE CITY REBORN FROM THE ASHES OF AMERICA'S MOST DISASTROUS FOREST FIRE
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City Debates Use Of $550,000 RLF Fund

Issue Date: March 28, 2019

In late December the final $100,000 grant needed to construct a fish viewing platform over the Peshtigo River in the City of Peshtigo was released by Wisconsin Coastal Management. In the process of filling out the necessary acceptance documents, Mayor Cathi Malke discovered that the city would be required to accept ownership of the concrete piers that will support it, which includes the cost of removing them if they ever have to be removed.

There is a slight possibility that could happen 17 years from now, when WPS needs to renew its dam permit with the Federal Energy Commission.

Concerned about burdening future taxpayers, Malke obtained quotes on costs of removing the piers, and found that the lowest estimate is in the neighborhood of $36,000. The first contractor gave a quote in the neighborhood of $200,000.

Malke wanted to set up provisions for future care and maintenance of the fish viewing platform, and that issue was discussed at the City Council meeting on Tuesday, March 5.

Also late last year the city had learned it would be receiving something of a windfall, in the form of a state/federal decision to close out its old Community Development Block Grant (CDBG) program that originated the Revolving Loan Fund (RLF) and turn the RLF money over to the city, apparently with no strings attached.

Since then, the RLF cash balance of $330,158 was received and placed in the city's General Fund. If kept separate the RLF account, which now belongs to the city, will grow over the years as outstanding loans (totaling $230,158 over and above the cash balance) are paid back, with interest.

At the March 5 City Council meeting there was talk of using a portion of the RLF money to set up a long-term maintenance account for the fish viewing platform. Council by unanimous vote asked the Finance Committee to look into the best use of the RLF funds. Alderman Mike Behnke, who had explained the special maintenance account proposal before making the motion, said later he thought the motion included provisions for financing the fish viewing platform maintenance fund, but it did not.

That issue was discussed at length on Tuesday, March 12 by the Finance Committee, which ultimately decided to seek input from the semi-independent RLF/UDAG Loan Committee before reaching a decision.

At a meeting on Thursday, March 21 UDAG/RLF members Daniel Seymour, Glenn Seyfert, Sandra Eklund, Thomas Maxwell, Jr. and Alderman Brigitte Schmidt, who chairs both the UDAG/RLF and Finance committees, spent an hour discussing how to handle the RLF money. Malke, Behnke and Clerk/Treasurer Tammy Kasal participated in that meeting in addition to the five committee members.

Malke had looked into opportunities to invest the money in interest bearing accounts, and she brought that information along.

Eventually, before going to closed session to discuss the only other agenda item - possible purchase of a property - they unanimously approved motions recommending that the city keep the RLF money in a special account under control of the RLF/UDAG Committee, and authorizing Schmidt and Kasal to invest $100,000 of the RLF money in an interest-bearing CD in a Marinette County Financial institution, separate from other city funds, and up to $150,000 into a Money market account at the best interest they can negotiate. Discussion indicated all committee members favor keeping the money invested locally.

Seymour noted if all payments on the RLF fund outstanding loans are paid on time, in addition to the cash they already have received, the fund will be getting another $3,000 each month to use as they see fit until October of 2022, and then nearly $800 a month until 2028. Other committee members agreed with his feeling they can invest some of the funds into the longer-term money market funds, for example three years at the better interest rates and continue using the fund to finance worthwhile ventures.

Before the next meeting, advice will be sought from City Attorney David Spangenberg and the city's audit firm on how the money should be handled and what it can be used for.

In discussion prior to the vote, Schmidt noted if the RLF money were placed in its UDAG account it would be subject to all the state and federal regulations and paperwork, but if kept in a separate account it is free of those restrictions.

Schmidt said she favors keeping the RLF money for economic growth, but added there has been talk about using it or other things in the city, including the fish viewing platform maintenance fund, and repeated, "I think we should keep it to loan out"but we can consider other ideas."

Behnke agreed the fund should be separate, "but I think we should come up with some rules or guidelines for using it. This is for everybody, to benefit the city of Peshtigo and its citizens, not just a single business.

"I want to respect the uses intended and where it came from" Schmidt repeated. She said she wants them to be able to make the business loans without the restrictions of UDAG.

Seymour felt the RLF should be used for loans to businesses. He said if the loans are all paid back the fund will never run out, but commented they have lost some really big money on loans over the years.

Maxwell suggested using it to reduce water and sewer fees . "I get angry every time they go up," he declared. He said reducing those fees would help the entire city, businesses and private residents, and in that way would also aid in economic growth by making the city a better place to locate a business.

Seymour, who also serves on the city's Water and Sewer Utility committee, said the PCS actually regulates what they charge for water, but not sewer. He felt they could not reduce sewer rates right now, but could prevent them from going up again two years from now by paying off some of the loans now. The sewer utility has two loans outstanding with the UDAG fund, both at 1 percent interest. One with a balance of $214,926 is being paid off at $8,548.52 quarterly, and the other with a $262,548 balance, is being paid off at $5,390.61 quarterly.

Schmidt repeated her contention that she wants to respect where the money came from.

Malke said there are other ways to promote economic growth than loaning money to businesses, and said she would like to spend some of it to promote the city, both as a business site and as a tourist destination. She said the fish platform is also a tourist attraction that would economically help the city.

"By setting up the fish viewing platform account , that money wouldn't really be spent," declared Behnke. "The money would just stay there, so it is there if the pillars need to come down in 20 or 40 years. Until then, it would sit in a bank at compound interest." He added if it is never needed for the pillars, it sill still be there for other purposes.

Malke repeated her concerns about burdening future taxpayers. She said until she received the final grant documents for the fish viewing platform she had not actually considered ownership of the concrete support pillars. She asked Spangenberg for help in filling out the papers, and he asked her who owned the pillars. They found BPM was the owner, but was willing to donate them to the city. However, it would be all or nothing. If the city didn't take the pillars BPM would not donate the other property involved.

After realizing the need to take responsibility for those pillars, Malke said she might not have signed the final loan documents and accepted the pillars had she not been under the belief, based on discussion at the council meeting, that the long term care account was going to be set up for them.

Behnke agreed with Malke that they should not put a burden on future generation, and drew several comments of agreement.

"You've done an incredible job of keeping taxes low," Seyfert commented. He felt it wouldn't hurt the RLF account to put some of it away for the pillar care and maintenance account.

"Putting money away for this is a drop in the bucket compared to how much we've lost on defaulted loans over the years," Seymour remarked. He and Behnke both said the platform is a tourist attraction and the people who live in Peshtigo also want it.

Maxwell suggested developing some suggestions on how the money could be used, and developing a sort of ballot with options to help them find out what the public wants done with the money. He wondered if they could get it done for the April 2 election, but everyone felt not, and there were comments that people who were not involved would not know all the issues connected with one solution or another.

Behnke said the city could certainly benefit from it, "We've been operating without a contingency fund for years, and need to borrow whenever we want to buy something."

There was talk of a property tax reduction us, which led to questions about what percentage of the property tax bill goes to the city. No one had an immediate answer, but everyone agreed it is a small percentage. Most of the tax money goes to the schools. Several committee members commented on how low Peshtigo's taxes are compared to the services provided.

Seymour said the Water Utility is always in need of costly investments. Seyfert noted Marinette's water bills went up 43 percent two years ago. Malke said Peshtigo had only sought a 1 percent hike last time, but PSC made them increase the rate by 3 percent.

After more talk of possible uses of the money and rules for using it, Eklund commented, "Based on what I'm hearing, we want a flexible fund with a committee that will consider every request. "I don't think you can write regulations that cover everything, but it needs to be available to spend for anything."

Behnke agreed, and also agreed with statements that it has to be used responsibly.

Maxwell again suggested taking steps to cut water/sewer rates now and in the future. He said if they use the RLF money to pay off the UDAG loans they will pay less interest now and get better rates for future borrowing by both the city and the utility. "We have $1.2 million in UDAG to loan out for businesses," he said. Others commented they wanted to be able to give loans without all the UDAG regulations.

Schmidt got back to the idea of polling the public for their preference. Most felt everyone would vote for lower taxes now, not in the future.

Schmidt said they need to be careful how money is obtained and spent because it can affect levy limits.

"I don't think any of these would be negative," Maxwell said of the options they had been discussing, ""it's just different types of positive outcomes."

Schmidt said she wanted to hear from the attorney and auditor before finalizing things, and also wanted to look into other things, like programs for low-cost home improvement loans, or improving blighted areas.

Everyone agreed they will get some input on those issues. They then approved the motions to keep the fund separate and under their supervision, and to invest some of the money now so it begins earning interest.

Malke repeated her hope that they will set up the fish platform account. "I signed that paper work after discussion at the Council meeting and now we're committed," she declared. "I really would like to see that future maintenance money in a separate account."

Seyfert suggested they could invest some of the money and set some aside as an interest bearing endowment account for the fish viewing platform. There appeared to be agreement that that discussion will come up again in the very near future.

History of the RLF fund dates back to 1974, when the federal government established a Community Development Block Grant (CDBG) program to help communities provide decent housing, suitable living environments, and expanded economic opportunities, (mainly job preservation and creation) that were intended to mainly benefit persons of low and moderate income.

Peshtigo took advantage of that program to help several local businesses, including Badger Paper Mills, Inc. to either locate or expand in the city. In accord with terms of the CDBG program, money from the grants was loaned to the businesses at low interest rates. As the loans were repaid that money came back to the Revolving Loan Fund (RLF) which was established to supervise its use and provide low interest loans to other businesses.

The CDBG-related funds, as well as money from the Urban Development Action Grant (UDAG) program, are handled in Peshtigo by the UDAG/RLF Committee that was set up for that purpose, under the supervision of the Council's Finance Committee. Currently Peshtigo's RLF Fund has $226,690.31 in outstanding loans and a cash balance of $330,158.33.

The federal government is closing the CDBG program. In Wisconsin that close-out is being administered by the Wisconsin Department of Administration's (DOA) Bureau of Community Development in a phase-out process know as CLOSE. Marinette County has been discussing using part of its CLOSE money to fund handicap access and possibly other improvements at spots on its waterfall tour.

Some CDBG recipients must go through a complicated process to close out their RLF accounts, but because Peshtigo has received no grants through the CDBG program since 1992 that did not apply. The DOA simply turned over the $330,158 RLF cash balance to the city, and it appears that legally they can do what they want with it. It is temporarily in the city's general fund.

As the RLF loans are repaid that money too, both principal and interest, will go back into the account. Outstanding loans total $226,690. Payoff date for the largest outstanding loan, with a balance of $94,370 at 3 percent interest, is due in October of 2022. The last loan, with a balance of $65,031 at 2.5 percent interest, is to be paid off in April of 2031.


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