Duluth City Council OKs trust fund spending on streetsA new face on the Duluth City Council led to a new outcome Monday night.
By: Peter Passi, Duluth News Tribune
A new face on the Duluth City Council led to a new outcome Monday night.
After the city administration had twice been denied authorization to use money from the Community Investment Trust to pay off about $2.2 million in bond debt for city road improvements, a reconstituted council reversed itself thanks to a swing vote cast by its newest member, Howie Hanson.
“I’ve spent hours and hours studying this issue,” said Hanson, who concluded that the city’s plan to tap the trust to retire debt makes sense.
“I think the city has been very prudent in working down its street debt,” he said.
Hanson replaced Councilor Garry Krause, who opposed drawing down the Community Investment Trust further. The trust had been funded with revenue from the Fond-Du-Luth Casino, but the balance has dwindled since the Fond du Lac Band of Lake Superior Chilppewa ceased making those payments, which a federal court and federal regulators have flagged as unjustified.
A super-majority of councilors is required to authorize expenditures from the trust, and Hanson provided the crucial final vote needed to approve the allocation in a 7-2 decision.
Voting against the transfer were Councilors Jay Fosle and Jim Stauber.
Councilors had been warned that failing to use the trust money would force the city to draw down its reserves instead, a move that Dave Montgomery, the city’s chief administrative officer, said could put Duluth’s credit rating at risk.
But Stauber said that argument isn’t borne out by reality.
“We’ve repeatedly been told that not approving this would cause the city’s bond rating to decline. But as all of you know, our bond rating improved after the council twice voted this down,” he said.
Just last week, Standard & Poor’s upgraded the city’s bond rating from AA- to AA.
But Councilor Sharla Gardner said she considers the improved rating evidence of support for the city’s strategy of paying down outstanding street debts from the trust fund while continuing to build an unrestricted general fund reserve. She said the city now is using a pay-as-you-go approach to paying for street improvements and has significantly pared down its debt.
Hanson successfully attached an amendment to the resolution the council passed Monday, requiring that any future settlement funds from ongoing casino litigation be used to replenish the Community Investment Trust. A recent court ruling found that while the city was not entitled to receive continued payments from casino operations, it was entitled to more than $10 million in back payments from the band. But the decision has been appealed, and the outcome of the case remains uncertain.
While the trust fund contained more than
$50 million when he joined the council, Stauber said Monday’s action will draw it down below $20 million.
“I assume the city will continue to spend it down until there isn’t any Community Investment Trust money left,” he said.