The Duluth City Council delayed a vote Monday on paying off some street improvement debt when the method of payment drew fire from two council members.
City administration proposed paying down about $3 million, to bring the city's outstanding street improvement debt to about $13 million.
"This is sort of like your scheduled mortgage payment," said David Montgomery, Duluth's chief administrative officer, in characterizing the proposed financial transfer detailed in a council resolution Monday.
But City Councilor Jim Stauber objected to taking funds from the city's Community Investment Trust to make the debt payment. He said that when the trust was established, only interest from the trust fund was supposed to be used to cover bond payments for street improvements, leaving the principal intact, as a nest egg. But four years ago, the city started drawing down the trust, as it switched to a pay-as-you-go approach to paying for street projects.
Stauber noted that the trust balance has steadily declined from about $57 million in 2009 to a proposed $21 million if the latest payment is authorized.
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"We're spending down our goose that laid the golden egg," he said.
The trust fund had received funding in the past from a revenue-sharing agreement with the Fond-Du-Luth Casino. But the Fond du Lac Band of Lake Superior Chippewa stopped making payments to the city in 2009, resulting in a protracted legal battle.
Montgomery predicted the city should have some resolution to the case in early fall or winter. If the city prevails, he said Duluth could collect about $15 million in back payments.
But Montgomery said the city's not taking victory for granted.
"We are working on alternatives to fund the street program, while, on a parallel path, we're also working toward some form of resolution with the band."
Regardless, Montgomery said he would advise against drawing down the trust any lower than the $21 million now proposed. He said that any further reductions in the fund could put the city's credit rating at risk.
City Councilor Jennifer Julsrud joined Stauber in opposing the transfer from the trust fund.
"I would like to see the council more actively involved in a discussion about the Street Improvement Program, and how we will pay this debt down. So I will be voting against this, as well," she said.
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The council needed seven votes to pass the resolution, and with Councilor Garry Krause absent Monday night, it would not have been able to achieve that threshold.
Councilor Jay Fosle moved to table the resolution until a full council could take up the matter, and his motion passed 7-1, with Stauber alone in his dissent.
