The Clinton Herald, Clinton, Iowa

December 2, 2013

Council juggling debt as it looks toward railpark

By Katie Dahlstrom
The Clinton Herald

CLINTON — Clinton County expects $6 million from the city of Clinton in the next six years either in sale proceeds from the Lincolnway Railport or some other city funds, raising some concerns over the city's ability to repay its debt associated with the industrial park.  

The county pledged $6 million to the development of the Lincolnway Railport through a 2009 28E agreement under the condition the city repay it after 10 years. The agreement states proceeds from land sales will be split between the city and the county until the county is repaid its $6 million.

Since the agreement was made, German rail tie manufacturer RAIL.ONE and Nevada Rail Materials have moved into the rail and industrial park. The sale price for the 26.8 acres that went to RAIL.ONE was $1.1 million and the county stands to receive around $400,000 from the sale, which will chip away at the $6 million.

The city will receive less than the county after the Clinton County Board of Supervisors decided $171,250 in sewer, demolition and well allowances along with roadway engineering and roadway construction are the city's responsibilities.  

The decision was made after several discussions concerning what "sale proceeds" means as it was not clearly defined in the 28E agreement. Now the county would like to amend the agreement for clarity's sake so sale proceeds are defined as the gross sale proceeds minus abstract expenses, sale legal expenses, recording fees, property tax prorate, platting expenses, land and/or easement expenses as part of the sale and any other expenses mutually agreed upon by the two governing bodies.  

The Clinton City Council during its Committee of the Whole meeting last week agreed to the proposed amendment.  

Sale proceeds from NRM have yet to be negotiated.  

The 2009 agreement also states if the land sales haven't produced enough money to repay the $6 million loan, the city will be responsible for the remaining balance.

The prospect of not being able to pay the county back with sale proceeds paired with the city's financial straits concerned At-large Councilwoman Jennifer Graf.  

"We're not realizing any funds from the past sale. We haven't done our responsibility in putting set aside funds to meet that obligation in 2019," Graf said, suggesting the city needs to exercise due diligence to shore up the railpark fund in the event that property isn't sold in time to repay the county. "I'm concerned we're saddling an incoming council, as we were saddled, with financial issues that they may have to try figure out what they're going to have to do to reach the obligation that was made in 2009."

City Administrator Jessica Kinser reminded council members the city's railpark fund is more than $2 million in the red and although the sale proceeds from RAIL.ONE and NRM will bring the fund closer to a positive balance, the city still has a ways to go.  

"We ourselves are not whole related to anything yet so it's very difficult to talk about how do you make the county whole in 2019, 2018 when we have a lot of work internally to do," Kinser said.

Other looming expenses for the railport include creating a unified water supply and more land purchases. The city has two more land purchases scheduled, one in 2014 for an estimated $725,000 and another in 2016 for roughly $607,480. These two purchases will be paid for using a urban renewal bond, adding more debt to the area.  

After those sales are complete, the city will own 259 acres in the railport.

"Conceivably when all the land is sold it could generate something in the area of $9 million. So there would be enough money from land sale, potentially, to pay off the county's $6 million loan without having to worry about where that money would come from," said attorney Jonh Frey, who is acting as the city's special counsel for the railport sales.   

The impact of selling land in the railport does more than just add money to the railport fund, Mayor Mark Vulich pointed out.  

"One thing to keep in mind, we talk about if we have the land sales. If we have land sales, that most likely means we have development coming. If land sells, we have development, we have jobs, then we also have most likely buildings, which means taxations, which means TIF can kick in and we have increment financing to take care of some of this money," Vulich said. "A lot of things have to fall into place unfortunately, but a land sale would indicate development out there."  

"Meanwhile the clock ticks," Graf responded.