Virginia’s finances still affected by new bridge

Despite several attempts to recover a $5.4 funding gap for the Tom Rukavina Bridge, Virginia’s finances continue to suffer.

VIRGINIA — The City of Virginia’s available funds are at the lowest they have been in recent history due to the relocation of Highway 53 and its bridge construction project. The bridge was recently named the Tom Rukavina Memorial Bridge but it has not yet been dedicated.

The 1,100-foot-long bridge crosses the Rouchleau mine pit sitting 204 feet above ground level, making it the tallest bridge in the state. The Tom Rukavina Memorial Bridge opened in September 2017 after a lengthy process to reroute Highway 53 traffic to make way for Cleveland-Cliffs’ expansion of United Taconite.

“We knew that when the bridge was built we would have to get the water and sewer to Midway,” said Virginia Mayor Larry Cuffe in his office Thursday. “We planned to hang the lines under the bridge and put out for bids.”

As Cuffe explained, it is the city’s responsibility to provide utility services to Midway, which has about 350 homes and is part of Virginia.

During the 2015 special session, the Minnesota Legislature granted the city $19.2 million, of which $6.2 million would be used for the ATV and bike trail to run across the bridge.

When Virginia requested bids for the utility work, they came back around $11 milion which, with $2 milion in contingency, fit their remaining $13 million budget.

The state was responsible for funding the construction of the bridge and put out for bids and selected Kiewit, a Nebraska-based construction and engineering company. Kiewet upped the bid for the utility work to more than $18 million, which left the city on the hook for roughly $5.4 million.

In need of money, the city found itself taking out two loans from US Bank.

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The city gained approval for $5.4 million to use toward the bridge’s funding gap on the 2018 bonding bill, but that was vetoed by Gov. Dayton during his last months in office.

“We went three times to ask for bonding funds,” said Cuffe. “It was denied all three times.”

The city was responsible for repaying the loans they had to take out to temporarily cover the funding gap.

“While the loan was issued in July 2016, the loan was not repaid until November 2018, after the legislature shot down our request for reimbursement the third time,” City Administrator Britt See-Benes wrote in an email Thursday. “We paid the loan using monies from our checkbook and monies from the Investments (commonly called our ‘reserves’).”

The loan came due and the city had to pay the bank. “That creates a big issue for us,” Cuffe said. “It affects our budget and ability to bond.”

In early 2018, before the loan was repaid, the City of Virginia had $3.5 million in the reserve account. As of Thursday, the amount in the same account was $500,000.

Cuffe also noted that the state pushed to have the $5.4 million taken from this year’s state Department of Transportation budget. An addendum was added to bill HF 513 to name the bridge Tom Rukavina Memorial Bridge, after the local politician who recently died. The allocation of the funds were removed from the bill, while the naming of the bridge stayed. Funds were then budgeted from Local Government Aid (LGA) with the restriction of not being paid until 2021.

And now, funds provided via the LGA could affect future funding from the LGA to Virginia.

“In 2020 we will be returning to the legislature to try and get the money reallocated earlier to replenish our cash reserves,” Cuffe said.

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Beyond the loans, what has the city done due to the funding gap for the bridge project?

“After consulting with our financial bond counsel, the City chose to give itself an internal loan from the Sewer Fund,” See-Benes said. “On January 1, 2019, a $5.10 service fee was added to all utility accounts as a sewer service fee. A portion of the funds generated from this fee, $2.50, will be utilized to repay the City for funds expended on the Bridge Project with 2.5% interest. The remaining portion of the monthly fee is designated to repay the PFA loan for the Wastewater Plant.”

A $5.10 service fee was added to all Virginia utility users to offset costs. This fee is intended to be temporary, said Cuffe.

Reserves have also been used to pay payroll and city projects.

“We’ve taken steps on a financial basis to see how we can be more efficient while still providing the same level of services,” Cuffe said. “We’ve met with department heads and looked at long range plans to determine these steps...It has been successful, so far.”

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One example of Virginia’s effort toward efficiency has been the addition of new hires.

On Friday morning, there was a special city council meeting called with the item of “Authorize Hire of Two (2) Repair Crew Positions at Public Works” on the agenda. This item was approved by the council.

It was discovered that enough overtime was needed by current workers so as to justify adding these two positions.

“Nobody is being laid off,” Cuffe said, “and there are no adverse effects to job descriptions except less overtime.” He states that more efficiency is being added with these positions as two full time workers are being added at full pay versus current workers getting paid time-and-a-half for the same labor.

Cuffe stated that the structure to the workers schedule, without the unexpected overtime, will benefit employees.

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Finally, there has been a freeze put on any purchase of non-emergency capital equipment. Departments are also now required to have administration’s approval of purchases over a specified threshold, even if those are budgeted items.

Cuffe identified a major area of concern for the city is road and street repairs. This is an area of particular difficulty to find funds, as they cannot come from a state source such as the IRRRB, but is one of the top priorities of the citizens and city. However, there are some state aid roads that the state does provide funds to repair- but these funds cannot be used on residential roads.

A major project the city has managed not to be affected by their current financial issues is the remodel-reconstruction of the Miners. The legislature provided $12 million, that can only be used on this project.

“Tax payers of Virginia are already overburdened and we don’t need to add more taxes to them,” Cuffe said. Still, a revenue source was needed to provide the required matching funds. This has resulted in the sales tax of 1%.

This type of funding is not possible for road projects as they do not have an identified project with an end date.

“Our purpose is to be financially transparent in our budget for our citizens,” Cuffe said. “People have the right to live in a community that is healthy, safe and gives them the biggest bang for their buck.”

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