Dakota County is snapping up new stimulus bonds, even as Scott County can't figure out what to do with them.

Both south metro counties are pondering uses for millions of dollars of "recovery zone" bonds allocated to them through the federal stimulus act, meant to spur building and create jobs in distressed areas.

But while Dakota County is poised to offer $13.9 million in bonds for use on new senior housing projects and solicit plans for the issue of another $20.9 million, neighboring Scott County, with arguably more need, can't find a way to spend its share of the bonds.

The bonds, divided into two pots -- economic development bonds with a 45 percent interest subsidy that can be used for public purposes and tax-exempt facility bonds that can be issued by local governments on behalf of private developers -- must be issued by the end of 2010.

They are designed to help distressed areas, including those hit hardest by foreclosures and job losses. The much more populous Dakota County has more foreclosures than Scott does -- 774 sheriff's sales in the first six months of this year, to Scott's 397 -- but Scott's rate of foreclosures per residential parcel is higher.

Within Scott, the highest number of foreclosures has occurred in Shakopee over the past several years, but again the highest concentrations are elsewhere: in the more remote country towns such as Elko-New Market, Belle Plaine and Jordan.

The county's finance chief, Kevin Ellsworth, told a gathering of county leaders in early November that the county was in line for $4.4 million in economic development bonds and $6.6 million in facility bonds. There needed to be a "recovery zone" hit by some form of distress, he said.

He sought responses from cities and others by Dec. 4, but late last week reported that he hadn't heard anything since. If no county-level entity shows interest, he said, "I will recommend that the county board free up the authority and send it to the state for reallocation."

Shakopee Mayor John Schmitt said it doesn't appear to be a fit for that city. "I already have a million square feet of vacant commercial space here," he said, and doesn't want to pile any more on top of that.

"We have looked at them [the bonds]," said Dawn Meyer, finance director in Belle Plaine, "and if a project comes along that fits, we will definitely see if we can utilize them. As of now, we're not planning any extra projects in order to utilize them and we don't have anything on our plate."

One possibility, she said, is a much-discussed new public works facility, but "we're not far enough along with that project right now."

Joe Mathews, a policy analyst with the Association of Minnesota Counties, said scenarios like those in Scott County are popping up around the state as counties search for ways to use the bonds quickly.

Some counties received such small allocations that it's not worth the effort to issue bonds. Others have projects that could use bond funding, but either didn't get enough bond money allocated or can't meet timeline requirements.

Plans are being drawn up to pool the unused recovery bonds at the state level and redistribute them to cover projects selected through an application process.

But Dakota County commissioners were determined at a recent meeting to issue the bonds locally.

The $13.9 million in economic development bonds are bound for the Community Development Agency (CDA) to help pay for the senior housing projects -- one in Farmington, one in South St. Paul and another possibly located in Burnsville.

Mark Ulfers, executive director of the Dakota County CDA, said the recovery zone bonds "fit beautifully" into the agency's plans to issue bonds in 2010 for those buildings. "If you have a lower interest rate, you don't have to use as much of the income to pay the mortgage," Ulfers said.

The county's use of $20.9 million in facility bonds is unclear. The county staff will seek proposals and report back to the board in February.

"There's some counties out there that only got a few thousand dollars," Commissioner Kathleen Gaylord said. "Our allocation is large enough that we can do some good."

Commissioner Joseph Harris agreed and urged county staff to take the necessary time to find good projects for the bonds.

"This is almost $21 million and we're trying to shove it out the door in a couple months," Harris said. "I think we have to be careful and don't know that we need to rush it."

Katie Humphrey • 952-882-9056 David Peterson • 952-882-9023