In Farmington, development bonding bill comes due

The Vermillion River Crossings development in Farmington has been a looming albatross for several years that came home to roost during this year's budget deliberations.

The city sold $5.5 million in bonds in 2006 for Crossings infrastructure improvements that city fathers expected would be repaid with development fees and assessments. But only a McDonald's and a medical clinic were built, generating far less than needed to cover ballooning bond payments this year.

The Crossings debt "has a huge impact on the budget," said Todd Larson, mayor for two years. "The previous council set it up" -- with costs kept low initially, then escalating debt payments -- "and thought it would be built up by now," Larson said. He noted that legal wrangling between the site owner and the initial developer delayed the project, and then the recession hit. "Nobody expected this. We gambled and we lost," Larson said.

The tab is a $509,572 ongoing levy for Crossings bond payments -- sold to cover utilities, roads and a $3 million bridge carrying Spruce Street over the Vermillion River. The levy tab is about the same amount city officials are trying to trim from the $6 million general fund levy, Larson said.

To balance the budget, the City Council in September approved cuts of $400,000, about half of that from eliminating three jobs, said new city Finance Director Teresa Walters. The council could cut an additional position on Nov. 8, when it discusses trimming another $100,000 or so, the mayor said.

The Crossings area is mostly wetlands and grassy fields, with the thin Vermillion River winding across the southern edge of the 60-acre site in the southwest corner of Farmington.

The east-side entry is marked by a decorative brick archway bearing the city's name; it sits across the Spruce Street bridge from a new asphalt bike trail. The brick marker is a half-mile east from the 2-year-old City Hall in the old downtown area.

Officials see a glimmer of hope next year. The Dakota County Community Development Agency has sold bonds to build a 66-unit senior housing complex in the spring, said agency Executive Director Mark Ulfers. He expects to let bids by winter. "That will help create some rooftops that will bring [business] people in," said City Administrator Peter Herlofsky. "It could be a chance for a restaurant."

He noted the city is competing for new businesses in a slow economy with closer-in suburbs like nearby Apple Valley. "We are the next jumping out spot. It's just a matter of when they come," Herlofsky said.

The Crossings bond payments ballooned to $713,000 this year, but the council was able to cover more than $200,000 of that with unexpected increased payments received from the metro area's property tax sharing system, Walters said. That left the $509,572 to be paid by a property tax levy, she said.

The Crossings levy, plus the $733,700 debt service for the nearly $10 million City Hall and public works garage, account for almost half the city's $2.6 million debt levy next year.

Cutting another $100,000 next week will be tough, said Mayor Larson. The staff has recommended trims without additional layoffs. Larson noted one possibility would be cutting the city's spring curbside pickup. It has cost more than $100,000.