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Home My WebLink About9A Transferring Residual Fund Balances to EDACITY COUNCIL AGENDA REPORT MEETING DATE: MARCH 7, 2011 AGENDA #: 9A PREPARED BY: JERILYN ERICKSON, FINANCE DIRECTOR PRESENTED BY: JERILYN ERICKSON, FINANCE DIRECTOR AGENDA ITEM: CONSIDER APPROVAL OF A RESOLUTION TRANSFERING RESIDUAL FUND BALANCES AND OTHER RESOURCES TO THE ECONOMIC DEVELOPMENT AUTHORITY SPECIAL REVENUE FUND DISCUSSION: Introduction The purpose of this agenda item is to ask the City Council to consider approval of a resolution that authorizes Staff to transfer the residual balances of following three funds as well as resources identified in the 2011 General Fund budget to the Economic Development Authority Special Revenue Fund: Economic Development Federal Revolving Loan Fund Economic Development Minnesota Revolving Loan Fund Downtown Redevelopment Fund History The Economic Development Federal and Minnesota Revolving Loan Funds were created to account for the proceeds of economic development grants received either from the federal government or the State of Minnesota to provide seed money for a revolving loan account. The purpose was to provide economic incentive for new business expansion within the community. The Federal Revolving Loan Fund has had no activity other than interest earnings since 1999. The Minnesota Revolving Loan Fund has had no activity other than interest earnings and investment market value adjustments since 2007. The Downtown Redevelopment Fund was created to provide development assistance for exterior building improvements for downtown businesses in an effort to revitalize and renew business activity and the general appearance of the downtown business district. The Downtown Redevelopment Fund has had no activity other than interest earnings and investment market value adjustments since 2005. In 2010, three priorities were incorporated into the 2030 Vision and Strategic Plan. One of those three priorities was Economic Development. The bylaws of the Economic Development Authority were updated and the structure of the governing body was changed to reflect the desire to tap into additional business expertise within the community. The 2011 General Fund budget includes approximately $55,000 in new resources available for economic development. Even though the resources were detailed as personnel expenses in the budget, the Council would decide at some future date how the resources should be used. The Economic Development Authority held its organizational meeting on February 10, 2011. One of the agenda items was establishing a 2011 budget. Any budget adopted by the EDA must also be approved by the City Council. Currently, the EDA has about $102,000 in the Economic Development Authority Special Revenue Fund. Current Circumstances The EDA is in the process of establishing a strategic plan for economic development in the City of Prior Lake which will be integrated into the 2030 Vision and Strategic Plan. A part of this process will also be identifying the financial resources and tools that will be necessary to accomplish their objectives. The EDA will be adopting a budget for 2011 at one of their upcoming meetings. Currently, the EDA has approximately $102,000 in available resources. The City Council has previously discussed the possibility of transferring funds from other economic development - related funds to the EDA as a means of providing seed money for economic development initiatives. In addition, the City Council could consider transferring the $55,000 that was identified as new economic development resources in the 2011 General Fund budget to the EDA, as well. The following table shows the new economic development resources available in the 2011 General Fund budget and the preliminary 2010 yearend cash balances for each of the economic development - related funds: General Fund —Economic Development new 2011 resources Economic Development Federal Revolving Loan Fund (Fund 250) Economic Development Minnesota Revolving Loan Fund (Fund 255) Downtown Redevelopment Fund (Fund 256) Subtotal Economic Development Authority Special Revenue Fund (Fund 240) Total Available Resources $ 55,000.00 105,609.09 82,010.97 38,425.86 $ 281,045.92 101, 966.94 $ 383,012.86 If the City Council were to authorize a transfer of funds to the Economic Development Authority Special Revenue Fund, the EDA would have approximately $383,000 in financial resources available for economic development initiatives. ISSUES: Upon transfer of some or all of the resources identified above, the Economic Development Authority would be able to use those resources for economic development initiatives within the constraints of the budget established by the EDA and subsequently approved by the City Council. The EDA must follow the City's purchasing policy guidelines. The City Council could elect to transfer only a portion of the above funds to the EDA initially, or until the Council has received a list of objectives to be accomplished by the EDA. Such action would assure that funding would be available from these sources for a longer period of time since once transferred, the EDA has full discretion with regard to the use of the funds. FINANCIAL If the City Council approves the transfer of residual balances from the IMPACT: above - identified funds, Staff would recommend making this transfer effective 12/31/2010. The funds would then be closed as of 12/31/2010 and they would not be shown on future financial reports. If the City Council approves the transfer of the $55,000 that was identified as new economic development resources in the 2011 General Fund budget to the EDA, Staff would recommend making this transfer effective 03/07/2011. The transfer of residual fund balances is a one -time event. Once those resources have been spent, they are gone and would need to be replaced with other funding sources if the EDA anticipates having ongoing expenses. The availability and sources of future economic development resources has not been discussed by the City Council or the Economic Development Authority. Some considerations may be as follows; 1. Transfer of General Fund reserves; 2. Transfer from General Fund tax levy; 3. Economic Development Authority tax levy, and 4. Bonds issued by the Economic Development Authority (with the approval of the City Council.) ALTERNATIVES: 1. Approval of a resolution authorizing the transfer of residual fund balances and other resources to the Economic Development Authority. 2. Deny this agenda item for a specific reason and provide staff with direction. 3. Defer this item to a certain date in the future. RECOMMENDED MOTION: y e iew b . Frank oyle ityManager 4646 Dakota Street SG Prior Lake. MN 55372 RESOLUTION 11 -xxx A RESOLUTION APPROVING THE TRANSFER OF RESIDUAL FUND BALANCES TO THE ECONOMIC DEVELOPMENT AUTHORITY SPECIAL REVENUE FUND Motion By: Second By: WHEREAS, The City of Prior Lake has determined that economic development is a priority; and WHEREAS, On October 18, 2010 the City Council approved an Enabling Resolution creating a restructured Economic Development Authority composed of three (3) members appointed by the Mayor and confirmed by Council and two (2) Council members; and WHEREAS, The City has unrestricted fund balances available in the following funds; and 1. Economic Development Federal Revolving Loan Fund 2. Economic Development Minnesota Revolving Loan Fund 3. Downtown Redevelopment Fund WHEREAS, The 2011 City General Fund budget includes $55,000 in new resources identified for economic development; and WHEREAS, The City Councill deems it appropriate to make financial resources available to the Economic Development Authority in order to achieve its objectives. NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA as follows: 1. The recitals set forth above are incorporated herein, 2. Staff is authorized to transfer the residual fund balances for the following Funds to the Economic Development Authority Special Revenue Fund (Fund 240): Economic Development Federal Revolving Loan Fund (Fund 250) Economic Development Minnesota Revolving Loan Fund (Fund 255) Downtown Redevelopment Fund (Fund 256) 3. The effective date of the transfer and closure of funds will be December 31, 2010, 4. Staff is authorized to transfer $55,000 from the General Fund to the Economic Development Authority Special Revenue Fund. 5. The effective date of the General Fund transfer will be March 7, 2011. 6. The 2011 General Fund budget will be amended to reflect the appropriation from the Economic Development department to Transfers to Other Funds. PASSED AND ADOPTED THIS 7th DAY OF MARCH, 2011. YES NO M ser M ser Erickson Erickson Hedberg Hedber Keeney Keene Soukup Souku Frank Boyles, City Manager March 7, 2011 Jerilyn Erickson, Finance Director 1 Economic Development Authority 1) Establish a Budget Administrative Expenses (per diems, etc) 2) Development a Strategic Plan Identify Plan first, then Resources Identify Resources first, then Plan 2 Economic Development Authority $102K Economic Development Authority Special Revenue Fund 3 City 1) Approve the EDA Budget 2) Consider making additional resources available to the EDA 4 City of Prior Lake General Fund: Econ Dev Dept ED Fed Rev $55k Loan Fund $106k Downtown $38k Redevelopment Fund $82k ED MN Rev Loan Fund $281k Available 5 City Council Action 1) Do Nothing 2) Transfer some or all of the resources identified today 3) Transfer some or all in the future after a Strategic Plan has been prepared by the EDA 6 Next Step 1) EDA develop a budget utilizing whatever resources are available 2) City Council consider approval of EDA budget 7