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City approves M.R. Paving lease for compost site

June 5, 2013
By Josh Moniz - Staff Writer (City, PUC get strong rates on bonds) , The Journal

NEW ULM - M.R. Paving & Excavating will take over running the New Ulm compost and burn site due to the new lease agreement approved unanimously by the New Ulm City Council on Tuesday.

The contract will go into effect after M.R. Paving completes the necessary applications through city commissions, which includes obtaining a Conditional Use Permit. That process could take until August. In the meantime, the city will continue to operate the site.

M.R. Paving sought the lease agreement because it recently purchased property next door. The lease allows the business to sell the previously free compost at the cost it sets and it permits the business to sell its own products on the site. It also allows M.R. Paving to convert the wood burning site into a wood chipping site, with the wood chips subsequently being sold. The price of the compost and the wood chips will be set by M.R. Paving.

The lease prohibits M.R. Paving from charging residents to drop off their compost or wood materials. It also requires M.R. Paving to have the site open from April 1 to Nov. 15 from 10 a.m. to 6 p.m. on Monday through Friday and 9 a.m. to 5 p.m. on Saturdays. The hours are longer than the current hours.

The move is estimated to generate between $33,000 and $41,000 for the City annually through $28,000 to $36,000 in saved personnel cost and a $5,500 rent from M.R. Paving. The rent will increase annually by 3 percent from the prior year's rent for the five years of the lease, capping at $6,190 in the final year.

The contract terms will be the final say in M.R. Paving's rights to the site. The contract can only be amended if both sides agree to the changes.

Bonds

The Council approved the issuance of bonding for the City's general obligation bonding and the New Ulm Public Utilities bonding, which is targeted at several major Water Department projects like the Nehls Park water tower. The City's bond was for $2.875 million and granted to United Bankers' Bank at a True Interest Rate of 1.6227 percent. The PUC bond was for $2.95 million was granted to Robert W. Baird & Co., Inc. at a True Interest Rate of 2.3842 percent.

The letter from Moody's Investor Rating gave the City and the PUC its top rating of Aa2 despite New Ulm being too small financially for this rating category. The letter noted the City and the PUC received the higher rating that allows more competitive interest rates because it keeps a high percentage of fund reserves compared to its annual revenues. The City has often kept its reserves at 75 percent of its revenues, but dipped down to just below 60 percent in recent years due to budget constraints. The City would need to go down to 35 percent of its revenues to change the rating. Moody's also noted that New Ulm experienced growth as a regional center in recent years, particularly with the introduction of several big box stores.

The Moody's letter also stated New Ulm had issues to avoid to keep its rating. It noted the city has a very small tax base and weak demographics profile for this rating category. It warned against letting high fixed costs creep up as a percentage of the City's operating expenditures or elevating its debt burden in a manner leading to leveraging its tax base.

(Josh Moniz can be e-mailed at jmoniz@nujournal.com)

 
 

 

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