Waseca council considers financial aspects of Gaiter Lake Deal

Despite sharp criticism from several members of the public, the Waseca City Council is continuing to move forward with the Gaiter Lake development, with councilors hearing from Doug Green of consulting firm Baker Tilly on how the financial arrangements around the project might work.

While acknowledging upfront that he is “not a housing expert,” Green attempted to provide a comprehensive breakdown of the city’s major investment from a financial perspective, breaking down the lots in the new development based on three tiers from most valuable to least.

Green estimated that the most valuable lots, with views of the lake itself, could potentially sell for roughly $70,000 while more inner facing lots could go for something closer to $45,000. He estimated an annual appreciation of about 2%.

While acknowledging that a comprehensive analysis would provide precise estimates for each of the categories, Green said that the rougher estimates would at least provide a baseline for understanding what would require the city to break even on its investment.

The project itself is broken down into three phases, which City Manager Carl Sonnenberg noted roughly correspond with the pricing tiers laid out by Green. Per Greens’ estimates, infrastructure improvements could come out to about $2.4 million for the first phase.

The second and third phases are expected to require much fewer infrastructure improvements, which in theory should reduce the cost, but it’s difficult to project how inflation could affect construction costs for the second and third phases.

Green’s calculations suggest that by selling an average of three lots per year, the city could break even on the project. Failing to hit that target could force the city to levy for the shortfall, though Sonnenberg said the Council has pledged to support the project through reserves.

“The reason that cash projection for the city is not included in this is to help financially prove that the levy doesn’t have to be raised at this time to support the construction of the project,” Sonnenberg said.

To help cover upfront costs, the city will look to bond for the project but is looking to keep the bonding to the smallest amount feasible, while considering that an amount to small would be unlikely to attract interest from potential bond buyers.

Green reminded the Council that selling bonds tends to achieve a better rate from the city than going down to a bank to borrow the money. However, Finance Director Alicia Fisher noted that the city previously borrowed $1 million from a local bank after finding a reasonable interest rate.

“We got a good interest rate at that point in time and it was competitive enough with the outside bids that we got that we decided to keep it local,” Fisher recalled. “It’s not at all outside of the realm that that could happen as well.”

That said, the project remains highly divisive with Councilors Jeremy Conrath, James Ebertowski and John Mansfield consistently expressing skepticism as to whether it is appropriate or wise for the city to make such a large, and in their view risky, investment.

During the regular Council meeting’s open public comment period, several public speakers assailed the proposal as a whole, arguing that it represented a large waste of taxpayer money and even casting doubt on the intentions of the narrow Council majority backing the project.

Resident Michelle Oswald said that while she is not against growth in the city, she wants to see carefully planned proposals that help citizens now. By contrast, she sees the Gaiter Lake initiative as speculative and only likely to pay off in the long term.

“Are we going to build this development on the backs of people that already live here?” Oswald asked. “I’m not sure that’s what the citizens want.”

Fellow resident Deb Dobberstein accused the Council of seeking a “legacy project” and wasting money on consultants, surveys and assessments for a project offering a questionable at best return on investment. She further accused several Councilors of pursuing the project because they or their friends want to invest in it.

“It’s time to quit throwing money in a hole,” Dobberstein said. “You might as well just dog a hole and throw all this money in there for all the good it’s doing.”