PINE RIVER -- The Leech Lake Reservation has asked Cass County to sell revenue bonds on its behalf to fund a hotel and convention center to be built adjacent to Northern Lights Casino near Walker.
County Administrator Robert Yochum told the county board Tuesday this is a new concept, not used yet in Minnesota and only once or twice nationally.
Under Minnesota law, Yochum said the county would issue bonds, but would have no liability for the repayment, even if the Leech Lake Band encountered future financial troubles and had difficulty repaying the debt.
The county currently has a moratorium on business subsidies, pending completion of a county business subsidy plan. Tuesday, the commissioners asked Yochum to research whether this proposal constitutes a business subsidy.
Commissioner Jim Demgen asked whether this would affect the county's bonding power.
Chief Deputy Auditor Larry Wolf said the county has been selling its own revenue bonds through private placement in recent years. This saves the cost of obtaining an annual bond rating necessary for public sales, he said.
If the Leech Lake proposal meant the county had to obtain a public sale bond rating annually, it would increase the county's costs for its own borrowing purposes, he said, and could make a difference in overall costs for the county to borrow money.
The board also questioned whether Minnesota Counties Insurance Trust could insure the county against liability for the Leech Lake bonds.
Jim Mayer of Dougherty & Co. of Minneapolis, financial adviser to the Leech Lake Reservation, said the concept of a government agency selling bonds on behalf of someone else has been used elsewhere for senior and low-income housing and for industrial development.
He said he believes, because the Leech Lake Reservation would carry repayment liability, it should not affect the county's ability to borrow money in the future for its own needs.
Mayer said Leech Lake needs a response from the county as soon as possible, because an option for a bank loan must be exercised soon if the county does not want to sell bonds on behalf of the tribal project.
Yochum said the Leech Lake convention center-hotel project would require $22 million in bonding.
The board set a special working session on this issue for 1 p.m. Aug. 20 at the courthouse in Walker. The county board will be asked to consider whether to set a public hearing on whether the county should issue bonds for this project.
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