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HRA gets $1.6 million total in loans from city, WPU

WORTHINGTON — The Rising Sun Estates townhome project cleared a major hurdle Tuesday morning.

In a joint meeting of the Worthington City Council, the Water and Light Commission and the Worthington Housing and Redevelopment Authority (HRA), the 48-unit project received loans from both the council and Worthington Public Utilities.

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The council and WPU will each contribute $800,000 in loans, plus each entity will give $25,000 toward the project. The council had approved up to that loan amount a year ago, but agreed to a reduced interest rate of 1.5 percent Tuesday.

“We all know the connection between housing and economic development and we’re working on the housing piece,” said Lyle Ten Haken, HRA board member. “A few years ago, the council gave the HRA a directive to get more active in creating some more housing units here in Worthington. We spent the last 16 months working on this project.”

It was also announced at the meeting Tuesday that the Southwest Initiative Foundation will contribute $200,000 to the project where only the interest will be required for repayment for 15 years. The HRA will be required to repay the principal to the Initiative Fund at the end of the fifteen years.

“I think today we saw a real collaboration between the city and the Public Utilities Commission and their willingness to support the project and do what needs to be done here to make it happen,” said HRA Executive Director Randy Thompson. “The Southwest Initiative Foundation came in with a piece to the puzzle as well. This was another hurdle cleared ... now we can move on to securing that first mortgage financing, securing the piece of property and getting the project rolling.”

After struggles with the project, including issues with land acquisition and cost per unit, Tuesday’s decision represented a step forward.

“I would say it’s 99 percent a go,” Thompson said. “There will be a couple of things our board will need to work out at the next board meeting. (They need) to give direction to the Southwest Housing Partnership as our consultant so we can get the property purchased, and get our final contracts from the modular builders so we can sign those. But we have the finance piece basically in order.”

The project’s total cost is more than $6.4 million. That includes a variety of funding sources. United Prairie Bank is the major lender on the project for $3.9 million.

Rising Sun Estates will have 32 three-bedroom units, and the proposed rent levels are $950 per month. There will also be 16 two-bedroom units at a proposed rent of $850 per month. The project is located on East Avenue on the east side of Worthington.

“I’m a little leery of the rent,” council member and WPU board member Ron Wood said. “We are probably at the top.”

A total of three bids were presented Tuesday, with Northstar Homes, Marshall, being the lowest. Worthington vendor Champion Homes’ bid was more than $250,000 higher than Northstar.

There was much talk at the meeting about using the local vendor. According to Thompson, that decision has not been made.

“Our board will need to make that final determination,” he said. “But at this point, there is about a $250,000 difference. That is a lot of money when we know this project is on the edge on where we’re at with our debt-coverage ratio and the cash ability that we have in our project. ... One of the council members said an additional $250,000 into this project could kill it, and there’s the difference in the cost of the construction.”

Worthington Mayor Alan Oberloh said he wished there was a way to still work with Champion Homes.

“I was really hoping that Highland would be doing this project just because there’s a couple hundred people who have Worthington or Nobles County as their home,” Oberloh said. “They would be employed doing that. I don’t know if we have the ability to go out to Highland and sit down and say, ‘Is there some chance we could do some value things here?”’

“These guys have done significant effort to work with Highland,” council member/HRA member Scott Nelson said. “That was one our initiatives of the group ­— to try to keep this local. We’re still open to that.”

Council member Diane Graber echoed the mayor’s thoughts.

“I know it’s $250,000, but there has to be a strategy to keep our own taxpayers involved in the implementation of this whole project,” Graber said.

“We tried every effort and we could not make it happen,” Ten Haken said.

Oberloh was also concerned about competing with private businesses that might be interested in building housing.

“The HRA is trying to fill a void that hasn’t been otherwise produced,” city administrator Craig Clark said. “We can’t wait forever.”

The best-case scenario for a timeline is sometime late summer and early fall.

“We don’t know what kind of spring we’re going to have,” Thompson said. “We have to obviously get dirt work done out there, sign contracts and actually ink our loan papers with the bank. All those things have to take place yet, but this was a big hurdle cleared today.”

Community Content Coordinator Aaron Hagen may be reached at 376-7323.