Dunn County Board approves borrowing $3 million for highway projects in 2024
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By LeAnn R. Ralph
MENOMONIE — The Dunn County Board has approved borrowing $3 million for the 2024 budget to fund highway improvement projects.
With the county’s debt structure, borrowing the money would allow for “debt smoothing,” said Kelly McCullough, county board supervisor from Menomonie and chair of the Dunn County Board, at the November 14 meeting.
Dunn County does have money in the general fund to cover the highway projects, he said.
Dunn County had a general fund balance of $14.18 million as of December 31, 2022.
County Highway B from Highway 12/29 to north of Exit 45 is expected to be rebuilt in 2024.
The northern portion of the project is estimated at $4 million, and Dunn County will receive $1 million back from the state.
The cost of the south portion of the county Highway B project is expected to be around $6 million, with $5 million in Wisconsin Department of Transportation funding from Highways 12/29 to I-94 covered by an 80/20 State Transportation Aid grant.
Stable levy
If Dunn County has money in the general fund to cover the Highway B project, then why is the Dunn County Board borrowing $3 million? McCullough asked.
The idea is to keep the property tax levy stable, he said.
The county pays off about $5 million in debt each year. If the county borrows $3 million, then that takes off about $2 million in debt each year, McCullough said.
At the end of 2022, Dunn County had outstanding debt of $31.08 million and had paid off nearly $18 million of debt in 2022.
If the county does not borrow any money for the 2024 highway projects and uses money from the general fund, but then in 2025, the county must borrow $8 million, that is going to result in a tax levy that is going down and then going up again, McCullough said.
Past county board’s have “dug a hole” by not funding the highway department adequately, he said.
Now the county board must try to dig out of that hole, McCullough said.
The county most likely will have to borrow money in 2025 and and in 2026, too, for the highway department. A certain number of plow trucks must be replaced at $300,000 each, and the county highway shop must be able to fit in those $300,000 trucks so they can be kept under cover instead of letting the trucks sit outside, he said.
If the county board decides to use the general fund now to pay for Highway B, then the money will not be available when it is needed in 2026 for a $5 million county highway shop project, McCullough said.
Audit report
The Dunn County Board received the audit report in September, and the county is in a strong position financially, said Diane Morehouse, county board supervisor from Menomonie.
The county is in a favorable position for the debt limit, and a certain amount of debt had been paid off by the end of 2022, she said.
The Dunn County board has handled the budgets responsibly, Morehouse said.
State law allows municipalities to borrow up to 5 percent of the municipality’s equalized value.
Dunn County has an equalized value of $5.01 billion, which means Dunn County has a borrowing capacity of around $250 million.
Dunn County did not have to borrow $1 million for the 2023 budget, but the $3 million for 2024 will be needed, McCullough said.
Borrow responsibly
Vaughn Hedlund, county board supervisor from Boyceville, said he had suggested to the executive committee that the county should borrow $3 million.
Dunn County cannot “wave a magic wand” and raise the tax levy to pay for items that must be paid for, he said.
State law allows municipalities to increase their tax levy by a formula that uses the amount of net new construction.
Dunn County does not have very much net new construction.
The budget increases every year. In 2010, the budget was around $70 million. Now, 13 years later, the budget has increased to over $90 million, Hedlund said.
Dunn County’s 2024 revenue and expense budget is $99,453,355, representing an increase of $6,906,603.
The budget is not going to go down, “unless you have some magic beans we can grow,” Hedlund said.
Hedlund said he was not in favor of “burying Dunn County in debt,” but that the county should “borrow responsibly.”
Borrowing money is a responsible way to go that offers future Dunn County Board’s the ability to have balanced budgets and to adjust programs to fit the needs of an increasing population, he said.
By borrowing money, the county could be in a position to shorten the replacement cycle for roads from the current 52 year cycle, Hedlund said.
Interest rates
What are the current interest rates as compared to the interest rate that is received for the money in the general fund? asked Sean Breslin, county board supervisor from Menomonie.
The bond advisor said that Dunn County is receiving 5 percent on long-term investments and that the current interest rate for borrowing would be around 4 percent, said Kristin Korpela, county manager.
In other words, the county is receiving more in interest for the money in the general fund than the county would pay in interest for borrowing $3 million.
By borrowing $3 million per year and paying off $5 million, over time, Dunn County pays off about $2 million in debt every year, McCullough said.
Between borrowing and investing, what would be more advantageous, to have the debt restructured at some point for a better rate? asked Gary Stene, county board supervisor from Colfax.
The bonds are issued for 10 years, so if in the first few years, or five years, it is financially advantageous, the county would consider refinancing, Korpela said.
The resolution to borrow $3 million for the cost of 2024 highway projects required a three-quarters approval vote, which is 22 “yes” votes out of the Dunn County Board’s 29 members.
The Dunn County Board approved the resolution to borrow $3 million with 23 county board members voting in favor.
