The Lanesboro City Council held a special meeting last Wednesday evening, July 31, to discuss and consider approving the loan and grant terms of a USDA (United States Department of Agriculture) Rural Development program which would allow the city to purchase a new ambulance. Rural Development's area specialist Laurie Balata was on hand to go through each of the 21 conditions and answer questions from the council.

A public hearing, in which no members of the public brought forward comments or questions, was held prior to the special meeting.

The resolution being considered was for the city to incur indebtedness to the USDA and Rural Development of $42,000 at a 3.5 percent annual interest rate to be paid back over seven years to the USDA at $6,870 per year.

Upon each payment, the interest will be paid off first and then the principal debt. The city would be able to make prepayments on the loan at any time.

In addition to the loan, a $23,300 grant will also be administered to the city on behalf of the Rural Housing Service.

The cost of the ambulance and equipment upgrades is $139,900 with $15,600 in taxes, license and other small items. Total cost would be $155,500.

Balata explained that any reduction in the costs would result in the de-obligation of obligated loan or grant funds. Grant funds would be reduced first. The city is putting up $90,200 for the project in addition to the USDA and Rural Development loan and grant. Funds from the city and other sources will be used first before funding from the USDA.

The city was required to set up a Pre-authorized Debit Payment Process (PAD) for automatic deduction from the new ambulance account. A reserve account will be required to be funded at a rate of 10 percent of the annual payment until the reserve account reaches the amount of an annual payment.

The city will be required to pass a resolution in the future to collect revenues for loan payments. Balata also made the council aware of the impact it would have on the city's budget. Operating and maintenance expenses will fluctuate year to year and thus rates would vary.

A Debt Service Reserve Account will be paid into at $58 per month until it matches the annual payment rate of $6,870. These funds would be drawn from in the case of an emergency. Other conditions relating to audits, insurance and bonding were addressed. A cost overrun by 25 percent would signal a discussing on where additional funding would be coming from.

Balata said grant funds would be advanced as necessary to cover the Rural Development portion of obligations due by the city. These funds would be used after loan funds are gone. Any funds remaining would be able to be used for eligible projects.

More discussion was had on a condition relating to advertising to bidders for the new ambulance. According to Autumn Johnson from the ambulance service, the city already has an idea where they will be purchasing the ambulance from and what the cost will be.

Councilman Tom Smith asked how the council would get around by not collecting bids since the ambulance will be over $100,000. "I don't want people coming up to me and saying, 'How did you get that without bids?" he stated.

Johnson said the city had looked into multiple companies and hadn't gone with the first one they saw. Smith said he wanted to do the bidding the right way. He asked Balata if the city put their search out for bids and received one for more money, if they would get more grant money.

Balata said the loan/grant money was pretty much locked in.

Mayor Steve Rahn reminded Smith that the issue for the special meeting was to approve the conditions and obligate the funds and discussion could be had at the next city council meeting about dealing with bids.

Rahn made a motion to request the funds from the USDA and Rural Development and to approve the city's obligations towards that agreement. The motion passed with Smith abstaining.

The city has 180 days to meet each condition by Jan. 27, 2014. Failure to comply would mean possible termination of the application.