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CAT-astrophe: NL asked to return grant funds

NORTH LIBERTY– In 2005, North Liberty was awarded a significant grant to help construct Liberty Centre Park and Pond.
Now the city has to give some of it back.
The construction of the park and commercial area at the intersection of Highway 965 and Penn Street– created as a visual showpiece and North Liberty’s central community pedestrian area– was financed with assistance from Vision Iowa’s Community Attraction and Tourism (CAT) grant, one of Iowa’s Department of Economic Development funding tools available to Iowa towns for cultural and recreational enhancement projects.
In May, 2005, the Liberty Centre Park & Pond project was estimated to cost $3.11 million. The CAT grant kicked in $750,000, about 24 percent of the project’s estimated costs. The local match– the city’s portion– was expected to be $2.36 million.
However, the park project ended up costing the city just $2.84 million total. In keeping with the Iowa Department of Economic Development grant rules, City Administrator Ryan Heiar told the North Liberty City Council last week that Vision Iowa CAT officials are asking for the City of North Liberty to return some of its $750,000.
“They did an audit,” Heiar said. “We were awarded $750,000, based on the $3.1 million, but we spent less. They are asking for $195,000 to be returned.”
Jessica O’Riley, Communications Director for the Iowa Tourism Office, said later The Vision Iowa Board holds applicants to the project as presented when they applied for funding.
“Per terms of the CAT contract, if a project experiences cost savings, the Board will share in those savings,” O’Riley said. “The amount to be returned is based on the percentage of the original award to the original project.”
In this case, $750,000 is 26 percent of the $2.84 million spent. Accordingly, said O’Riley, the grant amount will be reduced by 26 percent.
Council Terry Donahue described the calculated return as “fuzzy math 101.”
“How in the devil did they get 26 percent?” Donahue asked. “Every number I shake out comes out (for the city’s portion of the project) at 91 percent of cost.”
Donahue said the city should owe the CAT committee around $117,000.
Heiar told the council he had engaged in “countless” discussions with CAT program Director Alaina Santizo over the last several months, but program officials were very clear.
“They’re wanting their money back,” he said. If the city does not return the $195,000, Heiar added, they would likely send the matter to a collections agency.
“That’s crap,” said Donahue. “Let them.”
Heiar cautioned against letting it turn into a legal battle.
“We don’t want to burn any bridges. Anything related to community tourism– assuming this (CAT) program gets re-funded– we are going to want to apply for that,” Heiar said.
Heiar suggested the city borrow money internally from the water fund and repay the loan with Tax Increment Financing (TIF) dollars over the next seven years. Council member Gerry Kuhl asked why the city should borrow money from the water fund and not go directly to TIF.
Heiar said the TIF fund does not carry a reserve balance, so spending TIF funds directly would result in a negative cash balance.
The total amount borrowed would be $171,198, because CAT had yet to distribute almost $23,800 of the grant award.
The motion to approve the city’s financial arrangement with itself– borrowing $171,198 from the water fund and repaying it with TIF money over the next seven years– passed 3-2, with council members Donahue and Kuhl voting against it.
Heiar said in a post-meeting interview the experience will bring added vigilance when applying for grants.
“These are things we need to be very cognizant of in the future. We will make sure we are familiar with all the terms of the grant and exactly how they are funded,” said Heiar.