A project aiming to boost recreational activities and to enact improvements at Ramsey Dam hit a setback at the Capitol on Thursday.

City officials learned that in order to use bonding dollars on the dam area, the dam must be be publicly owned. Ramsey Dam is currently owned by Hormel Foods Corp., which has expressed interest in donating the dam to the city. But the process could hurt the city’s chances of receiving bonding dollars this session.

The city is seeking $3 million in state bonding dollars for the Ramsey Dam area and Ramsey Mill Pond near The Old Mill Restaurant to acquire more land, build two miles of trail, restore a railroad bridge, improve the dam and build public amenities to improve the area.

At a House Environment and Natural Resources Policy and Finance Committee meeting, city officials learned that state statute requires a Minnesota Department of Natural Resources permit when transferring ownership from private to public, according to Austin City Administrator Craig Clark.

“The permit is to ensure local government doesn’t take on a potentially large financial liability,” Clark said.

An inspection report has to be done and then passed onto the Legislature. But DNR Director of Capital Investment Kent Lokkesmoe said he didn’t think the report would be done in time before this legislative session ends.

Clark said they’ve taken steps to transfer the dam to the city, and he noted having those bonding dollars would allow the city to get access to that area and provide more flood control and recreational opportunities.

“It’s an important flood control measure,” he said. “It’s the largest body of water in Mower County and makes those 53 acres of water body important. It’s dependent on the permit coming.”

The city is in the early stages of acquiring the dam from Hormel, along with $650,000 toward improvements, after the company expressed approached the city earlier this year.

The Ramsey Dam area work isn’t the only Austin project seeking bonding dollars this session. The city is also seeking $600,000 for the Fourth Avenue Northeast Dam area for flood control retaining walls, restoring the former mill site, for stream bank restorations and to study dam conditions.

Water quality projects are also continuing as leaders are seeking $1.6 million for the first part of a project called the Accelerated Results Plan, which will complete 25 water retention and water quality projects in the district. The Cedar River Watershed District already has half the money for the $8.4 million project. The district is providing $1.2 million, the Hormel Foundation is providing $3.2 million.