By AMANDA LILLIE and ADAM HARRINGA

City Administrator Jim Hurm said no local property taxes would be used to pay for an expansion of The Hormel Institute if the Austin Port Authority owns the new building addition.

Hurm, who is also the executive director of the port authority, said the idea for owning the building expansion is new and not set in stone.

“It’s still early in the process,” Hurm said. “The intent is to not use local property taxes for it. The intent is to use the state bonding bill dollars, and then The Hormel Institute would lease from us as we’ve done (before) in the private sector.”

The city of Austin, through the port authority, plans to request about $13.5 million for the expansion out of the 2012 Minnesota State bonding bill, Hurm said. The funding, if approved, will be used for infrastructure modifications to the streets and sewer near the expansion area and likely for the building itself.

“This is Austin’s port authority receiving a grant for $13 million to come into the community,” Hurm said. “I just don’t know how that could be bad.”

Jeff Austin, member of the City Council and port authority, said paying for the expansion with bond dollars would allow The Hormel Foundation to continue spending its money in the community.

“It frees up The Foundation’s money to be spent elsewhere,” Austin said. “We currently receive $300,000 to $500,000 a year for the city for projects, and we certainly want that to continue.”

Austin said the University of Minnesota could request bond money for the project, too, because of its involvement with The Institute. However, that could leave the project lower on the state’s priority list, Austin said.

“If it was included in the university’s bonding money, it might not have as high of priority as if it’s coming from the city of Austin on behalf of these three parties (the U of M, the Hormel Foundation and Mayo Clinic), so maybe the likelihood of the money coming through for this project would be higher,” he said.

According to a press release issued by The Hormel Foundation Tuesday, Foundation officials were approached by city of Austin staff and told the city might be able to get state funding for a portion of the project through the bonding bill.

“The Foundation appreciates the efforts of the City and Port Authority … However, the Foundation has no near-term plans for a physical expansion of The Hormel Institute …” the press release states.

“(The city) approached us to inform us about bonding funds. It was informational,” added Steve Rizzi, secretary of The Foundation.

Hurm said the idea was formed by city staff because of the port authority’s ownership of other buildings around Austin. The port authority owns the buildings that house the B&J Bar and South Central Athlete and has owned other buildings in the past, Hurm said.

“These are the types of things we do,” he said. “Whether it’s the port authority or the Austin Housing Redevelopment Authority, depending on the project, we get involved in it.”

Brian McAlister, member of the City Council and port authority, said he is skeptical of a city-owned expansion. McAlister said he could support it once the details are more clear, though.

“Generally speaking … I don’t think the port authority should have ongoing ownership in buildings,” he said. “I just get concerned when you get hooked into projects like that.”

However, Hurm said ongoing ownership has the potential to raise revenue for the city through the terms of the lease.

Community Development Director Craig Hoium said the city must own the building if state bond money would be used to fund the expansion.

“When you request for bonding dollars, the property has to be owned by the government,” Hoium said. “(City staff is) going through the planning process. We’ve notified both the council and the port authority of our recommendations and how to at least initiate obtaining those bonding dollars.”

Hurm and Gary Ray, vice chairman of The Hormel Foundation, invited the Minnesota House and Senate Capital Investment Committee members and Gov. Mark Dayton to Austin to view a proposal of the expansion later this year. Hurm said there isn’t an official proposal yet, but there will be by the time the committee members visit in late summer or early fall.

Hurm said an expansion of The Institute would have the potential to bring more than 100 jobs to Austin, which fulfills the port authority’s mission to bring high-paying jobs to the city.

“It makes so much sense to apply for state bonding dollars for this expansion,” he said. “However we can help, I think would be very positive for this community as a whole.”