Board approves municipal revenue obligation assignment as temporary collateral for security deposit on commercial project

Cottage Grove, Wis. — The Village Board discussed and approved May 19 an assignment of a municipal revenue obligation (MRO) tied to Henseak Holdings LLC (doing business as New Tech Painting) as temporary collateral to address a security deposit shortfall related to the company's municipal revenue obligation payment schedule.

Village staff said the developer/property owner owes a security deposit that had not yet been delivered and proposed assigning a portion of the MRO payments owed to Henseak Holdings as collateral until the owner pays the deposit later in the summer. Staff said the MRO is a municipal revenue obligation issued to the Henseak Holdings entity and that assignment to a third party requires village consent.

Administration and legal counsel described the arrangement as a temporary stop-gap: the MRO would secure the village's interest until the owner can draw on working capital or a line of credit to make the security deposit. Staff reported the owner intends to make the payment by summer and that the village has no concern about the MRO's viability because the incentive is earned and backed by project property tax increment; counsel noted that if the owner sold the building the MRO would not automatically transfer to a new owner without village approval.

The board voted in favor of the MRO assignment as written; minutes show a motion and second with trustees voting to approve the action (motion recorded as carried). The meeting record notes the board opted not to enter closed session on the item and handled the discussion publicly.

Staff said they will document the agreement and monitor receipt of the security deposit; if the owner does not make the required payment by the agreed date the village retains authority under the terms of the assignment to apply the assigned MRO payments toward the deposit.