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Minutes of the Grand Forks City Council/Finance-Development
Committee - Monday, February 28, 2011 - 5:30 p.m. _______________

The Finance/Development Committee met on Monday, February 28, 2011 at 5:30 p.m. in the council chambers in City Hall with Chairman Christensen presiding. Present at roll call: Christensen, Glassheim, Sande.

Also present were: Greg Hoover, Saroj Jerath, Mel Carsen, Council Member Bjerke.

1. Application for abatement for 2009 taxes by Scott Ross and Barbara Zavala, 511 28th Avenue South.
Mel Carsen, city assessor, reported this is routine disabled veteran's credit, that last week handled application for 2010 for the same property and when considered that application did not have the current application, and recommended approval of the application. Motion by Sande
and Glassheim to approve and refer the application to the city council. Motion carried.

2. Request by Metro Plains, LLC for tax increment financing property tax exemption under provisions of NDCC Chapter 40-58 for proposed civic auditorium project at 1st Ave.N. and N. 6th Street (Lot 1, Block 2, Renewal Resubdivision #5)
It was noted that this is not the civic auditorium project but the project in the parking lot across the street. Mr. Carsen stated that in documentation it is called the civic auditorium project but is on the parking lot and that they are requesting a 5-year 100% property tax exemption under a TIF financing exemption. He explained that a TIF is an acronym for "tax increment financing" and that allows for the City to grant a property tax exemption for up to 15 years or sell bonds to help support a project; however, it was noted that we are not selling bonds so that is not an issue.
Their request is for a 5-year 100% tax exemption and that the city council agreed in the project development agreement that was signed several months ago to grant up to a 5-year and up to a 100% exemption (similar to The Current Apartments loc. across street from the Harvest bakery, where we granted a 5-year 100% exemption and the project across the street from this project was granted a 5-year 95% exemption). Greg Hoover stated that in the proposal for this project that was reviewed at an earlier finance committee one of the sources and application of funds was a tax abatement similar to The Current as that worked best with their financing with tax credits.

Mr. Carsen reviewed the exemption for The Current Apartments, a 5-year period with a max. tax exemption of $275,000, a limit of the eligible cost on that project and it seemed that the valuation and taxes would probably exceed the $275,000 over a 5-year period; since then the mill levy has been reduced so now it will go 4 or 5 years without consequence.

A spread sheet distributed by Mr. Carsen listed the eligible costs for this project which include the land, demolition, parking lot, clearing of the site and some environmental issues that are being taken care of and paid for by the developer and those total $305,189 and to that would add interest on the costs that they actually paid for, $20,100 over a 5-year period and that brings the total eligible cost to $325,000+; the estimated tax over a 5-year period comes to his estimated cost of $260,000; that is figuring on the first year the exemption alone would be a 50% exemption because only about 50% completed and that is an unknown at this time, and on the other 4 years are full tax, so the eligible cost is sufficient to cover his estimated tax load for 5-year period.

Mr. Carsen stated he was uncomfortable recommending a tax exemption, however, they have had discussion on this project for about a year which was held up because of housing credits out of the State, that the discussion has been that we entertain and probably grant them a 5-year exemption up to a maximum of eligible costs; because it is a low income property that is different than the project across the street (those units are market rent), that there was discussion for several years that the city council would like to have more housing units downtown and that is part of what is driving this, and have a developer that develops the site and for that we would grant them a 5-year 100% exemption.

There was some discussion relative to the total value of the exemption of about $260,000 over 5 years and after that the value of the property will be about $3 million and if that is the cost of what it is to build it; that it will cost more to build but that is the value. Mr. Carsen stated that is his value based on treating it the same as other apartment complexes, whenever they build a project, TIF, there are a lot of extra costs that don't really impact the value; est. cost of construction $4.5 million.

There was also discussion on how tax exemption is tied to a TIF; and the difference between a simple tax exemption and a TIF without bonds. Mr. Carsen stated a TIF is actually designed for renewing an urban renewal area by taking a building that needs to be rehabbed and to rehab it, or taking a vacant lot in the urban renewal area and building a new building - it was really intended to do just bonds at first, the City would advance bond based on whatever they felt comfortable with, and also allows for tax exemption up to the eligible cost and eligible costs are outlined in the law, four categories of eligible costs. Christensen stated that the acronym is misplaced by saying tax increment financing, so actually just giving them a tax break based upon the value of what the eligible costs are, and statute just deals with 4 items. We can give them a tax exemption under the statute where we can only give them a tax exemption equal to the amount of the eligible cost which Mr. Carsen has given us, the purchase of the land and clean up and some interest structure.

Mr. Carsen stated the next step in the process is to establish the public hearing, that his report suggested March 21, however, that is not sufficient time and will have to move it out two weeks - to April 4, 2011. Christensen stated that they have to have the public hearing and approval before they turn the shovel, and if that will impact their ability to get into the ground; Mr. Hoover stated no. Motion by Glassheim and Sande to set the public hearing for April 4, 2011 and refer to city council. Motion carried.

ADJOURN

It was moved by Sande and Christensen to adjourn, motion carried. Meeting adjourned at 5:45 p.m.

Alice Fontaine
City Clerk