Committee Minutes

FINANCE DEVELOPMENT STANDBY COMMITTEE
Wednesday, February 18, 2009 - - 4:00 p.m.
City Hall - - Room A101

Present: Christensen, Glassheim (via phone), McNamara, Gershman.

1. Matter of protests of special assessments for cemetery property.

Ray German, Attorney representing GF Cemetery Assoc., introduced Robin and Stacy Purcell, Administrator for the Association, Gordon Iseminger, Chair of the Association, Andy Anderson, Gary Malm, and Bob Alderson, Board Members of the Assoc., and a couple of lot owners and others with interest in the situation are in attendance today. Mr. German stated that he had forwarded a letter to Howard Swanson, City Attorney, regarding some case law in North Dakota that may indicate that an assessment against a cemetery may not be appropriate because the property that you are assessing against cannot be taken. He explained that the cemetery’s assessment is $356,817 and they do not have it so cannot pay and any funds that they do have are in a charitable trust for the perpetual care of the property and cannot be accessed and from a practical standpoint even if were able to use for expense of this nature would need District Court permission to access the funds and have to tell the court the law applicable and would not find that it is an acceptable purpose. Mr. German cited a case of Bismarck v. St. Mary’s Church in which it was ruled that the Church is not able to be assessed.

Christensen inquired whether there were any statutes or ordinances exempting cemeteries from special assessments. Swanson stated that there are no such state statutes or ordinances. He continued that on two separate occasions the special assessment commission has determined that the cemetery at issue here did receive specific benefit, but a different form of benefit than other property and as such were given a one half benefit and City Council on two separate occasions in confirming the special assessments accepted that recommendation and also found that the benefits were 50% as compared to other properties. Christensen asked if there is any city ordinance relating to special assessments. Swanson said that there is no city ordinance relating to special assessments. Swanson said that the record clearly establishes that both the special assessment commission and the City Council were aware of major flood damage in 1997, particularly at the corner of Columbia Road and Gateway Drive. Both bodies had taken that information into consideration when approving the earlier assessments. Memorial Gardens, in particular, suffered substantial damages. These damages included damages to grave sites and caskets, including at least one floating casket. He stated that there are pretty extensive findings that have been previously adopted by both the Special Assessment Commission and the City Council in that regard.

Christensen inquired as to the relevance of the case cited by Mr. German upon their appeal. Mr. Swanson explained for the Committee why he feels the appeal is not appropriate. First, the appeal by the association is not timely. The first special assessments on this property were approved on 10/21/01 and there was a 30 day appeal period following that approval. No appeal was filed. The second special assessment was approved on 10/20/03 with a 30 day appeal period following that and again no appeal was filed. Also, because the City Council has a specific amount that must be assessed at the time of confirming assessments, any change in assessments for a particular property must be spread over remaining properties. After a confirmation is made and the appeal period runs, those assessments are complete and there is no authority for the City Council to go back and reassess the project.
Swanson continued that if the City Council chose not to require the cemetery to pay the assessments and would like to find funds from another source to pay the assessments the Council could do so. Swanson said it is likely that there are a number of other nonprofits that likewise struggle to pay their assessments such as churches, other religious organizations and other nonprofits.

Swanson continued that the case the association is relying upon is a 1970 case involving a street improvement and was a 3-2 decision with a strong dissent. The majority opinion states that it is unfair to force the sale of property of a cemetery to potentially have it reused for another form after tax forfeiture. The dissent is a more reasoned opinion. The decision doesn’t reflect that there are other statutes in North Dakota that say that even if a property is exempt from tax forfeiture the City can enforce a special assessment by an action. That statute tells him that the Legislature has determined that a special assessment is enforceable and can be made whether or not the property owner is exempt. Secondly, the Legislature has adopted a specific statute setting forth who is exempt from special assessments for flood control projects. Cemeteries are not included as exempt properties. At one time cemeteries were exempt from special assessments but the Legislature repealed that exemption prior to the referenced case. That repeal is cited by the dissent. Swanson stated that the exemptions statute is N.D.C.C. Section 40-23-22.1 and the statute which allows assessments against a benefiting property even if exempt is N.D.C.C. Section 40-23-08. Swanson stated that there a number of other reasons why the 1970 decision is not controlling, one of which is that Supreme Court reviews appeals from a district court decision or the governing body in a different manner. The appeal from a governing body’s decision is set forth in N.D.C.C. Chapter 28. The record to be reviewed is created by the governing body. The Supreme Court will not substitute its opinion for that of the governing body. The 1970 decision appears to question the determination of benefit from the street improvement project.

Swanson stated that another factor that makes this case unique is that it was a 3-2 decision and that it has never been cited in nearly 40 years of special assessment cases. He noted that we have already litigated special assessments on the flood control project and the courts have said that all benefited property can be assessed. Swanson stated that he is comfortable with the actions of both the special assessment commission and the City Council in regards to this matter. He stated that the Council could choose to relieve the association of the special assessment but there is no means to respread this amount to other properties.

German stated that the total amount assessed is $356,817. The group discussed that the cemetery could not be taken back for lack of payment of taxes, that the City would have the recourse to file suit to try and recover the amount, but that there are no funds available, so seems to be a standoff.

Swanson referred to copies of media reports and other information regarding flood damages to cemeteries. That was a specific concern in 1997 in Grand Forks and has been a concern in various flooding events nationwide. It is well known that coffins come out of the ground and floods may cause disinterment of bodies, crypts, and other associated public health issues. There is simply no factual question that cemeteries benefit from flood control projects as does the Memorial Gardens. Swanson reported that cemeteries suffer unique damages in floods and receive unique benefits from flood control projects.

The group discussed that cemeteries do provide a unique service to the community, but that assessments cannot be based on ability to pay and that there are a number of profit and nonprofit groups that may come before the Council with the same claim that they have no ability to pay and may also ask for relief. The group discussed that there are some other cemeteries in town that are paying their specials, some are not current, and some have also not been paying. The group discussed the fee structure and whether there was any ability to generate revenue to pay the assessment, any ability to go to lot owners for assistance or perhaps to go to congregations or mortuaries that utilize the cemetery and ask for assistance to go toward paying off the cemetery. Purcell briefed the Council on current lot prices for both the northend and southend cemetery as well as comparative price information for other cemeteries in Grand Forks and noted that their rates are already higher. Purcell stated that it would be difficult or impossible to locate surviving family of many of the older lots and that generally church congregations have a hard time just supporting themselves and would not be receptive to a request for donations, likewise, mortuaries are not receptive to increases in fees.

Christensen stated that the association did not appeal within the time given and now there is no recourse. Purcell stated that he agrees that the cemetery does get a benefit from the project. He reported that burials now are made in vaults whereas burials before 1960 weren’t. He confirmed that one casket floated during the 1997 flood and that there were damages to other burial sites and damages otherwise to the cemetery. He continued that in 2001 had asked that the area to be assessed be treated differently and only assessed on the square footage of the buildings and feel that they are being assessed unfairly as compared to other residential properties. He added that the only revenue that they have is in the trust and can only be used for maintenance of the lots. Gershman inquired what funding source that Purcell would like to see the city use to fund the payment of this assessment if they were to vote for relief; the only option then is property tax, which means that everyone in the City now pays more. Frances Hagen, citizen, commented that the City has used their funds to contribute to other causes such as the Alerus Center operations and East Grand Forks event, and perhaps could not tear down Smiley and that would also save some money that could go to this cause.

The group discussed current burial rates and that there seems to be an average of about 65 per year that are traditional burials. Christensen suggested that if took the annual assessment and divided by 65 would add $70 to cost for each burial and then the annual payment is covered. He continued that there appears to be no legal avenue for the Council to use to waive the assessment, they did not appeal in timely manner during the protest period, and State legislature has taken the exemption for cemeteries away. The group discussed that the Jewish cemetery is paying the assessments as is the Catholic cemetery. Duquette inquired whether the group was interested in working on some type of pay plan with the City. German replied that the association does not believe that they should not have been assessed. Christensen stated that then could ask for a declaratory judgment action in court and would settle the matter. Purcell stated that besides the flood special assessment have also received a special assessment on the south cemetery for a new pump station and if keep on getting these and based on square footage feel that’s wrong basis and need to look at only assessing to building area or some other basis.

Swanson recapped that there is a structure set up for special assessment of property and do not want to take actions that would jeopardize that structure. He reiterated that the property, by their own admission, did receive benefit from the project, they had substantial damage and clean up following the flood event, they have gotten a 50% benefit rather than a whole benefit, that the State Legislature has determined that all property that benefits from a project is able to be special assessed with one exception for State property and that exception only covers flood assessments. Christensen inquired whether there is any ability to pass an ordinance that would exempt cemeteries at the local level. Swanson replied that the structure of special assessments is based upon benefits to the property within the improvement district as outlined in the North Dakota Century Code. Swanson reported that if a parcel does not receive any benefit from a project it should not be assessed.

Gordon Iseminger, President of Cemetery Board, stated that agrees that the assessment was reduced by half but feels it was exorbitant to start with, understands say that the statute of limitations has run out, but feel that if the Bismarck case that they have cited stands, then never should have been assessed to begin with so statute of limitations does not apply. Iseminger continued that they do all their financial transactions with Alerus Financial and have been told that they do an excellent job with managing the resources that they have, they have checked into the ability to use the trust as a funding source not only for these assessments, but also for some other needed projects for the residence and have found can’t use trust dollars for this and even if they could, once the trust is gone, then it’s gone and won’t have any funds to continue to pay for maintenance. He added that while the committee has suggested to raise fees as a means to pay, feel that is not option and cemeteries are considered special and should be treated special, that the City did own a cemetery at one time and couldn’t sell it fast enough, as they did not want to be in the business of owning one.

Gershman asked whether there was any ability to apply for bricks and mortar funding for the repairs at the residence. Hoover stated that the recipients must be a 501(c)(3). Purcell stated that the cemetery is a 501(c)(13) so would not qualify.

Christensen replied that there is no legal basis for the Council to address the concerns brought today on the flood protection assessment. He added that he would encourage the association to contact their state legislators to try and get a new statute put back in place that would exempt cemeteries and that will help them out for future projects.

The group discussed that the association has paid about $50,000 toward special assessments and asked if there was any ability for the City to restructure the amount they still owe to try and make payments better for them. Swanson stated that there is no ability to change the terms of the assessment for only this property, it must be the same as for other property owners.

Gary Malm, County Commissioner and board member, stated that there are many cemeteries that get donations from the City or County they serve to fund their operations and that there is a move back to rural cemeteries as they are less costly. As to the current special assessment issue, Malm stated that he would say to just not pay the assessment, the City can sue, but can’t tap the trust fund for payment and can’t take back the land so will just stay unpaid. Kreun stated that he does not agree with that attitude and there are others that are faced with similar challenges to pay their assessment and have worked out a way to cover it.

Purcell stated that as he has been dealing with potential lot sales he has mentioned the assessment and everyone has agreed that they would have gladly paid a little bit more to have the cemetery not be assessed. Hagen asked if Council believes that the churches would help then why wouldn’t Council just help pay it like they help the mission and others.
Christensen stated that the Committee has heard the request, there are others that have been assessed and are paying, that there is no legal basis to provide relief, that if the association feels that the assessment is not proper then maybe they should legally pursue the matter to that affect. German asked if the City could file for an Attorney General’s opinion.

Swanson stated that the Attorney General’s office typically will not issue opinions that are factually dependent. Rather, the Attorney General normally renders opinions on statutory matters. In this case there are no statutory exemptions for cemeteries. Swanson continued that he believes a Supreme Court decision is in order to determine whether cemeteries are exempt from all assessments. It would be up to the Legislature to grant a permanent exemption. Christensen agreed that he would encourage the Association to try and get the exemption back into statute so that they are exempt from assessments.

The group discussed whether there was any action needed or if just move to Committee of the Whole for discussion. Swanson stated that the Committee should adopt findings similar to what he has provided and move the item to the Committee of the Whole for further discussion.

Motion by McNamara, Second by Christensen to move item forward to Committee of the Whole with the recommended findings from the City Attorney. Aye: All. Motion carried.

2. Alerus Center Finances.

Jerath reported that there is no new information available related to this item yet and will forward to the Committee once receive information back from the Alerus Center.

McNamara commented that he realizes the $872,000 has been reported in our annual financial report, but inquired if and where the amount has been reported in the Alerus Center’s financial statements. Jerath stated that she just received the 2008 statements from the Alerus Center earlier today and does show the amount. McNamara asked whether it is on prior year’s reports. Jerath will review the earlier years statements and report back to committee.

Christensen stated that he has visited with Steve Hyman, Executive Director of Alerus Center who is present this evening, and have both agreed that Alerus Center will make some changes in their financial reports which will make them more transparent.

Christensen asked whether the Home Rule Charter had been reviewed to see if the wording had been reviewed to see what potential uses for the excess bond dollars were. Jerath stated that she has not yet reviewed that and will review and confirm with Swanson and bring report back to the Committee at a future meeting.

3. Report on Affordable Housing RE: Chestnut/Cottonwood Areas

Greg Hoover, Director of Urban Development, displayed a map showing lots in the Chestnut/Cottonwood area and explained to the Council which lots were still available, were in construction, and had been sold and are awaiting development by the purchaser. He explained that there are a couple of lots that are being held at this time, as there is a watermain issue that would like to resolve prior to the sale. Hoover continued that the lots had been sold in stages to control the amount of construction occurring in the neighborhood at one time and that the remaining lots are planned to be offered for sale this spring.

Hoover stated that there are also some infill lots in the University Park area and are planning to also advertise and sell those this spring. Before the sale a neighborhood input meeting will be held to get feedback from the neighbors as to the type of development and any concerns that they have regarding these lots.

4. Begin 2010 Budget Discussions.

Christensen stated that would like to see us start gathering some information on revenues as we begin to look into the 2010 budget, in particular, would like to get a feel for tax collections from property tax for both 2008 and 2009, building permit revenue, sales tax. Mel Carsen, City Assessor, stated that new development is down from prior years and overall foresees collections being flatter than they have been in prior years. Existing valuations are at the 96% ratio, which is our target and see no change relative to inflation, but there may be some properties that see either decreases or increases in value due to other factors.

Carsen continued that last year there was an increase of about 5% from new residential and commercial development and this year is predicting will be closer to 2% or slightly above that. This would equate to an additional $294,000 from property tax collections, of which $235,000 would be available to the General Fund. Maureen Storstad, Budget Officer, stated that we are presently working on a growth indicator summary that will be provided to the Council at the initial budget session. She noted that at present time is uncertain how sales tax will come out, given the legislation that is being considered at the State level that would exempt clothing from sales tax and could be big impact on our collections.

McNamara stated that he believes that the budget should primarily be a document out together by the Mayor, but would like to see a useful quarterly update on how things are going. The committee discussed that perhaps rather than the large printout that has been distributed, to provide a one page executive summary highlighting whether overbudget, underbudget or on track for major areas of the city, and if off in a category, then short note as to why like sales tax collections less than budgeted, extraordinary expense for this repair, higher than anticipated utility cost, etc. The group agreed that this type of report throughout the year would help them feel more in touch with how the City is performing and enable them to feel in a better position to start looking ahead to future budget years planning.

Christensen stated that he wants to state that Council has made a commitment to maintain personnel and their commitment to fulfilling the needs of the pay plan and want to be able to continue that. He would like to see staff start looking at if there are some things that we can do without for a year or two as the economy turns around and not talking about cutting services or people, but just see if there are some things that we could do differently.

Carsen stated that there are some other legislative bills that are being discussed and could have detrimental impact on the property tax collections – one dealing with a 2% cap on valuation and one dealing with cap on amount of total tax bill and monitoring those closely and hope to see them shake out as they move to crossover next week.
Meeting adjourned 6:00 p.m.

Respectfully submitted,

Sherie Lundmark
Admin Spec Sr.