Committee Minutes

Minutes/Finance Committee
Monday, January 17, 2000 - 2:00 p.m.

Members present: Babinchak, Brooks, Carpenter, Hamerlik.

1. Matter of financing infrastructure to serve power mall site on 32nd Avenue South.
Dennis Potter, city planner, stated that this was a proposed financing request to respond to Oppidan Development Corporation’s request for City funding to handle the construction of the streets - South 34th Street and South 38th Street.

John Schmisek, city auditor, reported that numbers had been sent to committee (and council) members, and that Exh. 2, which was initial conversation with Oppidan with the total costs of the projects in their area of development on 32nd Avenue South of about $2.65 million. He stated that in visiting with Oppidan there is a concern with the assessment and with the very high cost that they have seen in this development as they have had to build up site due to their primary tenant’s request for immediate drainage out of the lot, they want no water sitting there after a 10-year rain event and they asked City to look at this again to see if there were opportunities for savings for them and the City. He stated they reviewed with staff that if they do normal city-share because of wider streets, watermains and sanitary sewers being larger than normal, there’s about $790,000 of costs covered by that, leaving a share for Oppidan of about $1.5 million that normally would have been an assessment and other shares of about $342,000 that would have been covered by properties on the other side of the street, and result is Exh. 3 where they have revised proposals subject to committee’s approval. He stated that the change in numbers comes from the fact that after engineering and planning staff review it was decided that 36th Avenue South does not have to be a city street, but a private or service driveway to serve the back of that development and any development to the south with their backing onto that area, and that reduced cost of the projects of $667,000, the project is about $1.9 million and city-share (36th Avenue South didn’t have any city-share applied to it because not an arterial) still stayed at $790,000, leaving $1.88 million in the Oppidan side and other share of about $.1 million.

Mr. Grasser stated that as 38th Street comes into 32nd Avenue South, it’s really an extension of S. 42nd Street because of Interstate and off-ramps; that a layout has been discussed but haven’t seen any drawings from Oppidan, are looking at the intersection of 32nd as a 5-lane section (left turn lane, a through in, right out and a left) and as it gets past the first set of entrances into the power mall it would go down to a 4-lane section, and as it gets past the second set of entrances would go down to a regular 3-lane section, and that design with current outlook would provide reasonable capacity. He stated they would have to signalize 38th, probably move lights they have and do 34th Street, and costs are included in the total project (normally those costs would be 100% City cost). He stated the savings by doing some reduction deduct about $180,000 off of the costs of 38th Street.

Mr. Schmisek stated they tried to show the numbers simply to give the total cost but as noted on the stoplight modifications those are 100% covered by City share, and those
wouldn’t have any Oppidan share associated with them. He stated that the net effect really
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comes out to the fact that they would be covering approx. $995,000 to $1,195,000 of
infrastructure coming from our Infrastructure Fund; that these are approximate numbers. He stated he also enclosed an Exh. 4 from Mel Carsen on the projected total property taxes that would be generated by this type of development upon completion showing approx. $819,000/year (as corrected by Mr. Carpenter), which will take some time but the payback of the investment they are talking about will be significant and substantial. He also included the amount that Oppidan had talked of their total sales of about $70.1 million, hard to determine the sales tax impact but both the new property tax generated, the sales tax generated will have significant impact and benefit city-wide.

Chairman Babinchak stated that based on Mr. Carsen’s exhibit the total cost of the project is $34 million and will be done in phases. Mr. Potter stated it will be done in two phases, Phase I will run at 300,000 sq.ft. and they want to break ground this spring and then open that phase in the spring of 2001, the balance of it, another 200,000 to 256,000 sq.ft. would be market driven over the next 3 to 5 years.

Hamerlik stated that when we give any kind of incentives, we are concerned about impact on other businesses in the community, etc. and that raises question of what some of those retailers might be. Mr. Potter stated that speculation of who is coming and who isn’t tends to revolve around SuperTarget and while the contracts have not been signed with SuperTarget they are very close to being finalized and contracts are under discussion with Best Buy and Outback Steak House and those are fairly close to being finalized; and in the normal development of a center like this the big anchor tenant determines how quickly everything else gets in place, assuming SuperTarget goes forward and agrees to come in then the rest will fall fairly quickly in terms of being able to be lined up, but not sure how fast that will happen. He stated that he hoped an Oppidan rep. would be present at the council meeting tomorrow and they may have some updated information.

Carpenter stated this is a project maybe in competition with other retail establishments within the community, that it maybe true that there will be competition but thinks a project of this nature is going to expand the pie and everybody will have an opportunity for a greater share of a greater amount. He stated that they were losing a significant amount to other communities because of our lack of depth in various areas and thinks this is a project that will help with that and retain dollars from going outside the community as well as attracting others into the community because it will give an opportunity for more diverse shopping. He stated because it is such a substantial project in excess of 50 acres and over $30 million of investment in the community, thinks this is something is worth the City’s investment, going the extra step in this case, and would encourage other members of the finance committee that this is something they should recommend approval to the full council.

Brooks stated this project is inside our borders and is going to expand our tax base, our concern as city council is that we need to expand tax base to give some relief to our citizens,
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and this is economic development that we need to see here.

Mayor Owens spoke in favor of this as an economic development tool for Grand Forks.

Chairman Babinchak stated that this is only for the external infrastructure, all internal infrastructure would be the responsibility of Oppidan. Mr. Grasser stated that with the change on 36th Avenue that there are still some things that need to go in there that does become part of their internal infrastructure. He stated that on approving the concept because they still have to work out some details, that they’ve talked with Oppidan in order for them to expedite things and keep costs down, thinking of them actually doing the contracting for the projects, except for 34th Street which will be done by City, but they will do 38th and can coordinate that with their other building construction and parking lots.

Chairman Babinchak stated funding is proposed now to come out of the Infrastructure Fund so it will be paid in cash so there will not be any bonds sold, and Mr. Schmisek stated that would be the intention now but as the contracts come in can finalize that portion; that there is enough money to pay that out of the Infrastructure.

Moved by Carpenter that we approve the concept of the City paying for the infrastructure
related to this development through the defined sources of city share, Highway Users and
infrastructure dollars. Hamerlik seconded the motion. Motion carried.

Mr. Grasser stated how important the infrastructure is for economic development, that the southend drainway is one project that has generated some controversy and a lot of dollars, etc. but that is one of the keys to being able to open this area up, some of the lift stations, etc. that went in there.

Duane Hafner, chairman of the Public Service Committee, thanked staff for an excellent job and that rep. of Oppidan stated that Grand Forks was one of the easiest cities as far as cooperation, and staff is responsible for this moving forward.

Moved by Hamerlik and Carpenter to adjourn; meeting adjourned at 2:30 p.m.

Alice Fontaine
City Clerk

Dated: 1/17/00