Committee Minutes

MINUTES/FINANCE COMMITTEE
Tuesday, August 9, 1994 - 4:30 p.m.

Members present: Carpenter, Babinchak, Johnson, McCabe.

1. Application for abatement of 1992 and 1993 taxes:
a) John E. and Tina K. Cowger, 121 8th Avenue South.
John Herz, Asst. City Assessor, reported the application involves single family home which qualified for remodeling exemption, but property owner failed to apply, and to change value of a prior year would have to follow abatement process. The applications would change the value for 1992 and 1993 to reflect reduced value due to the exemption and recommended that the applications be approved as submitted. Moved by Geller and Babinchak that the applications be approved as submitted. Motion carried.

2. Financial report for TCI of North Dakota, Inc.
John Schmisek, city auditor, reported that according to the agreement TCI is required to furnish us annually a report from their auditors as far as their financial conditions, and one of the requirements is that their auditors state amount of revenue generated in Grand Forks so we can compare to make sure our franchise fee is right; that according to the audit letter for 1993 they had generated $4,566,899 in revenue from city of Grand Forks, with the 4% franchise that would amount to $182,676 and we received $182,680.

Jerry Hovet of TCI was present to answer any questions.

Moved by Geller and Babinchak to receive and file the report.

Mr. Hovet stated that franchise negotiations are on-going, Mr. Swanson is working on this; that they have given to the City the East Grand Forks' franchise to review, change, etc.; they have asked for one change which was made, and now waiting for what City wants to do.

Mr. Schmisek reported that in visiting with Mr. Swanson, he is still in the full review process but he did stated he would anticipate having new franchise agreement in place effective January 1. It was noted that there will be another public hearing before council once proposed franchise agreement submitted to committee/council.

Upon call for question the motion carried.

3. Temporary and overtime statement for July, 1994.
The committee reviewed report. Mr. Schmisek reported they would be transferring funds from regular wages (due to vacancy) to cover temporary/overtime if need be; that he will be bringing in for review within next couple weeks revised job descriptions, so can go out and fill that position. Moved by Babinchak and Geller to approve. Motion carried. (Committee only)

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August 9, 1994 - Page 2

McCabe present.

4. Matter of contribution to North Dakota Small Business Invest-
ment Company.
Chairman Carpenter stated that the committee had received copies of the letter to the Mayor from the North Dakota Small Business Investment Company, and copy of the subscription agreement.

Tim Zestoupil, North Dakota Small Business Investment Company, Richard Wold, First National Bank, and Thomas Clifford were present.

Mr. Zestoupil stated that NDSBIC is a for-profit private entity that is utilizing leverage funds through the SBA and the federal government to provide an equity source of funding for small business; and it's process that has been in the making for over two years, that they are at a point now where they are raising the funds; that prior to this time a business plan was put together, a management team was selected and process going on in trying to make the whole process coming together to raise an equity source of funding for small business in North Dakota. An SBIC is a license event by the SBA, that in order to license have to have private capitalization of $5 Million, and the key is to leverage the funds from SBA, it will give them 3 to 1 leverage or a $15 Million fund. He reported that they have raised just under $4 Million at this particular point; that they are trying to wrap up the program no later that mid-September because it's a process that takes time to finalize the paperwork so that they can get up and running to provide an equity source of funding for North Dakota and contiguous states. He stated they are asking for the City of Grand Forks to take a look at an investment of $100,000 in the SBIC. He noted that Minot is involved in the amount of $200,000, Bismarck $100,000 and Fargo between $200 and $300,000; that everything else is private industry. He stated that totally they can only have 100 investors in the program by the security law. Mr. Wold stated that goal among North Dakota banks is to raise $2 Million, and Mr. Zastoupil stated they would raise $2.5 Million in banking community; financial institutions, $2.5 million, named utilities involved, (Minnkota, Basin Electric, NSP, MDU), insurance industries involved, incl. BC/BS, some foundations looking at it, UND Foundation, NDSU Foundation, and private companies and individuals (Fargo Forum). They felt hopeful that they would raise $6-6.5 Million, that leverage 3-to-1, and that they wouldn't call on all investors right away; that as long as subscribed to, would have perhaps half requested amount in the next 3-4 months, and balance paid down in next year or two. Mr. Wold stated that leverage important under the SBIC license, they have to have minimum of $5 Million and have to have a prudent management team in place before licensing can occur; that licensing requirements pretty stringent.

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Mr. Zastoupil stated that there is a definite need for this program. He stated that he wanted to talk about the management team; that this is a limited partnership; Invest America is general partner, they are out of Cedar Rapids, Iowa, and they make the investment decisions, and the investors will be limited partners; that Invest American has a great track record, not only on ROI but also with the SBA, and if government is going to go 2/3's of the money they want to make sure they get a return of their money not just on it, so they request certain guidelines in terms of management, so much experience, etc.

It was stated that there isn't an investment bank in North Dakota, only commercial banks. Mr. Wold stated that North Dakota has struggled with venture capital starting back in 1987 when Legislature authorized funding through the Bank of North Dakota to assist a start-up effort to develop venture money in North Dakota from private sources. He stated that Grand Forks' growth fund is a venture pool to assist local and county companies to help them with financial needs.

Mr. Zastoupil stated they have to look at North Dakota as region that extends outside the boundaries of the state; that there will be full time partner level person with staff in North Dakota, whose sole responsibility will be to look for deals in North Dakota. He also stated that there is a 25% guarantee against the investment by the Bank of North Dakota for the first $5 Million.

Geller asked if anything in charter that speaks geographically to where the dollars are going to be invested because from municipal standpoint would want dollars close to home; that from city's perspective our interest is not so much the return on the investment but doing some good for this area.

Mr. Zastoupil stated that there is no guarantee in the program that 100% of the funds will be spent in North Dakota, but giving tax credit to the North Dakota investor. It was noted that hopefully the program operational in 1995. He also noted that the program designed to end in 12 years.

The committee discussed source of funding: excess sales tax, growth fund, pension fund. Mr. Geller stated he would have some concerns re. growth fund monies, which are much more local in scope, but out of excess sales tax, or pension fund if they so elected. It was also noted that the city attorney hasn't look at this.

Moved by Geller and Babinchak to authorize mayor to sign the subscription agreement in the amount of $100,000 with the source of funding to be determined and with agreement subject to review by the city attorney. Motion carried.


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5. Matter of budget amendments:
a) Emergency Management - $2,132.00
Mr. Schmisek reported they are using carry-over from last year to purchase a computer, and would recommend approval.

b) Auditing Department - $1,271.00
Mr. Schmisek reported that we are completing the furnishing of two office spaces and need to purchase two chairs for personnel to work in those stations, and these are the prices from the contract in the original bid for City Hall.

Moved by Babinchak and McCabe to approve the budget amendments as presented, and to introduce ordinances to amend the budget. Motion carried.

6. Matter of time of meeting.
Chairman Carpenter stated that there is a problem with meeting time; Urban Development Committee meeting at 4:15 and this committee at 4:30 p.m.; that he had talked to committee members and to Mr. Beach re. possibility of Urban Development moving their meeting to 4:00 p.m. and Finance back to 5:00 p.m. Mr. Schmisek reported auditor's office has problem with taking minutes, recording minutes, that at last meeting he would have liked Mr. O'Leary to be at finance, and also that he would like to start attending Urban Development meetings in order to get handle on things earlier because lot of times our office coming in at end. Committee decided to schedule meetings for 5:00 p.m. on trial basis for 2 months.

Meeting adjourned.

Alice Fontaine
City Clerk

Dated: August 10, 1994.