Committee Minutes

MINUTES/FINANCE COMMITTEE
Tuesday, September 27, 1994 - 5:00 p.m.

Members present: Carpenter, Babinchak, Geller, McCabe.

1. Application for abatement of 1993 taxes by ND Automobile
Club, 2701 South Columbia Road.
Held in committee for 2 weeks.

2. Matter of offer from Red River Valley Chapter of the American
Red Cross to purchase City property at S. Washington Street
and 40th Avenue South.
Mr. Schmisek reported he had discussed this with Chief Aulich and that this is not a property they would anticipate using anytime in the future even if they don't close the deal on the other property they are considering. Chief Aulich reported this property purchased in about 1980 when it appeared the city was going to expand in a southeasterly direction, and in past several years city expanding in southwesterly direction so they are looking more towards that area and doesn't anticipate the fire department ever having any use for that property at 40th Ave.S. and S. Washington. He reported they are now negotiating on property in the area of 36th to 40th and South Columbia Road. The committee noted that if the City does sell the property, it would have to be declared surplus and advertised for sale. Mr. Hollifield of the Red Cross stated that there are legal rulings that the Red Cross is a semi-official entity of the U.S. Government, if that makes a difference.

The matter was held in committee for 2 weeks, with instructions from the committee for the city attorney to research legal question re. Red Cross having some federal government status and the city auditor to send a memo to other departments regarding their need for the property.

3. Matter of financing for Burdick's Resubdivision.
Mr. Schmisek reported that the matter of the housing units in Burdick's Resubdiv. has been before various committees, that part of the process of building these houses is that there is a $250,000 local match required in order to pay for the construction that's going on; that in visiting with bond counsel Lynn Endorf, and Wally Dornfeld, Springsted, in Minneapolis, there really isn't a bonding mechanism that can be used to fund construction of private residences; John O'Leary is visiting with some of the financial institutions in the community to see if through some other mechanisms they could actually borrow $250,000 at a bond rate of 6 1/2% with the institution holding that as a tax exempt status, etc. and he hasn't finalized that, but is looking for preliminary approval on this item to continue to pursue that type of financing, and if that should fall through, then he asked that committee consider the possibility of a loan from Loan and Stabilization Fund with payment back at 6 1/4% interest from the lease payments on those properties over a 10-year period.

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Terry Hanson, Community Development, reported that on February 7, 1994, the council approved authorizing a TIF for the Burdick's Resubdivision, and through lots of conversations with bond counsel, the city attorney and Mr. Schmisek it was determined that perhaps the project is not eligible for TIF. He stated that the city assessor has determined that the property is taxable, that was one of the concerns; the Grand Forks Housing Authority will ultimately own the property and they are a political entity, however the property will be under lease for a year or more by the tenants and makes it eligible for taxation. He stated that what they are requesting is, that rather than the TIF, if the council would approve a fifteen-year tax abatement on this property, and use the revenue off the property to pay back the loan. He stated this is actually better for the City in that the HOME program under which these houses are being built requires, starting with 1994 funds, a 25% match on behalf of the communities using the funds; the present value of the 15-year tax abatement, if one were granted, would be considered the match by HUD or by the State; and under the tax increment financing only the savings and interest would be considered a match. Mr. Carsen advised committee that when a governmental entity owns property that is under lease to a person who is not exempt from real estate taxes, there is a leasehold interest assessment against the tenant, if the lease or practice of leasing or occupying that space is for 12 months or more, they assess that property as if they would own it, and the tax bill actually goes to the tenant, but in this case the Housing Authority would agree to pay that tax for the tenant, but there is a tax liability to the tenant actually. Terry Hanson stated that if banks have interest rates that are favorable they would go after the bank financing first, and if not, go with the City. He reported that the rent on these houses, which is based on fair market rent established by HUD for a four or five-bedroom house in the city, will be approx. $608/mo. for a four-bedroom house, and $705 for a five-bedroom house (incl. utilities). These houses are required, under the HOME Program regulations, to be affordable, and to be affordable have to be at or below the fair market rent. He reported that they have families lined up for 7 of the 11 houses, and that between those 7 families there are 35 children. He also reported that maintenance on houses will be taken care of by the Housing Authority. He also reported that families must also be under Self-sufficiency program and to become self-sufficient within 5 years.

There was some discussion re. length of time for the tax exemption, and Mr. Schmisek stated that he didn't think, if the City loaned the money, that they would want to go beyond ten years; and that he would recommend that they pursue though banks first. Mr. Hanson stated they would pay back when cash flow would allow; that the reason they picked 15 years was that was the length of the TIF.

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Mr. Schmisek stated that his suggestion would be to give preliminary approval to pursue financing through the banks with the City giving loan, if that falls through, but they need tax abatement to go to the banks.

Mr. Hanson also reported that they have 11 houses under construction and are seeking financing for all 11 of the houses, at $22,000 per house. He reported that under 1994 funding they will receive $480,000 of same funds, which they have not received, and which was intended to build 5 more houses, for a total of 16 houses. He stated that they have to have 25% match on the 1994 funds, but the present value of the abated taxes would give them the match to cover 1994 and 1995 match; however, he stated he thinks they would continue to come back and ask the City to abate the taxes on the new houses as they go and always keep pushing the dollars ahead for the source of the City's match. He stated that lot value is not figured into value because they were purchased with federal dollars. He stated that fair market value of houses would be between $105-115,000.

Mr. Carsen asked if they were asking for an exemption on the houses currently under construction; Mr. Hanson said yes; and Mr. Carsen stated there might be a problem on that because he thought the exemption has to be granted prior to the beginning of construction. Mr. Hanson stated that if abatement cannot be granted, their alternative would be to ask the City to contribute the tax revenues from these properties for the number of years back towards the match requirement of the HOME Program. It was noted that would be 27% of the tax dollar and that may change the length of term, etc.

The matter was held in committee for 2 weeks, with instructions from the committee that the city assessor and the city attorney review whether the tax exemption can be allowed at this time.

4. Matter of tax exemption for TAG.
An application by Technology Applications Group, Inc. (TAG), 4957 10th Avenue South, for a 100% five-year property tax exemption for new or expanding businesses was presented to committee. (The project business is a research and development center engaged in a proprietary technology for the electrochemical coating of nonferrous metals, and expansion will allow operator to build production line capable of coating magnesium: aerospace, automotive, computer and industrial tools). Mr. Schmisek stated a public hearing would be required and because of publication requirements couldn't be held until November 7. Bill Elmquist, general manager of TAG, was present, stated that tax exemption is for the building expansion.

It was noted that the building that TAG currently in (6,000+ sq.ft. in FTZ building) was under a tax exemption through 1992

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and in 1993 became fully taxable; and that is only subsidy, no growth fund monies. City will pass costs onto TAG under lease agreement.

Mr. Elmquist stated that what they do is make up a chemical solution, coat other people's parts, ship them back to them and they put into their assembly, but in the future Grand Forks will become one plant that does do coating, and another plant that makes the chemical concentrate and ships out to other coaters so they can use this technology. He also stated that most of the jobs they create are high level jobs (doctorate degree in chemical engineering, master's degrees in chemistry, etc.)

Moved by Geller and McCabe to recommend preliminary approval of the exemption on a graduated scale of 100% for the first year, 80% for the second year, 60% for the third year, 40% for the fourth year, and 20% for the fifth year, subject to review of the city attorney and the city assessor and to set the public hearing for November 7, 1994. Motion carried.

5. Matter of bonds for expansion of FTZ building.
Terry Hanson reported they have received bids for general construction in the amount of $389,000 (they have not received bids for mechanical or electrical work), that the architect estimates that at $100-125,000, with a total contract cost of $625,000 to $650,000. Mr. Schmisek reported they would need preliminary approval, subject to review of bond counsel and financial advisors, and public hearing on November 7.

The committee asked Mr. Elmquist if they had looked at the Growth Fund, and he stated that they would like to because they are going to be spending so much money in analytical equipment that they would like to look to the Growth Fund for production items.

Moved by Babinchak and Geller to grant preliminary approval of up to $650,000 in bonds subject to review of bond counsel and financial advisor with a public hearing set for November 7, 1994.
Motion carried.

6. Matter of proposed amendment to Civil Service Code to allow
employee with break in service due to on the job injury to
retain his/her seniority.
Jay Graba, personnel officer, reported he had sent copy of proposal to the city attorney, but has not received any response. Held in committee for 2 weeks for city attorney's review.

7. Matter of job description for deputy fire chief.
Chief Aulich reported that main reason for the change is that they were able to appoint a training officer, and before that the assistant fire chief was the training officer; went through and revised job duties (the incumbent will be leaving around first of MINUTES/FINANCE COMMITTEE
September 27, 1994 - Page 5

the year), and jobs do change. He reviewed revised job description, went through personnel and went to public safety and they recommended approval. Mr. Carpenter questioned whether they had considered any change in organizational structure that might eliminate this position if the incumbent leaves. Chief Aulich stated it was his opinion that it wouldn't work nearly as well to parcel out duties to other individuals as what they are proposing to give the deputy fire chief as his job.

Moved by McCabe and Babinchak to approve the new job description.
Mr. Carpenter stated that he still has some concerns about whether we need deputy fire chief, and would like to see some written discussion of what might be alternatives. He stated he believes that they need to look at ways to eliminate management layers and finding better and cheaper ways of doing things, and deputy fire chiefs are an expensive position, and if can save money by parceling out duties and get by as well, would potentially save some money; that this is only way foresees going forward in years ahead to have money to utilize for employee raises, training, etc. and when opportunities such as this comes up have to seriously look at the alternatives, but at the time the vacancy takes place then should have gone through analysis of whether we actually need the position. Chief Aulich stated that he supports this position, that they did actually drop a position 8-10 months ago, and it's conceivable they will drop more, as fire department becomes more efficient. Mr. Carpenter stated he would like to see that come to council before process actually initiated. Chief Aulich reported they did take three people off fire suppression forces, one off each shift, because they don't have their own dispatch center - through PSAP in the police building; that those 3 positions vacated and were proposing to take those monies and hire a third fire marshall, a training officer and a receptionist, but ran into difficulty with the receptionist position and was not able to indicate necessity for that position; but filled other two positions. He stated that the organizational structure of the department about the same, but working of the department is handled more by work teams - hazardous materials work team, public education work team, the emergency medical services work team, and those people get together and decide how best to provide the service; but transforming that type of operation into a re-organization, hasn't really tackled that yet; that there may be some ways to reorganize better than we are now.

Jay Graba stated that perhaps every department ought to be asked to take a look, and maybe is something they might want to start suggesting to the departments. Mr. Carpenter stated that every department should take look at that, to take opportunity when someone leaves to raise the issue, and make changes when they are justified.

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Mr. Graba stated he hadn't evaluated job description for deputy fire chief but would do that before next Monday. Chief Aulich stated only change he could see that might increase grade was in education (going from high school education to a four year degree), but change in duties might off-set that. Mr. Carpenter stated he would not be in favor if what they were doing changed the job description enough to upgrade the position; if that's the case, have to change job description to insure that it doesn't increase the grade; and they need to give real serious considera- tion to that if they determine they can't eliminate the position eventually.

Upon call for the question, the motion carried.

8. Matter of ordinance allowing tapping fees.
Held in committee.

9. Applications for sidewalk assessment cancellation under
CIP policy for low and mod. income:
a) 1132 South 12th Street
Mr. Schmisek reported that this person has submitted tax statement to their office for review, the exemption CIP has allowed is based on a household income, the applicant qualifies for the exclusion, the sidewalk assessment cost is $923.89, and recommended that exclusion based on the policy. Moved by Geller and Babinchak to approve sidewalk cancellation for 1132 South 12th Street in the amount of $923.89. Motion carried.

b) 2216 2nd Avenue North
Held - assessment not going to be levied until next year.

10. Matter of setting license fees.
Held in committee (license fee recommendations sent out with the budget).

11. Temporary and overtime statement for August, 1994.
The committee reviewed the statement. Moved by Geller and McCabe to approve. Motion carried. (committee only)

12. Matter of City-owned property in City Center Mall.
Dick Jackson, City Center Mall, reported that they have more tenants who want to rent; Bon Voyage wants to lease space vacated by Craft Shoppe and reviewed work that needs to be done, and asked for authorization to do renovation; and have tenant for front portion of the building (upstairs rented), and cost would be approx. $12,000 for renovation of the space. Moved by Babinchak and McCabe to approve expenditure of $12,000 from Deficiency Fund to be paid back through lease income. Motion carried.

Mr. Jackson reported that when they signed lease with the Post MINUTES/FINANCE COMMITTEE
September 27, 1994 - Page 7

Office he had made tentative commitment about signing the back of
that building and was trying to get some funding through Community Development but nothing available right now, and that he's been getting a little pressure from the Post Office, that Cook Sign Company has come up with a figure of about $7200 to install and would like to finish back part of the building. Mr. Schmisek stated he would like time to look at. Held in committee for 2 weeks.

13. Matter of RFP for audit services - Information only.
The city auditor distributed information to the committee for their review, with item to be discussed at the next meeting.

14. Matter of polling places for November 8 election.
Mr. Schmisek submitted listing of polling places and inspectors of election for the November 8, 1994 general election. Moved by McCabe and Geller that the polling places and inspectors of election be approved as listed. Motion carried.

15. Matter of special meeting and agenda items.
Mr. Schmisek informed committee that they will need to meet on Monday at 6:45 to go through the bond resolutions that will be on the agenda for the various issues, and also that Wally Dornfeld wants to visit about concerns they may have as bond consultants for the number of small issues City doing, and how it may impact City's bond rating if continue to do that.

Meeting adjourned.

John M. Schmisek
City Auditor

Dated: 9/28/94.