Committee Minutes

MINUTES/GROWTH FUND AUTHORITY
Monday, January 6, 1997 - 7:00 p.m.

The city council of the City of Grand Forks sitting as the Growth Fund Authority met in the council chambers in City Hall on Mon- day, January 6, 1997 at the hour of 7:00 p.m. with Chairman Carpenter presiding. Present at roll call were Council Members Beach, Polovitz, Ellingson, Hamerlik, Hanson, Sande, Klave, Beyer, Babinchak, Bakken Hafner, Owens, Carpenter - 13; absent: Council Members Glassheim, Hagness - 2.

Chairman Carpenter called for the public hearing on the appli- cation and asked for comments:

a) Grand Forks Varmints Baseball Team

Chairman Carpenter reported that the recommendation from the council on December 2, 1996 to the Growth Fund Authority was to approve a $40,000 loan from excess sales tax for a maximum of 36 months at 5.6% interest, which is equal to the three-year treasury rate, and that there be personal guarantees from the owners of the Grand Forks Varmints.

Council Member Sande expressed some concern about lack of back- ground information and paperwork for this session.

Chairman Carpenter stated that the request was for a loan, with personal guarantees, amortized over 36 months at 5.6% interest, and reason coming through the Growth Fund is that Economic Development is the entity that can make loans/grants, etc.

Jack Geller, rep. Grand Forks Varmints, stated there would have been lot more paperwork on this, ie., cash flow projections, etc. if it had been Growth Fund application from the beginning, that early on they had spoken to Mr. O'Leary and others involved in the Growth Fund and determined at that time that that may not be most appropriate way to go (not go through economic development dollars but excess sales tax dollars) and then went directly to the finance committee. He stated the committee's recommendation then went to council and through council action referred to the Growth Fund. He stated that the intent was never to be a Growth Fund application for loan in the Growth Fund portfolio but because of council action.

Council Member Sande questioned City's position on list of creditors in the unlikely event of a bankruptcy of any of the guarantors. Howard Swanson, city attorney, stated that in the event of a bankruptcy filing, the City would be treated as a unsecured creditor, however, her question addresses two matters he would like raised: 1) that as he interpreted the motion, it required guarantee of owners, and he interprets that as all owners (any individual holding stock in the corporation) and he's not sure that is understanding that the owners have; and second matter is typically the City and Growth Fund when they utilize
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January 6, 1997 - Page 2

guarantees, which are joint and several guarantees, meaning that each one will be guaranteeing the full amount of the loan, so if any one individual failed, the remaining owners would still be responsible for the entire amount, but could collect from all owners collectively the total amount of the debt owed. He stated what he would like to have clarified is the issue of who is executing the guarantees and whether or not they are joint and several guarantees.

Mr. Geller stated that was discussed at the council meeting and it was their understanding that it was the primary owners who would sign the guarantees, and that he forwarded the list of guarantors, of which there are seven, to the city auditor, and essentially consists of the Board of Directors of the corpor- ation. He stated that in terms of whether the City can go after any or all of the guarantors for the full amount, the answer is yes. It was stated that the guarantee was intended to be jointly and severally liable. Mr. Swanson stated that if that was the intent of the Growth Fund, they should amend motion to require seven owners of the corporation.

Tim Sprague, 1918 24th Avenue South, questioned what benefit taxpayers would receive from this investment, and why would city council want the Varmints in the city. Chairman Carpenter stated that this was a loan that would be repaid at 5.6% interest which is currently what the City's investment portfolio is earning, and anticipated that the City won't suffer any loss by the loan. Council Member Hanson stated that the Growth Fund is set up to initiate funding for projects or operations that will bring money into the community, that the Varmints are a very public-spirited operation that is going to bring people to the city. Mr. Sprague also questioned whether money for bleachers was a loan; Chairman Carpenter explained that was a grant to the Park District and stands are owned by the Park District. Mr. Sprague also questioned whether there were any negatives to this that the public should be aware of; Chairman Carpenter stated that with personal guarantees, with the interest rate being charged and with the benefits of the team to the community, wouldn't see any negatives to the residents.

Council Member Beach stated that it's not only matter of bringing money into the community through economic development but a quality of life issue also.

Chairman Carpenter closed the public hearing.

It was moved by Council Member Hanson and seconded by Council Member Beyer to approve a $40,000 loan to the Grand Forks Varmints from excess sales tax for a maximum of 36 months at 5.6% interest, which is equal to the three-year treasury rate, and that there be personal guarantees from the following seven
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January 6, 1997 - Page 3

individuals: Jack Geller, David Thompson, William Coutts, Glen and Darlene Frericks, Kevin Tveter, Jim Lynch and Jud McKinnon. Upon roll call the following voted "aye": Council Members Beach, Polovitz, Ellingson, Hamerlik, Hanson, Carpenter, Sande, Klave, Beyer, Babinchak, Bakken, Hafner, Carpenter, and Mayor Owens - 13; voting "nay": none. Chairman Carpenter declared the motion carried.

ADJOURN

It was moved by Council Member Hamerlik and seconded by Council Member Beach that we do now adjourn. Carried 12 votes affirmative.

Respectfully submitted,



Saroj Jerath
Deputy City Auditor