Committee Minutes

MINUTES/FINANCE COMMITTEE
Tuesday, March 10, 1998 - 3:45 p.m.

Members present: Carpenter, Babinchak, Bakken, Hamerlik.

1. Application for property tax exemption by Conte Luna Foods
Division of Philadelphia Macaroni Company for processing area
addition to the existing processing facility.
Pat Downs, Grand Forks Development Foundation, reported that Conte Luna is doing their fourth expansion since first locating in 1990, seen tremendous growth in their company to 70 employees, and have asked for assistance several times in the past and Conte Luna has always delivered jobs promised and met their ends of obliga-tions that they've done as far as incentives granted them. He noted that there were several other options except Grand Forks for this expansion (in Philadelphia itself, and another plant there also, and also durum mill being built in Minot), and many reasons to be here from economic basis (plant and management here and existing lines here). He noted they put together a package that would be fair to the City and to the company to get them to expand here and tax abatement was part of that, along with some things through Growth Fund. He noted that this will be largest plant in their system and even into the future there could be further expansion (close down Philadelphia plant and everything move to North Dakota).

Claude Smith, general manager, reported that new lines will be expansion of existing business, that they are an industrial pasta supplier, selling to Gerber Baby Food, Pillsbury, General Mills, Kraft. etc., that there's lot of business out there for them as they have good reputation and see the opportunity to do more than what currently do and which they do very good. He stated that there are some large customers who have expressed strong interest
in their company as a supplier, but the problem they have is that they are sold out (run 7 days week 24 hours day and shut down for holidays), that they have no more capacity and are in juggling mode, and need additional expansion to service existing customers base and to solicit new customers who have expressed interest and some of their existing customers want to expand their product also. He also noted they have been doing some work with Dakota Growers (packing half of their commitment) and maybe 15% of business.

Mr. Smith reported they have 67 full-time employees (fluctuates sometimes) and will add 18 additional jobs so up to 88 until do another expansion.

Hamerlik asked if expansion will do anything to create any problems for City re. Code, etc. Mr. Carsen stated he didn't know of any.

Mr. Carsen reported that each time they expanded they received 5 year expansion on a 20% step-down each time, total number of dollars and tax savings, about $236,000 for all three projects for all exemptions - total tax savings. He reported that first exemp-tion expired in 1995, first expansion terminated in 1997 and this MINUTES/FINANCE COMMITTEE
March 10, 1998 - Page 2

one terminates in 2001; that plant and first expansion fully taxed currently or for 1998. Mr. Downs stated they were in competitive nature, before expansions came here, and this time asked for help but couple other communities also asking. 2.5% over 10 years, $250,000 est.

Mr. Schmisek reported they would need to establish public hearing on April 20. Carpenter stated his preference would be to establish public hearing but not take formal action as there will be an application going to the Growth Fund and would like to see looked at together.

Moved by Hamerlik and Babinchak to establish date for public hearing on April 20 or as soon thereafter as possible.

It was noted that Conte Luna cannot start on project until this has been done (Mr. Schmisek will do some review on date of hearing); application has been submitted to Growth Fund. Mr. Downs reported that in previous applications they have done buydown on PACE loan which was a grant, and in current application buydown on PACE loan is to be loan to be paid back at conclusion of the project, and other incentive doing is direct lending with the Revolving Loan Fund (EDA fund) so doing some lending because all funds repaid along with interest.

Upon call for the question, the motion carried.

2. Matter of selection of underwriter for Corporate Center bond
issued.
Mr. Schmisek reported he had visited with Al Erickson, Springsted firm, talking about modified plan and having Springsted create one page description of project and what would hope to achieve through financing, would need to establish a subcommittee as did for the Aurora project and perhaps couple members from this committee, himself and someone from Springsted. He stated they wouldn't do as large advertising project since only $3.7 Million item but would have to set up to interview underwriters and do here rather than in Minneapolis and could start that process if this committee recommends a subcommittee Monday night, should be quick process and come back by mid-April for the underwriter on this project. He stated they are looking for consensus on that interview process, that subcommittee choosing 4 - 5 regional underwriters, let Springsted do a quick write up with firms to be interviewed and bring back to committee, and Monday night approval of subcommittee to work towards selecting the underwriter.

Moved by Hamerlik and Bakken to establish Council Members Babinchak and Carpenter, the city auditor and Al Erickson of the Springsted firm as the subcommittee for the selection of the underwriter for the bond issue. Motion carried.

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3. Matter of establishing polling places for June 9 election.
Mr. Schmisek presented listing of tentative polling places for the primary election because still trying to affirm by Monday night, several are outside city ward and there is a restriction within State law where cannot go outside the ward, and have asked Secretary of State to grant us a waiver in this case. He stated if not granted waiver will have to amend on council floor. Moved by Bakken and Babinchak to approve listing of polling places for the election. Motion carried.

4. INFORMATION.
Hamerlik stated that briefly have discussed TCI contract, that not only did he get his bill but heard from several others, his concern was how they roll their rates, they received change in billing without customer doing anything in amount of $2.84/mo., and would hope would look at cable franchise when it comes up. Mr. Schmisek stated that Federal government took local control away from the city, no control over rate structure. It was noted that contract with TCI was not a conclusive franchise and will run for another 7 years.

5. Information - matter of property taxes.
Mel Carsen, city assessor, reported that they generally follow the market on a real estate assessment, that they look at previous year's sales, and adjust this year's assessment to those sales within 5%, so whatever the last year's sales dictate, they set the 1998 assessment based at least 97% of what sold for. He reported that all the information isn't in for 1997 sales and they have a very skewed market, have a market that was normal for 3 1/2 months, and anything but normal after that. He reported that he had talked to the State Tax Department and asked them if we did not equalize to 95% would they in fact move us to that or greater, and they are not sure what they would do; that he thinks there's good possibility that for 1998 they could probably equalize their assessments somewhat below 95% of what the 1997 sales would indicate. He stated the reason for asking is that it isn't very popular to raise people's taxes and raise evaluation, and he's leaning towards not making blanket change on residential properties by way of an index, but wanted to run that by this committee for their opinion.

Hamerlik stated that residents feel impact because of new mechanical equipment (water heaters, furnaces, electrical panels, etc.) and asked if one particular house sold over assessed value, would it be increased. Mr. Carsen reported they wouldn't adjust sale properties without adjusting the whole neighborhood by equal percentage.

Mr. Carsen reported what they are doing with flood-damaged restoration: if the house is occupied they are assuming that the mechanical equipment (furnaces, water heater, etc.) is back in
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place, if house not occupied they are assuming that the mechanical has not been restored. They are checking all properties that had
first floor damage that are not being bought out; those that had first floor or garden level damage, they are adding back that portion of the restoration which was done on February 1. He reported that concerning basement finish, they are not adding any basement finish back in that was damaged by the flood even though it has been restored in some cases because for the most part are not restored. He stated that if there is foundation damage they are restoring that so most of the houses that were flood damaged are going to have a slight increase over 1997 without doing anything to the overall valuation. He stated that the State would test 1997 sales to their 1997 pre-flood value unless there was damage to the property and can make an adjustment for that. He reported that sales they have in were at somewhere between 90-92%, about 8-10% behind what market should be at. He reported they have an artificial market, after flood tremendous demand for houses that were dry, and even now more than adequate demand for houses that are in the affordable price range, and hesitates to use that market to begin to set values when presumably short-term market.

Mr. Schmisek reported several concerns, keep in mind that inflation continues, have expenses as a city, and people aren't asking for less service. He stated that when delay an increase this year, do they double increase next year to come back and people don't remember that you gave them a break in the one year. He stated that he thinks it is an artificial market.

There was some discussion re. not assessing basements that were finished, while others who didn't have damage are being taxed. Mr. Carsen stated they won't be assessing for one year, that problem is that they had to make some hard choices as to how much time and manpower had to do, some more important things that had to be done. He stated they are way behind where want to be, could still go back and do it, but found that most not fully back on February 1. It was also noted that they cannot go by permits taken out, because not always done. Mr. Carsen stated that lot of basements done without permit, so couldn't only do those who took out a permit - and if do all looking at 7,000 additional properties. Bakken agreed and stated that they will be doing a lot of basements this summer with volunteer labor and free materials, and this is open to anyone - considering 2,000 homes. Mr. Schmisek reported that Pat Burger, United Way, stated allocation of funds goes beyond income level, and check ability to pay and go beyond income level.

Carpenter stated that he wasn't sure there shouldn't be some general adjustment because following year larger increase, doesn't think market artificial, and wouldn't like to see February 1, 1999 if increase taxes by 15%, perhaps do some adjustment if justified based on sale prices. Mr. Carsen stated that State would force City to be within the 95% but not for 1998. Mr. Schmisek expressed
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concern re. holding a year and then double digit adjustments across the board without some adjustment this year. Mr. Carsen stated
that sales indicating that houses selling for more than were year ago - 7 to 8%, gaining new mechanical equipment, new construction and losing those being bought out - without proper percentage increase anticipating 2% increase and gets back to 1996 valuation. Mr. Carsen stated that from statistics they can support some increases and would look at all their numbers before doing that, but asked if it was prudent to increase based on the market they had in 1997 - to some lesser extent than the full extend. Com-mittee stated that inflation there. Hamerlik stated that people really concerned re. property taxes. Mr. Carsen stated they are supposed to have their values set by April 1, with Board of Equalization on April 14 but not going to make that but have to extend that, that once make decision can have the new numbers in 2 to 3 days but need to decide by end of March. It was also noted that Grand Forks has highest mill rate of four largest cities in the State. Information.

Moved by Hamerlik and Babinchak to adjourn; meeting adjourned at 4:45 p.m.

Alice Fontaine
City Clerk

Dated: 5/10/98