Committee Minutes

MINUTES/FINANCE COMMITTEE
Friday, May 29, 1998 - 1:00 p.m.

Members present: Carpenter, Babinchak, Bakken, Hamerlik.

1. Consideration of protests of 1998 assessor's value:
a) Terra International, Inc., 2200 North Washington Street.
Mel Carsen, city assessor, reported he had provided each member of the committee a copy of the report and the property owner; the report lays out what the 1997 value was including a damage adjustment of totaling writing building off for 70% of the year, so value comes to $109,900 but prior to that value was $391,000; that they lost building to the flood (fertilizer pushed walls out) and they rebuilt in summer of 1997, slightly smaller than the old building, but is a better building, and made a new appraisal which comes to value of $1,125,100 for building and land. He stated that the owners would like to see that value increase phased in, that they do not have the authority to do that nor do they have an exemption of any kind in place so have no choice but to value the property as to its value on February 1. He stated he has photos of old and new buildings.

Jim Schmidt, regional manager for Terra International, stated they were flooded and made decision to rebuild and did so with building up to the 100-year flood code and took extra measures for this not to happen again, and that loss of product out of a facility isn't good for the community or Terra (ended up with losses up to $5 million at facility) and concerned with tax base here each year compared with facility had before and had no plans of doing what they did (had put new roof on former building). He stated that agricultural environment is not good and made decision to stay in the city and to have yearly real estate taxes is lot of money for their corporation, want to contribute in the community but would like to see some type of phasing in as they've had lot of losses and don't have lot of customer base back due to the flood. He reported that the extra expense they took to make changes - con-crete walls 16" thick which was $130,000 more than wood structure, and brought facility up to the 100-year flood plain so moving dirt out and replacing was another $60,000, around $200,000 additional cost for this project and if should happen again, shouldn't have problem. He stated he is not disputing value but disputing they've been long term business in town and employ lot of people and pay big salaries and spent lot of money fighting flood as everyone else, stayed and rebuilt in town and to have tax base of $30,000/ yr. is too much. He stated his concern is businesses staying here, where are they at, and that's big concern of his - need to make sure that the businesses that are here are going to survive here. It was noted that taxes for 1997 at $7500 and now looking at $29,051 for 1998. He stated that he knew taxes would increase but some of the dollars spent on the building were to protect the property - that previous building was adequate structure to operate their business for another 20 years, had spent $65,000 on new roof spring before and due to the flood it wrecked the building and had to rebuild; that with building costs in this town and labor, esca-
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lated above normal conditions, but made decision and didn't go through tax structure to see what taxes would be but didn't think four times previous amount. He stated they want to pay fair share of taxes in community but need to make living and are in business to make money, thinks there needs to be consideration given as they stayed in town and rebuilt facility and maintained employee base for this community - something should be looked at for businesses that are continuing to be here -and everybody up against this and to alleviate some hardship after coming off hardship, thinks needs to be some consideration, either postponing or moving it down the line.

Carpenter stated that when acting as Board of Equalization they determine value and not necessarily able to phase in or postpone, and will have to uphold value but there maybe something they can apply through - not as a tax exemption but way of potentially reducing tax burden, but is not guaranteed, and Mr. Carsen can provide copy to them. He stated this would be only avenue they would have - not through value but maybe able to assist through this and is only potential way of assisting them. It was noted that the deadlines are passed but have found clause where he should consider pursing and making application for.

Mr. Schmidt stated that $200,000 of the $1 million was due to bring building to 100-year flood plain, and even consideration on the tax base of $200,000 would help him. He stated that there were things they did that were not normal at one of their other fertilizer buildings and have 12 in North Dakota (foundation and walls, etc.) Mr. Carsen stated their value is slightly below cost and have not added for additional cost in raising building to different eleva-tion but considered building as it sits; have included value of the 8' concrete bin walls and exterior walls.

Moved by Babinchak and Hamerlik to uphold the assessor's value of $1,125,100 and ask that Mr. Schmidt look into exemption that was brought forth. Motion carried.

b) David and Catherine Perry, 610 North 25th Street.
Mr. Perry reported that their assessed value has been adjusted downward by assessor's office, which he appreciates, but several things on the new appraisal that he didn't understand, first of all appraisal was $1,500.00 more than the assessment done by Terry Anderson and no indication as to why. Mr. Carsen reported that Mr. Anderson made appraisal in February, 1998 at $145,000 and did state in "as is" condition, which they assumed was flood-related damages that were not restored were already included as a deduct so assessor's value of $146,500 assumes those flood-related damages that are still there as if it had been repaired and now are deducting off $3,000 so really compare the appraisal of Mr. Anderson by $145,000 to our value of $143,500.

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Mr. Perry stated that he discussed with Mr. Herz the matter of property across the alley from them, 3 houses that the City has acquired and thinks that has impact on their property value until something done with those houses (repair or demolition) and is deterrent to the value or negative influence on the value of their house, and concerned about way City is neglecting those properties and impact on their property value; that Mr. Herz stated that they can't take that into consideration but doesn't understand why not.

Mr. Carsen stated they have listing of sales from that neighborhood in the proximity of damaged property and four current askings, sales of various properties, price and date, and compared sale price against 1998 assessor's value less damage existing in pro-perty, and ratio to relationship between sales price and assessor's value. He stated that all except one are in the high 80% or 90% of what sold for. He stated that if this situation is left unat-tended to are going to have problem, not only in this neighborhood but many neighborhoods but doesn't think it has affected the mar-ket, and that's not to say that the City doesn't have responsi-bility to take care of the grass and boarding up houses, etc. but as far as measuring in the market place don't see an adjustment would be warranted based on the evidence.

Hamerlik asked when can they discuss what the probabilities are because he hears people in the area saying they are willing to pay taxes but not more than their share, but of more concern is pro-perty value based on surroundings they are living in, so would like to see if comments can be made re. what's going to transpire, and
need to address that in consort with this, either houses maybe shouldn't be taxed at that amount or find out what agenda is to take care of them.

Dana LaPlante, rep. Urban Development, stated property being addressed is being taken care of and is getting plan together to take care of these areas more efficiently, do more beautification to them, having community meetings with neighbors, getting neigh-bors involved in what can do better for these properties to make better, that they have been mowing area and had contracted out and they finished yesterday - however, there were some comments that this has not been done. He stated they have lot of tree removal to do. He stated there are some properties in limbo - not sure whether demo or rehab and those decisions made, and taking care of houses (houses being broken into weekly) and have problem with that, meeting Tuesday with police department to devise plan and get neighborhood involved, coding vehicles and workers so highly recog-nizable so whoever in house is supposed to be in the house (also contractors) so neighborhood generally watching itself. Hamerlik asked what is timeline because things don't seem to be moving, and not only in this neighborhood and demand for action throughout the whole city. Mr. LaPlante stated if any problems/ questions, to call him at Urban Development.
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Moved by Hamerlik and Babinchak to uphold assessor's new value of $143,500. Motion carried.

(It was noted that the reason for reduction because of appraisal that has come in since that time by the homeowner.)

c) Russ and Nancy Melland, 620 North 25th Street.
Mr. Melland stated he has letter from Mr. Carsen recom-mending reduction, doesn't disagree with his result, but differs somewhat in way came about it and understands problems city is having and difficulty with the neighborhoods and they are recom-mending $68,200.00 on their property which is agreeable. He stated primary reason and concern they had with the tax assessment was the issue of condition of the neighborhood and using this forum to address that issue somewhat. Babinchak stated that because of previous discussion hope they will feel confident that they will try to address that shortly. Mr. Melland stated that one of the issues he would raise to the board is opportunity to speak to them about neighborhood is that neighborhood is a bowl and bottom of bowl is in backyard of properties City acquired - very concerned with what City does with those properties because if rehab those properties and raise elevation of those properties above the flood stage, and people impacted would be adj. four-plex which is next lowest place , and concern not so much with 500-year flood but with an annual melt and they take water in that block every year and water was encroaching on properties (heavy rain causes bowl to fill and if raise elevation of yard will shift burden onto the neighbors. (before flood shot elevations in the area to find low spots and that's more long range concern and tied with the decision that City makes with respect to development/redevelopment/ demolition of those lots. Committee stated those comments appreciated and that should be directed to staff so they know that.

Moved by Babinchak and Hamerlik that we reduce value of the property as follows: Land $16,000, Building $52,200, for a total of $68,200. Motion carried.

d) Mildred Koth, 706 North 25th Street.
It was reported that Mrs. Koth chose not to be here, retired person in her 80's. Mr. Carsen reported they have made a new appraisal of this property using comparable sales and seems to support value between $89,800 and $93,150, and assessor's value $87,900 and recommended not changing the value. He stated that one of her concerns was that she lost her hardwood floor. John Herz, assessing, stated he had visited with Mrs. Koth yesterday and explained and she's fully aware of what assessors did and is acceptable of that.

Moved by Babinchak and Bakken to uphold the assessor's new
appraisal of $87,900 on the property. Motion carried.

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e) Valley Markets, Inc., 1631 S. Washington Street.
Gordon Caldis, attorney for Valley Markets, reported they had been furnished with a copy of the assessor's newest recommenda-tion dated May 27, 1998 and if that recommendation is approved, Valley Markets would withdraw its appeal.

Moved by Babinchak and Bakken to approve the assessor's valuation of $994,900. Motion carried.

f) Lois Stawitcke, 636 49th Avenue South.
Mr. Carsen reported that Mrs. Stawitcke is from out of sate and purchased lot in September of 1997 for $25,000 plus she assumed special assessments of $7,604, bringing total to $32,604, and assessor's 1998 value is $26,100 which is about 80% of the sale price; that he furnished her with a copy of the report, and have not heard from her. He stated that special assessments unpaid are always included in the assessor's market value as if paid. Moved by Babinchak and Bakken to uphold the assessor's valuation of $26,100.00. Motion carried.

2) Matter of underwriter for corporate center bond issue.
John Schmisek, city auditor, distributed copies of report from Al Erickson, Springsted, Inc., and reviewed proposals from Dain Rauscher and Norwest; that Dain Rauscher was fixed rate issue for 15 years and Norwest gave proposal for 10 year variable rate bond, but City is looking for a schedule of 15 years based on lease they will bring in and guarantee making payments. He stated that in both issues if things work out right and lease payments come in correctly, can pay off early. He also reviewed proposal from Norwest to do a swap, which means you buy fixed rate but if reaches that point and would have savings under variable rate swap amount that would be made if were to do a 15-year swap. He reported that Springsted's letter states that Norwest's corporate policy is to allow only 10 years on this swap arrangement, and would try to make a case to his superiors if City insisted that we needed 15 years but couldn't guarantee they would approve and granting this request would be significant departure from current policy. He also noted that City would be liable for the swap contract for the remainder of 15 years even if they were to allow the 15-year swap rate and paid off debt early with early lease revenues. And that means is that City would have to ask out of that contract with them and if didn't occur is that if rates after the 10 years moved or shifted or wanted to do buyout, that if the interest rates had dropped 100 basis points at time to do cash settlement with them, the City would have to pay $47,000 to Norwest to get out, and if interest rates had gone up 100 basis point, Norwest would have to pay City $47,000. He reported that Springsted's recommendation was that "not being able to lock in the swap rate for 15 years changes the complexion of the analysis" and that while the variable rate shows
itself to be slightly less costly over the term of the lease, they have determined that there are items associated with this that are
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unpredictable and different than those that were originally explained, and committee/council have to determine how to enter into this, that there are some savings going with the swap rate, but there are lot of complexities; and determine whether to go with Dain Rauscher proposal at a fixed rate or with Norwest. Norwest did furnish Mr. Erickson of Springsted with a run for a fixed 15-year straight run and had a true interest cost of 6.74% that was in the ballpark with what Dain Rauscher amounts were. He stated that Dain Rauscher gave several different proposals range from 6.6% to 7% Committee felt comfort level to go with Dain Rauscher. Mr. Schmisek reported that Dain Rauscher's proposal included cost of insurance but didn't know if Norwest's 6.74% included that.

Moved by Babinchak and Carpenter to accept proposal of Dain Rauscher as underwriter for the corporate center.

Babinchak stated that Norwest first proposed at 10-years and City wanted 15 years, and they gathered more information and changed as asked more questions; that Dain did Aurora bonds and do lot of business in North Dakota and in this region and feels more comfort-able with proposal and guaranteed rates. It was noted that to accept Norwest's proposal of changed rate, they would have to change corporate policy. Mr. Schmisek reported that the proposal called for a 15-year rate based on certain assumptions and Norwest came in with a 10-year factor, and with interview process there was more homework done by Dain.

Upon call for the question, the motion carried.

g) James Bronson, 3712 Cherry Street.
Mr. Carsen reported that Mr. Bronson indicated he would not be here, that they communicated with him and he was satisfied with their new valuation. He reported that they first thought that all the damage had been restored, but since protest rechecked, work was done in less than workmanship-like manner and lot of things that need attention; he purchased property after the restoration had been done for $77,000; assessor's new recommendation is $79,300 and he feels that would represent a fair value. Moved by Babinchak and Bakken to reduce the value of this property as follows: Land $13,000, Building $66,300, for a total of $79,300. Motion carried.

h) Best Western Townhouse, 710 1st Avenue North
Mr. Carsen reported that rep. for Best Western would not be coming as he had a funeral out of town, and that he had discussed information with him. Committee asked whether they want to get into adjusting value year by year based on prior year's occupancy; Mr. Carsen stated they wouldn't, but what's unique about this one is that a big part of his business base might well be from the downtown sector and if that is hurt, could be adjusted. It was
noted that they didn't adjust for Ramada or Holiday for lack of business when Canadian tourist traffic changed. Mr. Carsen stated
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that state-wide motel occupancy about 65%, and a full-service motel little bit less than that - 58% and 60%; the Ramada Inn are cur-rently about 80%, Holiday about 72-3%, and that during 1997 those two motels increased occupancy and in 1998 leveled off; and Town-house is 13.5% down from prior to flood. Hamerlik stated that anybody who came in with profit and loss statement on business and could be fluctuating all businesses in the city, and asked whether that was up as well as down (noted they only have right to pro-test). Mr. Carsen stated that their current valuation pre-flood is conservative based on Holiday and Ramada Inns and he didn't seem to disagree with that and also shared with him occupancy numbers for his motel before the flood and now little below, and whether it's enough to justify reduction, stated he didn't make recommenda-tion but that this could be done. Mr. Carsen reported they have repaired flood damage and made better because new, but have pre-flood value on the property. Mr. Carsen stated value same since 1992.

Moved by Babinchak that we uphold value of $2,329,300 for this property; Bakken seconded the motion. Motion carried.

Mr. Carsen stated that reps. may be at council meeting Monday evening; and he will notify Mr. Madison of Townhouse Motel.

i) Howard and Kari McGlynn, 307 Chestnut Street
Mr. Carsen reported McGlynn's have withdrawn their protest. Moved by Babinchak and Hamerlik to uphold the assessor's value of $53,600. Motion carried.

j) Thomas and Irene Wrenn, 2929 Shadow Road
Mr. Carsen reported this property was heavily damaged on lower level in 1997 flood, since then those improvements have been restored and also included new windows and resided house and reshingled and reflected those improvements in new value. He reported that since the protest they have made a new appraisal and done market approach on property and cost approach indicates value of $136,900 and market approach indicates value range of $146,600 to $158,750 and has photos of subject property and of sales; and at this point market seems to support their value of $135,800. He stated that there is unique problem with this property and two others in same neighborhood - lack of property drainage in the yard (water pools in backyard) and cure is that probably grade to some extent but solution maybe by putting in actual storm sewer drain in the backyard (or easement); that they tried to get estimates of cost from engineering but they've been too busy and have est. cost of $3,000 for each property owner and $1500 for other properties and suggesting that this value be reduced by $3,000 on land.

Thomas Wrenn stated he had photos of area showing drainage towards back and towards street, and also edge of Belmont Coulee and
supposed to drain all the way to the river. He stated that in
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order to alleviate flooding within his house, put additional pump in front of his house as well as behind to get water pumped below footings. He stated he doesn't mind raise on his property but approach given to him when first looked, looked like 30% raise on assessed value and if one time assessment wouldn't mind paying, but knows there's going to be further increases, and also with water sitting in ditch and picking up water shouldn't be, ditch was supposed to drain everything off Shadow Road back toward Belmont but never did. He stated that roof redone to hail damage back in 1996 and siding because of flood damage.

There was some discussion re. drainage problem and whether drain could be installed, Mr. Wrenn stated culvert best answer and going back to 10th Street and 32nd, and looks at ditch as safety hazard. Babinchak asked how many properties affected if put in storm sewer (houses to 32nd Ave.S. incl. houses on Sleepy Hollow, etc.) Mr. Wrenn stated this is longest drainage area for storm sewer in the city, drain mile and half. Babinchak thought cost of storm drain would be more than $3,000 per property.

Moved by Bakken and Hamerlik to uphold assessor's reduced cost of $132,800, which includes $3,000 reduction to compensate for the drainage program.

Bakken reported that the drainage problem was there prior to the flood, Mr. Carsen stated that they have never recognized drainage problem in this area, and if there is problem it should be valued as having that problem and to value as if didn't have problem minus the cost of cure, and appropriate to make the adjustment. He stated they would make adjustments to the adjoining properties for 1998.

Moved by Babinchak to make an amendment to reduce the value by an additional $3,000 to the land value to a total of $129,800 because of drainage problem. Motion carried.

Upon call for the motion, as amended, the motion carried.

k) Daniel and Kathleen Daly, 114 Chestnut Street
Mr. Carsen stated this property received flood damage and made adjustment for that, most of flood damage repaired when made 1998 assessment except for some basement finish, assessed value $93,600 which is inflation factor of 3% and restoration of flood damage. He reported that since the project they looked at property again and made cost approach appraisal which indicates value of $90,200 with basement finish as it stands now, that market approach indicates value range of $90,000 to $97,500, and recommendation is to reduce the value to $90,200, which is about a $3400 decrease.

Mr. Daly reported they have about 47 properties in the neighborhood
in 4-5 block area, 12 or 1/3 of houses will undergo rehab. or
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demolition and area will be different down the line than is now, and decision hasn't been made on those properties, that they are in transition area between downtown and residential areas. He stated that in speaking to realtors (informal discussion) that they are talking property values in $80's for this house. He stated that if they accept this, will they be able to work with finance/assessor's office again next year if an issue. Mr. Carsen stated they could work with assessing office every year, that they do follow market sales, and those sales indicate what market is doing in certain neighborhoods, reflect into values for upcoming year.

Hamerlik noted that there was some discussion about neighborhood and what is being done with that, and are being heeded and moving forward so whether rehabbed/upkeep of areas looked at. Mr. Daly submitted letter to the committee (assessor's office) outlining their feelings in more detail.

Hamerlik and Babinchak moved to uphold assessor's reduced value of $90,200.00. Motion carried.

l) Leonard and Betty Grabanski, 2429 Glen Circle.
Mr. Carsen presented report recommending upholding of his value. Moved by Babinchak and Bakken to uphold assessor's value of $141,700. Motion carried.

Hamerlik brought up matter of overtime for exempt employees, that there was to be a review in 6 months by the mayor, which has been done; that he checked with Mr. Schmisek and about half has been spent, and question come up as getting back to normalcy, perhaps should take look at this - no sunset clause on this. Carpenter asked that this be placed on committee's next agenda.

Moved by Hamerlik and Bakken to adjourn; meeting adjourned at 3:10 p.m.

Alice Fontaine
City Clerk

Dated: 06/01/98.