Committee Minutes

MINUTES/FINANCE COMMITTEE
Tuesday, August 11, 1998 - 3:50 p.m.

Members present: Babinchak, Brooks, Carpenter, Hamerlik.

1. Matter of tax exemption application from LM Glasfiber.
Terry Hanson, Urban Development, reported that LM Glasfiber is a company from Denmark and are producers of wind turbine blades with fiberglass, the Growth Fund Committee previously approved entering into a lease agreement and a building financing structure with Grand Forks Regional Economic Development Corp. to build a 57,000 sq.ft. facility with the City supplying some seed capital and funds to the Development Corp., JDA would lease that building from the Regional Economic Development Corp. for a term of 15 years, and would then take that building and lease it to LM Glasfiber for a term of 5 years, and that 5-year term would be guaranteed by LM Glasfiber. Included in the lease would be air quality mission equipment that the Development Corp. would include in the construction of the building but the cost would be passed on to LM Glasfiber. He stated they have asked through JDA and Development Corp. for this building that would be a turn-key building to them and approx. cost of the building is $2.5 Million, the funding sources for the building are $400,000 loan to the Development Corp. from utilizing EDA funds and granting the land that the building would sit on to the Development Corp, this land is parcel south and adj. to Noah's Ark building, and would have to be subdivided or replatted in order to get this specific land. He stated they would provide $500,000 CDBG funds to the Development Corp. and that would be paid back if building sold by the Development Corp. either to existing tenants or other tenants.

John Schmisek, city auditor reported that the request is for a 5-year flat 60% tax exemption, which is average of what normally do.

Carpenter stated that they are looking for the fact that City deems that there are no competitors to this and voids the publication requirement.

Anders Christensen, LM Glasfiber, reported equipment manufactured in California and in Texas and they are world's largest manufacturer of blades.

Hamerlik asked where funding was in the matrix; Mr. Hanson reported that is part of original $7 million in matrix, and from that $7 million, allocated $2 million to the Disaster Relief Fund for Small Business and pretty much expended except for $30,000; they then allocated $4.4 million to Interest Subsidy and $600,000 to Flood Insurance, and those two programs came in under; today there's excess of $3.5 million left of that initial $7 million; this $500,000 would come from the $3.5 million. He stated they are planning and on matrix for tomorrow will be presenting 2 or 3 plans for remainder of that $3.5 million. Mr. Hanson reported they plan to ask council to retain any balance of that $7.5 million in economic development. Mr. Hamerlik stated there isn't a plan to
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turn it back to be used by other $45 million of requests. Mr. Schmisek stated they will get request from the Mayor to add back only $2 million for business programs because there are too many other requests.

Hamerlik asked why reason for flat percentage rather than decreasing as used in the past. Mr. Hanson stated that wasn't based on company's request as it was that Dick Olson had thought that would be a flat so can project out for the five years what type of taxes they will be expending rather than not knowing for sure what that declining scale means; and is what was recommended by Development Corp. Carpenter stated that previously they approved one of these and part of motivation that Mr. Olson has in bringing is to get them paying taxes right away, so some revenue coming into the School District, Park District and City vs. the 100-80-60, etc. and basically same effect to the company other than generating some revenue to City, etc. Hamerlik stated that for new business starting up, for cash flow purposes better to have the other way. Mr. Hanson stated that the funds would come as a loan from the Economic Development Adm. Revolving Loan Funds that they received (received $2 million revolving loan fund grant from EDA, and of that have approx. $1.3 to $1.5 million obligated so far and this would be a portion of that $2 million). It was noted that the $500,000 has been approved through the Growth Fund Authority.

Carpenter moved that they find that there are no competitors for LM Glasfiber and approve the application as presented. Hamerlik seconded the motion.

Mr. Christensen, sales and marketing director of the company, stated they appreciate the hospitality in terms of business climate and would like to take opportunity to emphasize that time is money and in this case they are in a hurry and would appreciate if the deadline in the application, 9th of January, could be kept, and extremely important for the customers that all approvals have been put together so the building can be handed over at the latest, the middle of January. He stated that if in a position to grant a declining rate of tax exemption, they would prefer that because obviously it's more difficult to get cash flow up and running in the beginning than later and if would be kind enough to reconsider that they would appreciate that.

Mr. Christensen reported they have had a small office in Red Wing, MN the last few years to monitor what's going on in the market, and during that time have had discussions re. establishing a corporation concerning the manufacturing once got to the point where the American market increased to extent that they decided to move into the market, and have been in a waiting position 2-3 years and will establish a corporation in ND and office in Red Wing will be closed and establish themselves in ND for sale, service and manufacturing. He stated they sell blades to customers in Denmark, MINUTES/FINANCE COMMITTEE
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Spain, Germany, American customers. He stated market growing by 20% per year and hopes American market will join rest of the world in that respect.

Hamerlik asked for comments relative to the percentage. Mr. Schmisek stated that if they decided to go the 100-80-60, etc. it wouldn't make that large an amount because talking $64,000 in taxes and at 60% forgiving $38,000, so talking $26,000 that's difference in first year. He stated that the comments about this being a fairly strong company also have to be weighed by committee and if this application holds true, there looks and appears to be some cash flow right from the beginning.

Hamerlik moved an amendment that it be a graduated scale rather than a straight 60%; Carpenter seconded the amendment.

Carpenter stated that normally what they have done is gone with what the company has wanted and if in conjunction with our standard policy which is declining rate and he's comfortable doing the graduated scale. The committee stated they could do both ways.

Upon call for the question on the amendment, the motion was carried; Brooks voted no.

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

2. Matter of request for increase in per diem for Civil Service
commission members.
C.T. Marhula, 5124 Belmont Road, and chairman of Civil Service Commission, stated that in doing some research and as outlined in his letter there hasn't been an increase in the expense pre diem salary for the Civil Service Commission since 1966, and if $20 fair in 1996, $100 fair in 1998, and when serve on boards don't expect to get cost of living, yet in the past 2 or 3 years some of these hearings are getting to be quite lengthy and people giving up vacation time or coming in on Saturdays or staying late at night, and afraid start losing qualified competent candidates because of time demand and maybe some adjustment in the per diem would be appropriate. He stated he likes split per diem (any meeting four hours or less $80 and any meeting that exceeds four hours, $120) but when go 2 to 3 days in a hearing, etc. $20 doesn't cut it. He stated he doesn't know what's appropriate, no hurry on this, but if committee wanted to give some thought.

Hamerlik asked if he was representing Commission or if this was on his own; Mr. Marhula stated he was doing on his own, and will present to Commission tomorrow. Hamerlik stated that very often community service is time off from jobs and lot of companies allow that; Mr. Marhula stated that some places if time off, any per diem is turn into the company, but that's company business.
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There were some questions raised as to how many city council committees, boards received pay. Mr. Schmisek stated that only civil service and special assessment commission receive pay. Carpenter asked what history was of city council member pay, what back in 1966 and how increased.

Moved by Hamerlik and Brooks to table for further information. Motion carried.

3. Budget amendment:
a) Civic Auditorium - $3,000
Mr. Schmisek reported request is to use cash carryover for repair of ramp at the end of the building which is in state of disrepair. Mr. Owens reported they will do work in-house, that they received quote for $8,100+ and can do in-house for less than $3,000. Moved by Carpenter and Hamerlik to approve the budget amendment.

Hamerlik asked if there was problem with liability insurance, Worker's Comp. if work not included in job description. Mr. Schmisek reported that they take out building permits on City buildings as well as anyone else so it's inspected by inspection department, that if someone injured on job covered under Workers Comp. Hamerlik asked if they had time to do this, if they were overstaffed; Mr. Owens stated that scheduling wise they will work in and do when don't have events scheduled in the large auditorium room.

Upon call for question, the motion carried.

4. Matter of property at 1315 7th Avenue North.
(Lots 9 and 10, Block 8, Alexander & Ives' Addition) Mr. Schmisek reported the City received this property back for delinquent taxes and property was in grave state of disrepair and asked that they declare as surplus property and authorize to bid demolition of the property; probably can do in conjunction with some of the flood properties to get better price. He stated they would like to advertise the lot and garage for sale.

Moved by Hamerlik that we advertise for demolition of the house and sale of the lot and garage, individually or together; seconded by Carpenter.

It was noted that the assessing department will set a value, and if City's actual costs comes out higher than that would like to advertise higher price. It was also noted that garage could be advertised with Urban Development and demolition with Mortensons; Mr. Schmisek reported they run an ad in the paper for sale and is a bid process, and allow oral bidding; they do put sign on the lot for sale by the City. Mr. Hanson suggested that lots should be offered individually so adjacent property owners have opportunity
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to bid for the lots; Mr. Schmisek stated they do reserve right to reject. Carpenter stated he would like to see sold as one so get new house built there or moved in.

Upon call for the question, the motion carried.

5. Other business:
a) Hamerlik stated that a couple meetings ago he brought up the matter of sick leave, that Dan Gordon ran some information for him, he reviewed and feels comfortable enough and would like to drop matter now. Info.

6. Other business:
Mr. Schmisek reported that back in March or April they talked about 1/4% sales tax for potential levee project for the June election, now have November election coming up and if committee wishes to discuss in more detail at a future time or if should be discussed at Flood Response but needs some direction; the election would be second Tuesday of November, November 10; if call a special election have to advertise that special election 60 days in advance, which is September 11, and would need to start discussion soon if were to put something on the ballot.

Committee stated they would like to see discussed either by finance and flood response, or at a committee of the whole meeting. It was also noted another item is strategy with Legislature. Mr. Schmisek reported that it was stressed fairly strongly yesterday by Sen. Dorgan, he stated several times that unless the federal government sees a commitment by the State and by the City, there will be no funding; and need to show commitment to our share but make sure get State to show their commitment when legislative session comes up.

Carpenter questioned if placed on the ballot in the general election how is vote counted. Mr. Swanson stated it's been some time since he drafted the ballot. Mr. Swanson stated that under Section 40-05.1-05 it reads: if a majority of the qualified voters voting on the charter at the election shall vote in favor of the Home Rule Charter it shall be deemed to be ratified. He stated that if someone chose to abstain from voting on that particular item it wouldn't be counted. He stated this wouldn't be presented in the County, only election within the city precincts.

It was noted that there was a special committee that met in July re. this matter and will meet either this or next week, committee includes legislators, Glassheim, Hafner, Babinchak, Mayor, some private citizens and staff; Christi Stonecipher is coordinator. Mr. Schmisek reported there hasn't been a lot done since July because they were putting together an information packet and booklet to distribute, and will send information out to all council members; trip planned for Bismarck in September.

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Mr. Swanson stated that Sen. Dorgan's comment about having to have State and local participation, that because of time, the bill goes to Congress in September and October of 1998, and couldn't have action on a city matter until November at the earliest and State Legislature won't act upon until last weeks or week of their session, which would go to March. Mr. Schmisek stated he wasn't referring to the authorization, but when go back for appropriation of funding.

Mr. Swanson reported that if the City were to decide they wanted to submit a Home Rule Charter amendment, their office has drafted notice required and proposed ballot language, although it would need to be reviewed and acted upon by council.

There was some discussion re. election, and Hamerlik stated that if committee is going to meet they should give some suggestion to the council rather than this group and should go to that committee first; and info. come back to this committee in two weeks.

It was also noted that if hold election, they don't have to implement until later; Mr. Swanson stated they would be acting upon Home Rule Charter amendment which gives council the authority to impose an ordinance, that there has always been a delay between the adoption of a Home Rule Charter amendment and implementation of an actual ordinance. Mr. Swanson stated that State needs time, if adopted, to generate tax tables, publications and usually been 90 days, and try to get on first of month report or quarterly.

Moved by Hamerlik and Brooks to adjourn; meeting adjourned at 4:50 p.m.

Alice Fontaine
City Clerk

Dated: 8/12/98