Committee Minutes

MINUTES/FINANCE COMMITTEE
September 29, 1998 - 3:45 p.m.

Members present: Babinchak, Brooks, Carpenter, Hamerlik.

1. Matter of sale tax for levee project.
Mr. Schmisek reported that Mr. Swanson had sent out memo with several options/resolutions included and also ballot language in the notification, and noted that the two options are 1/4% and 1/2%, keeping in mind that when an election is set will have to have 60 days notice for publication. Babinchak asked for review of payment of levee system project and separation between sales tax and special assessments. Mr. Schmisek reported they have some of those numbers put together for informational meeting. It was noted that if hold election in early January, ie., January 12, publication would have to happen no later than November 13 and means council action on November 2, and if moved to the 5th everything would have to be moved up one week.

Carpenter asked for review of two main sources of revenue - special assessment and city sales tax. Mr. Schmisek reported that $1.4 million for the 1/4% sales tax and with a $35.00 flat rate per parcel saying that there was a general benefit to every property and basing this on a $58 million bond issue as know can't use the $30 million now - that there are 14,663 parcels at $35 which equals $513,205 to apply against the debt service. The amount generated have 388 million sq.ft. and cost of that per sq. ft. for the remaining debt service is $0.00882 and that generates $3,429,702 for a total debt service and this is based on a 30-year issue at 6 3/4% interest of $5,342,907, this is an average and depends on how benefits are calculated, etc. once start a special assessment process, but a 10,000 sq.ft. residential property, with 2.5 people, and 60% of the sales tax collected comes from within the city of Grand Forks or so the State tells us, and would amount to about $40/yr. for that household. Flat rate per parcel was $35 and 10,000 sq.ft. times .00882 was $88.20 for a total of $163.20/year. He stated to keep in mind if you're 100,000 sq.ft. property the $88.20 is $882.00.

Carpenter stated $1.4 comes from sales tax and about $4 million from special assessments. Mr. Schmisek noted that he is not sure how Special Assessment Commission will assign benefits, there are opportunities to do on elevations, distance from the river, etc.

Babinchak stated that there had been a memorandum received from the Chamber of Commerce, and asked for comments.

Tony Trimarco, Operations Manager for Chamber of Commerce, stated that the Chamber is very concerned about what hearing from retail community, met on this in July and reviewed retail statistics and Grand Forks is falling behind midwest and national averages in a lot of areas, (specialty food and gift shops seems to be our niche), but in other areas seem to be falling behind, retail has
endured a great deal the past couple years, not only with physical
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and economic impact that a lot have suffered from the flood and throughout the recovery and construction, and concerned with how this is going to impact them, and now sales tax is going to go up. He stated they are in a situation where Fargo is very competitive, that Fargo is at a 1% city sales tax, we are at 1 3/4% and this would put us at a full percentage or more over Fargo. Our market area is defined as a 40 sq.mile radius of Grand Forks so you can see to the south a lot of people sitting on the fence of where to shop, and sales tax will have a big impact to that as well as impacts to organizations like Columbia Mall, but when question why don't we have stores like The Gap or some national retailers in the Mall, find interesting statistics of how concessions try to be made with rental space to try to get them in here but not been success-ful in recruiting a lot of those we would like to see here, and these are things these chains are going to look for when they want to come to Grand Forks and are concerned with competitive ability to compete with Fargo with sales tax area, 104,000 people in our market trade area, and Grand Forks population half the net, looking at 50% of shoppers that shop in Grand Forks or outside the region and concerned with impact that is going to have on them. He stated they are trying to recapture the Winnipeg market, tough with Canadian dollar, but the Governor went to Winnipeg a few months back and he got tired of hearing "hey, is Grand Forks burned down", and he went to ND Tourism and they gave us a grant for Canadian marketing so Chamber has been working with the CVB trying to do some target marketing in Winnipeg area. He stated they are fighting an uphill battle to reverse the shopping trends and think this will have a significant impact on our retail community, and hope that is taken into consideration.

Mike Porter, First American Bank and speaking on behalf of Chamber of Commerce, that he serves on the executive committee of the Chamber and have handout of Memorandum. He stated they had their Board meeting on September 25 and there was considerable discussion as it related to a proposed sales tax increase, whether it be 1/4 or 1/2% and the members of the Chamber of Commerce do not feel that a sales tax increase at this particular point in time would be in the city's best interest. Not only was it discussed at the Board meeting but has had several conversations with business people and they feel an increase in the sales tax would not be good for the retail area of the community. He stated that also discussed was the impact that a Yes vote could send to the State Legislature implying that the citizens of Grand Forks would like to share the burden of building the dike with the regional shopping base as well as looking for the State Legislature to fund a considerable portion of the dike system. He stated that the vote taken at the Chamber Board meeting was to encourage the city council to explore alterna-tive methods to fund the dike protection as well as not going ahead with this until there has been a public forum and getting some input from the citizens of the community, and Board does not sup-port a sales tax increase or a general election vote until the city
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council adopts a resolution on how protection plan could be funded. It was noted that the Board did recognize the fact that of $5.4 million/year and sales tax is only $1.4 million, council is con-sidering special assessments. Mr. Schmisek stated they need to remember that when Grand Forks initiated the 1% sales tax, Fargo had none and didn't see the shift, so have that gap and understand and asked what would be the suggestion to make that up because going to be paid for somewhere in the community and businesses are going to pay that special assessment. Mr. Porter stated that from the retail side a 1/2% increase would make Grand Forks of major cities the highest sales tax in the state, and encouragement is to seek other sources of funding rather than sales tax. Babinchak stated that local reps. of State Legislature wanted City to have election in November, but didn't make that publication, and they encouraged council to get in as soon as possible so they could go to the State and say that Grand Forks is willing to fund part of it, and they feel that people in the region benefit from Grand Forks having a levee system because the city economically help them out because of health care, shopping, etc. and are dependent on us and for us to have a flood protection project was important.

Hamerlik stated that because we didn't have election in November it gives us some time to have some dialogue and that he heard Mr. Gustafson and others say that the Chamber was willing to sponsor some of these, and what was the role of the Chamber in the forum they were talking about. Mr. Porter stated that the Chamber does good job in sponsoring public forums to get public input from the community and was sure they would be willing to do that.

There was some discussion re. consideration of a use tax, pros and cons, and what it would generate; Mr. Schmisek reported that when the City was looking at the use tax, the Tax Department told us about $500,000/750,000 year, and use tax appears to be very dif-ficult tax for public to understand, because at election there was a perception that it was an additional 1% on top of the 1% sales tax, not realizing that it isn't; that there was a misperception that were going to be a 2%, and amount it would generate from $500,000 to $750,000 year and is significant amount and perhaps should be considered. Mr. Trimarco stated that the entire area would benefit from Grand Forks, are regional hub, and are wondering about the timing when look at agriculture and economic development and students, and Chamber would be willing to support and host any type of open forum to hear both sides of the story and listen to the retailers and citizens as to what might be some options. Carpenter stated that Mr. Gustafson was here several weeks ago re. Chamber survey that indicated that there was significant support for a 1/4 cent and is disappointed in change in Chamber without coming beforehand and discussing with them; and stated there could be discussion between the 60-day publication period, and will have to show some commitment to the Legislature or they will be extremely reluctant to commit $58 million and need to be moving on

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this. Brooks stated with the 1/4% and special assessments the people of Grand Forks are going to carry a bigger burden than people coming in to shop here, but are looking to get something on the ballot, and that's not a commitment that going to use that, start that process but still have open forum and look for input, could still move aheAd with sales tax and could use the up to phrase in that wording. Hamerlik stated if encourage dialogue or response would hope would occur before a recommendation to council moves out of this committee because that implies to the people that it's going to be there anyway and then won't respond as much, so from that standpoint that if going to have that, talk in terms of how, procedure being used, help that we need and do have some time to hold forums. Babinchak stated her objection would be that a recommendation wouldn't come from finance until there was some dialogue, and would rather that the mayor call a meeting and dis-cuss with the city council first and then Chamber forum. Babinchak asked that Mr. Schmisek layout what they discussed six months ago and how changed on the $58 million compared to what it was and what other costs coming up and affects the Special Assess-ment in combination with the sales tax and meet with Special Assessment and see what cost would be there. Brooks stated he would like to see what other areas they could look at rather than just sales tax and special assessments (looked at some of the assets we have, buildings but do we need all the buildings we have, current city sales tax that could redesignate). It was also noted that if consider use tax, that would include vote also. Mr. Schmisek reported that when original presentation the multiple uses of funds did include half million dollars from the current sales tax, and reason didn't use in latest figures is now using half million dollars of that sales tax, and going to this project, because using annually to fund some of the upfront costs working on, and would include that as that became free, but lot of current sales tax has debt service tied to it for 15 years, etc. but will look at that as well as items Chamber has listed as alternatives and would like to hear them and look at every source we have. Brooks stated he didn't realize use tax turned down, but that he has had some conversations with special interest groups, unbending and narrow on what their interest is and will run into that and some that will not like our ideas, and perhaps need to look at use tax again. Mr. Schmisek stated they had also looked at gas tax for use for street improvements, and only one way to get money for project and it's to collect from people that live here.

Hamerlik suggested mayor call meeting and committee hold this item and do forums shortly. It was suggested to have an evening meeting. Carpenter stated he would prefer public forms and have finance put together revenue sources and put together presentation
and have public come and hear that, and have comment come back to finance. Mr. Schmisek stated that they want input to alternatives that are acceptable to the public and see what can do and maybe
something out there; that when looking at special assessments there MINUTES/FINANCE COMMITTEE
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are many ways to levy benefits and what's palatable, elevations, distances, flat rate benefit, and get input on that also. Mr. Swanson advised to keep in mind the council's role, not to deter-mine benefits or determination of benefits, and suggested inappro-priate that all assessments equal because based on benefit and Commission determine what that benefit would be, and not to exclude Special Assessment Commission. It was also suggested to have Corps at public forums also.

Mr. Swanson suggested with January date of election, unless call special meeting, would have to take action the first meeting of November, 60-day notice of period Herald requires 3-4 day advance notice of publication, use 65 day period to calculate publication. Carpenter suggested that they hold two forums within next two weeks. and following that the council would have an information meeting, committee of the whole, etc. to provide guides to finance committee who would make recommendation at its finance committee meeting the last week of October and recommendation to council on November 2, and suggested that the City could do forums, Chamber do advertising or promotion amongst its members but City should sponsor the public forms and encourage everyone to attend.

Carpenter stated he would like to see is how much use tax generate, how much 1/4 cent generates, how much special assessments generate, have several options with provision that benefits going to be determined by Special Assessment Commission and ideas they may be looking at, and give them some dollar amounts based on two or three tentative scenarios, need to look at long term and current infra-structure and economic development monies, what spending on, what have spent it on in the past, bond issues, etc. and need to lay out that information for everyone to see.

Open forums were scheduled for October 13 and 15 at 7:00 p.m. at the civic auditorium.

2. Matter of sale of former public works garage.
Held in committee.

4. Matter of enrolling in Public Risk Management Assn.
Howard Swanson, city attorney, reported he had been contacted by organization called the Public Risk Management Assn., national organization solely focused on reducing risk of public entities, primarily litigation risk, insurance risk, etc., that the City of Grand Forks is not a member but by joining the organization have the ability to tap into their library resources, etc. in the area of studies, research, publications, and do have various meetings and City would have a membership vote on behalf of the City, fee is $220/year, and requested authorization to enroll the City of Grand Forks into that association and have himself designated as a voting member on behalf of the City, the budget amount would come out of his line item budget for member-ships, and would be well worth it.
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He stated he became aware of it as they have provided a joint training session with the International Municipal Attorneys Assn. and had quite a bit of good information, particularly in the area of employment law and risks dealing with employment litigation. He stated he would only need committee action, or if somebody else in the City would be more appropriate designated official, he would defer to that, but appropriate that the City does join in and identify individual. Moved by Brooks and Carpenter to approve request as presented. Motion carried. (committee action only)

3. Matter of payroll advance due to conversion.
Mr. Schmisek reported they are going through a payroll con-version from semi-monthly to bi-weekly caused by a conversion to a new and updated payroll system that was approved, and are going through an installation of that for the next payroll in October, however, there is a gap in hours that would be paid during conver-sion, that pay period would be on 16th of Oct. but pay through the 9th and because paying on an hourly rate rather than salary rate semi-monthly, there are only 56 hours in that pay period; normally employees receive checks for 80 hours and are here with some recommendations to try to soften the first pay check and would like advise and approval to allow to move ahead with it.

Dan Gordon, Human Resources, stated they thought could go through this administratively but found out needed to go through finance; that with bi-weekly system there will be a week's lag for employees to get their full paycheck and are talking about transition into the system and have employees who live paycheck to paycheck but when enter new system with only 56 hours, will be big shock. He stated in order to have orderly transition into new system would like to be able to create a whole check for first time they get paid with intentions of it being paid back, Mayor is supportive of this request and had department head and employee reps meetings to answer questions of this transition; their biggest concern is implementation that they are not shorting of the 80 hours; cost of it is $175,000 that would have to be held on accounts receivable at a time with approval of this and other approval is how soon should it be paid back by the employees. It was noted that 24 hours would have to be paid back. Mr. Gordon stated what would be reasonable is to have that paid off within a two or three year time period, employees don't have to take it and will be given choices and provide options of repayment and thinking of two years because of 3.6% increase January 1 and also a 3% increase January 1, 2000 and can choose to have taken out of their check every two weeks, can be a date certain that all paybacks have to be, ie., end of January, 2000, or whatever they determine; need to provide prudent options for employees on how to pay this back. Mr. Schmisek suggested it was by the end of the year 2000 to take into consideration pay raises, and can work out paybacks as long as know the timeline and give employees options.

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Moved by Carpenter and Hamerlik to approve proposal which includes the payback no later than 27 months or by the end of year 2000, and to have as many options as possible within that, or upon termina-tion of employment, with no interest and at current pay. Motion carried.

4. Matter of overtime for exempt employees (sunset clause).
Mr. Schmisek reported that Hamerlik had asked about this matter, and we are now at end of September, that $100,000 had been approved and now at $92,678.85 for individuals who received these payments, and if not increase the $100,000 would need to cut off as of date of next council meeting. He stated there are some accruals that haven't been turned in but close to the $100,000.

Hamerlik reported that when discussed this there were some employees that weren't turning in their hours and included in that motion it was required that employees turn hours in by the 15th of the following month and any current delinquencies need to be turned in within two weeks after council approval, and bring back no later than six months. He stated they had a sunset of $100,000 and assumed that the current delinquencies had to be turned in and that they are at the end of it now according to the dollar amount, unless want to go to the 15th. Mr. Schmisek reported there are some who have submitted theirs up to the middle of September and some accruals for September that haven't been paid, and if do at the next council meeting so give some advance notice, but if go to the 15th would go over the $100,000. It was noted that funds are coming from Admin. fees in CDBG. Mr. Schmisek stated that he doesn't anticipate hours slowing down for a while yet and that's consideration they have to look at, but this was level set, and doesn't know when slow down. Hamerlik stated that it's $92,000+ plus a two-week time period from 15th of September, and asked if this would have to go to council. Mr. Swanson stated problem is if exceed $100,000 how determine who gets last dollAr, either cut off on date rather than dollar amount. It was noted that the employees need to be informed, but bulk of them continue working anyway because have job to do and they'll keep working.

After further discussion it was moved by Carpenter and seconded by Hamerlik that we end overtime for exempt employees as of Monday,
October 5 and that we allocate any additional monies over $100,000 necessary to reimburse them through October 5. Motion carried.

Mr. Schmisek stated it would be the intention of his office and Human Resources to send notice out that recommendation is going to council to end this as of date certain.

Moved by Hamerlik and Carpenter to adjourn; meeting adjourned at 5:10 p.m.
Alice Fontaine, City Clerk
Dated: 9/30/98