Committee Minutes

MINUTES/GROWTH FUND AUTHORITY
Monday, May 3, 1999 - 7:00 p.m.

The city council of the city of Grand forks sitting as the Growth Fund Authority met at the council chambers at City Hall on Monday, May 3, 1999 at the hour of 7:00 p.m. with Chairman Carpenter presiding. Present at roll call were Council Members Brooks, Polovitz, Lucke, Hamerlik, Bouley, Glassheim, Carpenter, Lunak, Klave, Beyer, Babinchak, Bakken, Hafner, Martinson, Owens - 15; absent: none.

HOLD PUBLIC HEARING ON APPLICATION FOR
FUNDING ASSISTANCE FOR LM GLASSFIBER

Chairman Carpenter read the recommendation from the Growth Fund subcommittee as follows: that the Growth Fund Committee recommends approval of a PACE loan buydown in an amount up to $132,600 with the stipulation that the same guarantees be obtained as held by the lead lender. The assistance will be in the form of a zero (0.0%) interest loan to be repaid, starting at the time the PACE loan is paid in full, at the same payment rate as the PACE loan, until the balance of the Growth Fund loan is paid in full.

Chairman Carpenter called for the public hearing on the application and asked for comments. There were no comments and the public hearing was closed.

It was moved by Council Member Polovitz and seconded by Council Member Martinson that this recommendation be and is hereby approved. Upon roll call the following voted “aye”: Council Members Brooks, Polovitz, Lucke, Hamerlik, Bouley, Glassheim, Carpenter, Lunak, Klave, Beyer, Babinchak, Bakken, Hafner, Martinson, Mayor Owens - 15; voting “nay”: none. Chairman Carpenter declared the motion carried.

MATTER OF CORPORATE CENTER LEASES

Chairman Carpenter reported that information had been sent in packets - copies of the leases and option agreements and an executive summary; and that the recommendations from the com-mittee recommending approval of the options to purchase and the leases are as follows: 1) authorizing the lease which the JDA would enter into with the City for the Corporate Center building; 2) to authorize the leases to the tenants; and 3) to approve authorizing the option agreements. He stated that a

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public hearing is not required on this, but asked for discussion on the matter of the leases.

There was some discussion as to how to calculate the lease and the options, and total construction costs, and whether land cost was capitalized in this project. Mr. O’Leary stated land cost was not, that the land cost was part of the acquisition under the acquisition and demolition on project program of the City. Council Member Lucke stated that when he looked at the way the option to buy made sense is in effect when they exercise their option they will pay off the cost they haven’t paid off by their rent payments, that they will pay off the first bond issue which basically pays off the non-federal money, and will they not have to pay something for the land. Mr. O’Leary stated that wasn’t included as part of the purchase option because it’s difficult to put a property value on any land in this district, do you put a value on the land as April 17, 1997 or do you put a value on it a year after the completion of construction. He stated that if it was the actual market value of the land as of 1997, lot of vacant property downtown and that’s why it is not incorporated as part of the lease.

Mr. O’Leary reported that the leases as in the report; the total cost per sq.ft., which includes taxes, maintenance, etc., ranged between $15 and $17.50 sq.ft.; there’s a base lease cost plus cost for mechanical, plus cost for tenant fit-ups plus overhead costs, common costs, etc. and that’s where they came to the numbers in the report.

Mr. O’Leary stated they were trying to work their way out of the ownership of the building altogether. He stated that when they started discussions with the tenants there were about four or five items that the tenants were really interested to get included, and the option to purchase their occupied spaces was one of those options. He stated that condoization is not a real popular way to own an office building in Grand Forks as of today, however, it is very common in other parts of the country. He stated that this lease does give them an option, as a separate document, to purchase their individual spaces, and if they all exercise their individual purchase options, the City wouldn’t own the building at all. He stated that if some did and some not, the City could end up to be a minority owner.

Howard Swanson, city attorney, reported that his office has
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concluded review of these leases. He stated that’s what before
Authority are policy issues and they are drafted in a manner that his office finds acceptable.

It was noted that there is approx. 20,000 sq.ft. of the building that is not leased, that would include fourth tenant; that building b has the bulk of the space that is not rented, that about 4500 sq.ft. has been taken by First National Bank as part of their commitment to make the building cash flow until they get the other leases in place. He stated that the walkway that runs from the old parking ramp over to First National Bank as well as across DeMers Avenue and that walkway takes out a lot of sq.ft. on the second floor which makes the useable sq.ft. in that building lower.

Council Member Glassheim asked what the approx. taxable value of the building on the tax rolls was; Mr. O’Leary reported that their best estimate is that it will be paying in taxes and early projections from Mr. Carsen were around $200,000, if more or less than that, it will depend on how he values the building completed. He stated it’s hard for Mr. Carsen to come up with an exact number. Mr. O’Leary reported that overhead expenses are not fixed. Mr. Swanson reported that Dean Rauscher, the financial underwriter of the bond issue, is requiring a formal appraisal that is being conducted presently, that document, though not necessarily binding upon the city assessor’s office, will be available to the assessor for tax purposes.

Council Member Glassheim stated that a lot of people were involved in the City’s getting the funding of bonds through the State government had a crucial point in negotiations and discussions, there was concern that Grand Forks was getting too much from the State. The fact that we had this building to put up the revenues from years 20 through 40 became a crucial turning point in the acceptance of the whole dike project and water bonding bill. He stated that because we’re going forward with this, though not the original intention, became a crucial item in the whole mix of the dike funding.

Chairman Carpenter stated the first motion will be to authorize the appropriate JDA officials to enter into a lease with the City of Grand Forks for this building. It was moved by Council Member Beyer and seconded by Mayor Owens. Upon roll call the following voted “aye”: Council Members Brooks, Polovitz, Lucke,
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Hamerlik, Bouley, Glassheim, Carpenter, Lunak, Klave, Beyer, Babinchak, Bakken, Hafner, Martinson, Mayor Owens - 15; voting “nay”: none. Chairman Carpenter declared the motion carried.

Mr. Swanson reported that an additional component will require the city council later, whether it be tonight in the form of new business not on the agenda or referred to finance committee for future action, would be the companion motion from the City to enter into the lease with the JDA. He stated there is a reference in the executive summary about it having been approved earlier, but his recollection is that the concept was approved but not the actual lease documents and that will have to be done and timing should come fairly quickly.

Chairman Carpenter stated the next motion would be to authorize the Grand Forks Growth Fund to enter into leases with Brady Martz & Associates, P.C. and with Camrud, Maddock, Olson & Larson, Ltd. It was moved by Mayor Owens and seconded by Council Member Klave. Upon roll call the following voted “aye”: Council Members Brooks, Polovitz, Lucke, Hamerlik, Bouley, Glassheim, Carpenter, Lunak, Klave, Beyer, Babinchak, Bakken, Hafner, Martinson, Mayor Owens - 15; voting “nay”: none. Chairman Carpenter declared the motion carried.

Chairman Carpenter stated that the next motion would be to approve the lease with First National Realty Corporation. It was moved by Council Member Hafner and seconded by Council Member Klave. Chairman Carpenter asked to be excused from voting on this matter and it was moved by Council Members Klave and Beyer. Carried 14 votes affirmative.

Upon call for the question on the motion to approve the lease with First National Realty Corporation, the following voted “aye”: Council Members Brooks, Polovitz, Lucke, Hamerlik, Bouley, Glassheim, Lunak, Klave, Beyer, Babinchak, Bakken, Hafner, Martinson, Mayor Owens - 14; voting “nay”: none; Chairman Carpenter abstained from voting. Chairman Carpenter declared the motion carried.

It was then moved by Council Member Beyer and seconded by Council Member Hafner to enter into the option agreements with Brady Martz & Associates, P.C. and with Camrud, Maddock, Olson & Larson, Ltd. Upon roll call the following voted “aye”: Council Members Brooks, Polovitz, Lucke, Hamerlik, Bouley, Glassheim,
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Carpenter, Lunak, Klave, Beyer, Babinchak, Bakken, Hafner, Martinson, Mayor Owens - 14; voting “nay”: none. Chairman Carpenter declared the motion carried.

It was moved by Council Member Beyer and seconded by Council Member Klave to enter into the option agreement with First National Realty Corporation. Chairman Carpenter asked for a motion to be excused from voting on this matter and it was so moved by Mayor Owens and seconded by Council Member Brooks. Carried 14 votes affirmative.

Upon call for the question on the motion to approve the option agreement with First National Realty Corporation, the following voted “aye”: Council Members Brooks, Polovitz, Lucke, Hamerlik, Bouley, Glassheim, Lunak, Klave, Beyer, Babinchak, Bakken, Hafner, Martinson, Mayor Owens - 14; voting “nay”: none; Chairman Carpenter abstained from voting. Chairman Carpenter declared the motion carried.

Mr. Swanson reported that he was provided with a copy of the council referral sheet from the Flood Response Committee’s meeting of February 25, 1998, with respect to the property. He stated there were six different actions taken and one of those was to authorize proper City officials to enter into a lease agreement with JDA and was approved by city council March 2, 1998, so earlier comments with council having to act again were not necessary and that would be all the action needed to be taken on this matter.

MATTER OF NOAH’S ARK BUILDING AND LM
GLASSFIBER DRIVEWAY MODIFICATIONS

Chairman Carpenter reported that the recommendation from the subcommittee was approval for the LM Glasfiber project to move forward with the modification of the driveway between the Noah’s Ark Building and LM Glasfiber. It was noted that the City owns both buildings.

Pat Downs, Grand Forks Development Foundation, reported that the costs will be borne by the LM Glasfiber project, which is through bonding.

It was moved by Council Member Beyer and seconded by Council Member Hafner that this recommendation be and is hereby
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approved. Upon roll call the following voted “aye”: Council Members Brooks, Polovitz, Lucke, Hamerlik, Bouley, Glassheim, Carpenter, Lunak, Klave, Beyer, Babinchak, Bakken, Hafner, Martinson, Mayor Owens - 15; voting “nay”: none. Chairman Carpenter declared the motion carried.

Mr. O’Leary reported that Dick Olson is retiring May 1 from the Grand Forks Development Foundation, and that they know how productive this individual has been and hundreds of jobs brought to Grand Forks through his hard work and competency. The council acknowledged Mr. Olson’s contribution to Grand Forks’ economic development.

ADJOURN

It was moved by Council Member Hamerlik and seconded by Council Member Hafner to adjourn. Carried 15 votes affirmative.

Respectfully submitted,



John M. Schmisek
City Auditor