Committee Minutes

MINUTES/FINANCE-DEVELOPMENT STANDBY COMM.
Wednesday, September 10, 2003 - 8:00 a.m.________________

Members present: Christensen, chair; Glassheim, Hamerlik.

Others present: Keith Lund, Peggy Kurtz, Al Grasser, Terry Hanson, Greg Hoover, John Schmisek. Several individuals (applicants) were also present.

2.1 Funding recommendations for 2004 CDBG Program (bricks/mortar and public
service)._____________________________________________________________
Chairman Christensen called the meeting to order and reported there was a report from staff
Keith Lund introduced Gerald Nies, chairman for the Citizens Advisory Committee (CAC), and that the Advisory Committee ranked the applications. Mr. Nies reported that the Citizens Advisory Committee consisted of 2 members appointed by each council person, that they had $690,000 that was available for them to allocate and had requests of $6,444,739, the committee met and began presentations and the fourth meeting was a public hearing and after the public hearing closed they did their vote, a yes-no vote followed by a ranking of those who had passed the 60% yes; and one of the things reflected in the lower portion of the sheet showing the 2004 CDBG recommendations was that the CAC was very concerned and understood the need for a couple projects in particular but didn't feel they had the capability of funding those; but recommended that the City explore alternative funding sources for the Grand Forks Housing Authority projects Promenade Infrastructure (#19) and Inner City Redevelopment (#20). They also discussed a more regular meeting throughout the year so that they were able to discuss some of the projects, follow up on some projects, see what the progress was. He thanked the Office of Urban Development, Keith, Greg and Peggy, who were they to support them and help when they had questions.

Hamerlik asked for the committee's recommendation. Mr. Nies stated their recommend-ation was 1 - 13, the priority of the applicants. Mr. Lund stated that it has been process since flood and last two years for that group to prioritize the applicants and to rank them, staff makes recommendation and city council funds the project. Dollar amount by staff and ranking by committee.

Hamerlik asked if there was any flaw having to get the 60%, the elimination process, and that is very difficult and sometimes a project gets cut off by mere statistical analysis rather than the worth of the project. Mr. Hoover stated that no matter where you draw the bar, somebody is not going to be able to get over it, that he has had some discussions with staff and with some of the members of the CAC and as Mr. Nies indicated they would like to look at having the CAC be more of a permanent advisory body to the council, meeting once a month, helping the staff review at the program in its entirety if it is doing the things from the citizens perspective it should be doing and also helping design the application, the rating and ranking criteria - and can get as complicated or as simple as possible, this is straightforward, simple process and there are always going to be those people who don't pass and have that anytime when have more funds requested than funds available.

Glassheim stated he has been interested in Alternative Sports, Inc. (Dream Project) which didn't make the 60% and asked Mr. Nies for comments. Mr. Nies stated that was at 58% and just under the bar, there was concern that this is something that should be looked at and they weren't quite sure of the funding process and how it would progress, and wanted to see if there were some ways that something could be done with this, committee did not entirely feel that way (would have needed 1 more vote - there were 12 members and needed 8 votes).

Hamerlik stated it is difficult to pick when haven't heard all presentations, one concern is that because of various people and their attitude towards infrastructure (engineering) which helps a lot of people in the LMI class; that we have $355,000 for administration and that is a concern. ($280,000 for program administration plus $75,000 for Item #7 to Urban Dev. for Property Management and Disposition Program) Mr. Lund stated a majority of the funds are used for maintenance contracts (snow removal and paying special assessments on properties), that HUD has allowed them to extend their urgent need designation to those properties as they were acquired under urgent need and designation, that they have told HUD that if they are not going to allow us to use your dollars to manage these properties, that will be a general fund expenditure and the council would be less likely to allow them to continue the affordable in-fill housing program and might require a mass sale of all properties, and they have allowed us to maintain an inventory of lots with this designation while demonstrating our focus on affordable housing and redevelopment. There is 80% of a staff person on there to manage the contracts and have staff go out there and pick up the occasional freezer that's dropped off on the lots, plus tree trimming.

Chairman Christensen stated those are points they can address in future standing committee's meeting that Mr. Glassheim has suggested and will engage in constructive debate; and the issue before us now is to discuss the process. He asked for copies of minutes of previous meetings; that it would be nice to read the comments. Mr. Lund stated that the regional office has allowed them to be 2 days late in the submission of their annual action plan. The timeline for council - recommendation from today scheduled to go in front of the committee of the whole on September 22, and ask council to give preliminary approval to these applications and funding recommendations on October 6, and are required to have a 30-day public comment period which puts the process back a bit. It was noted if they need to have another meeting, could still meet the schedule.

Chairman Christensen asked if anyone in the audience who wished to speak to their project, reps. of the Dream Project by Alternative Sports, Inc. were present.

Katie Collette and Jason Schafer, co-organizers of the Dream Project, Alternative Sports, Inc., stated they were hoping to open a facility that would include an indoor skate park and all ages music venue and art space for the youth in Grand Forks, they feel this will help the youth to have something to do and have made partnerships with Northeast Human Services, Lutheran Social Services so that they can get referrals to help low income youth and at risk youth with this program. Since they made their testimony to the CAC, they understand that they weren't ranked but the situation has changed as the bank has decided to auction the building off, building is located at 121 North 5th Street, old YWCA building, that when they applied for CDBG funding the bank was asking for $90,000 for acquisition of the building and got estimates (building needs $50,000 for rehabilitation). They stated that as the bank is going to auction the building off and want to get rid of it, that the bank has had the building for 2 years and they are the only ones who have asked about that building. (Bank is Alerus Financial and foreclosed on property day after they did their testimony on the building).

Chairman Christensen stated he is concerned, that it isn't so much that you get the first dollar, it is where you will get your second and third dollar; that they can put you in business but can they stay in business, and asked what they have for on-going funding sources.

Jason Schafer stated they have user fees that will pay their expenses once they get running and have good sustainable budget, conservative reasonable user fees, and the issue with a project like this is the start-up cost, with City's help with rehabbing the building (they are asking for help to rehab the building of $50,000 for the roof and water pump). He stated originally the ap. was for acquiring the building, but with new development, they feel they can get the building for under $12,000 and feel they can raise that money themselves; that they can buy the building but would like to ask the City to set aside some money to pay for the rehab, $50,000, and from there should be in good shape. They do not have a business plan.

Hamerlik asked if this plan was presented to committee, and it was stated that this particular plan was not presented. He asked if all the plans were presented verbally before they voted for the 60% ranking. Mr. Nies stated they heard everybody before voting. Chairman Christensen stated they were within their purview to reconsider the project. Mr. Schafer stated they would have the old gymnasium and swimming pool area which are adjacent to each other and gives them the amount of sq. footage that they need for an indoor skate park, perfect size building for that and is downtown which is a great location for a project like this - center of the low/moderate income neighborhood and right across from the high school - building and location perfect, and with building going up for auction and no interest in the building. Chairman Christensen asked if the building is purchased by the group, if they will be a 501C3 organization, non-profit. Ms. Collette stated they are working under Alternative Sports and are program of Alternative Sports and that is the non-profit they are working under. Alternative Sports is the group that built the outdoor skate park and also runs the BMX track in town, have been around for several years and have good track record. Chairman Christensen stated that assuming Alternative Sports got the building for $12,000 and if it didn't work, would like to know if we could have that building at the Urban Development Office or have it available, and if $12,000 will buy it, and if we're going to put $50,000 in their for the roof and fix it up, doesn't want to lose our $50,000, that it's off the tax rolls.

Mr. Lund stated it is a requirement if the City allocates $25,000 or greater to a project that the City is assigned a mortgage on that property and we would be in first priority position if they were able to acquire the building, unless there was some additional debt service so that building would come back to the City. Chairman Christensen stated he would like to see these people have a chance, and see these people recognize that if we are going to fix up the roof, etc. would like to take the building back if it doesn't work, because mindful of what did at Cosmos and we don't have the building and there's quarter of million in it, and assuming we put this back into the queue, we will have to work with them to make sure that if it doesn't make it, we would like to make sure that we have the building available for other worthy projects if this doesn't work.

Hamerlik stated owning the building or holding first paper on it, is there any difference in liability. Mr. Lund stated that their security instrument would require that the funds be repaid if the use of the facility changed or another approved use by the City; if it was transferred to another organization that was doing something similar or something else that was eligible, you could not call the mortgage and foreclose on the property, however, if in two years it happened. Chairman Christensen stated he really didn't want to get into a foreclosure, understand they might have some rules but other reasonable requirements.
Hamerlik stated his concern is that maybe the committee should have had first dibs at this because it might have had some other project along the way that was close by and he is having a little difficulty in preferences and to override the committee which is our authority, but this is a different presentation than what the committee had. Glassheim stated it seems to him the vision is clear, that committee made recommendations and understood that the council could overrule them, but over 20-25 years the council accepts almost all of the committee's recommendations and makes a few changes - that what the committee says carries weight but the council reserves the right to change it - that they can make some changes but it behooves us to follow most of the recommendations. Hamerlik stated that we don't have enough money and someone is going to be dropped off.

Mr. Hoover stated that if it is the desire of the committee to look at providing some amount of money for Alternative Sports, staff would be more than happy to work with you to find ways to get that money, whether it be from existing requests or anticipated programming, etc.

Glassheim moved that we recommend that staff find $50,000 to include Alternative Sports, Inc. in the distribution list. Hamerlik stated he would second the motion if you attach to it attempt not to decrease any of the other recommended amounts, concerned about the others that went through the process.

Chairman Christensen asked if he would just second the motion and then make an amendment. Hamerlik agreed.

Chairman Christensen stated that staff made a recommendation as to the amount, the Citizens Advisory Committee did not, and that it is a staff recommendation as to amounts and laudable as to what Mr. Hamerlik is suggesting but not doing anything to circumvent the process of CAC because they didn't recommend any money, and if you were to amend the motion, he wouldn't second it. He thanked Mr. Hoover for suggesting to find the money from other sources but that may circumvent the process inasmuch as the process was that everyone came with their applications and requests and presented them to the group, the group ranked them, staff allocated the money, and thinking about the next time when someone didn't make it and we funded all these and then found some money, there would be a way of coming in the back door and that he's is not good at back doors but good at process when it comes to government money - it's a great idea and there maybe an exception to that. Assuming this will go forward and passed, he would like the conditions to the grant that goes to the council, that if the project fails, that the City gets the building back because off the tax rolls anyway, nice piece of property downtown and it is something that we could use. It was noted that the property is on the tax rolls now, but if Alternative Sports, Inc. get the property it will go off the tax rolls.

Glassheim stated he would accept that as a friendly amendment to the motion, that staff figure out where to get the $50,000 (that his understanding the only other place to find it would be from original monies coming into the same pot of money). Christensen stated that this money comes from program income, and this is your $550,000-600,000 grant that you always get plus the revenues we're getting from repayment of CDBG. Glassheim stated there maybe $50,000 more coming in; Christensen stated that they put this on the list and add it to the bottom of the list. Mr. Lund stated that the program income is derived from repayment of loans, rental rehab as well as business assistance and the same of property and we do estimate conservatively, struggled in trying to determine which homes will be available for sale and when, with the flood protection project, is accelerated and then slows down, entitlement communities such as Grand Forks are able to allocate an additional $300,000 of their next year's funding to projects if they choose to do so and is provided for in the CFR, they have been personally encouraged to use that process as a result of timeliness issues, they have averaged over $200,000 of additional program income each of the last 3 years and that typically happens, however, they would rather not be short and use that process. He stated they are suggesting now and if go into another meeting, go into it in more detail, but we're suggesting that we actually use $200,000 of that $300,000 opportunity, adding another $50,000 would be fine, has some reservations about capping out at $300,000 in case situation would arise where they would like to allocate a few dollars of 2005 funding, and suggesting that we could add $50,000 to this project without taking any dollars away from any other project, as long as we incorporate that pre-award process. Committee agreed.

Upon call for the question and upon voice vote, the motion carried.

Mr. Lund stated that the approval if it passed the council would be subject to their acquiring the property. and agreement.

Terry Hanson stated he came to see if they have any discussion on the Promenade and on the Inner-City Redevelopment Project as commented on by Mr. Nies at the beginning of the presentation. Promenade is south of Congressional I and part of the city-approved affordable housing district. Infrastructure is within the downtown renaissance zone area and the proposal is by Bill Schoen and Jim Kobetsky and going to be the acquisition and redevelopment of property in the downtown renaissance zone area; and presented as the Inner City Redevelopment because he feels that it is appropriate to approve it that way and knowing there was funding available that they can go and negotiate; it is a project that will work anywhere within the downtown. Christensen stated when they had discussed affordable housing that some of the money for infrastructure at Promenade was going to come from CDBG monies. Mr. Hanson stated that earlier discussions when the City was reallocating or distributing excess income in the middle of the summer, discussion was that the City would put CDBG funds into the infrastructure of the Housing Authority's affordable housing district, the Promenade, thereby providing a reduced price for the lots and in exchange the development would have to produce 51% of the homes would have to go to LMI families and projecting sell lots for $15,000 to $17,500 without any specials if this funding was available.

Mr. Hanson stated what they will do with the Promenade with the affordable housing district is that they will continue forward with that, that under the affordable housing district the City will put in 100% of the infrastructure, start with half of the development and bring those lots on line and pass those special assessments onto the home buyers, then go on and have the City put in the other half of the project under the affordable housing district and sell those lots off individually or to developers, and it would be a longer term process as they wouldn't do all the work upfront and ultimately pass on $12-15,000 for special assessments onto the home buyers which they would assume 2 years down the road, and Affordable Housing District calls for special assessments not to be charged to the project until 2 years after it goes in. He stated that would be their plan for affordable housing district, Promenade, that they would continue and offer that program to developers.

He stated the Inner City Redevelopment would be more difficult to move forward, in discussions in the office, it was thought that they would go after CDBG funds, HOME funds, Renaissance tax credit program, and if partner up with a 501C3 and go after LMI housing tax credits, etc. The large dollar amount and were counting on CDBG funds, the developer on that project is looking for that assistance to move forward and if we do not provide it, don't know if have alternative funding source. Chairman Christensen stated the dollar amount $2 million wasn't realistic.

Chairman Christensen stated as to the Promenade issue the cost of $15,000 would be paid and specials not make much difference on the affordability of the home. It was noted that if they are LMI people, $1,000 is big time bucks - $100/month.

Mr. Hanson stated under the affordable housing district, the City will front the infra-structure costs at 100%, this money, the $1.5 million, would supplement that and replace those funds and if City obtained Section 108 loan from HUD and utilized program income over the next 7 years to pay that back, and there wouldn't be any special assessments on this property. Mr. Hanson stated it would be passed on as lower price on the lots. Chairman Christensen stated trying it another way - program income now rather than grant money is approx. $850,000 and that income is stream of cash coming to the City because of the things they did when the allocated money after the flood, and what is our expectancy as to future program income for the next 10 years (would like to know for next meeting) and what is projected amortization - Mr. Lund stated in a couple years our Business Assistance Loan Program will be paid off and revenue will be from sale of homes and Rental Rehab. payments, and sale of homes will probably be eliminated in the next 3 to 5 years, and will then be on Rental Rehab alone, unless we are able to allocate funds to projects that derive an income again. Mr. Christensen stated he wasn't concerned with source of the money, but what expected money. Mr. Lund stated in the next 3 to 5 years would be looking at $300,000 tops, and carrying that on for another 8 years after where flood Rental Rehab program is re-amortorized for 12.5 years. Mr. Lund stated we are getting $800,000 now and half million drop off in next 3 to 5 years. Mr. Christensen stated what we should have for our next committee meeting, that we should seriously explore the utilization of that excess money for the affordable housing initiative that we have because they remind him that $100 is important and that we have this source of money and have a big project out there that would do a lot of good - that he believes that we should explore that stream of money, the money is available and we have the source of revenue which we won't have in years to come and could put 85 to 100 homes out there for LMI people - there was a lot of gnashing of teeth for Congressional II but it sure is a nice neighborhood now and probably spent more money than we should have but result is it is pretty nice - and would like to explore that.

Mr. Hanson stated with the subsidization of the infrastructure they hope to have most of the homes at about $105,000 or less, and with that will still have the other programs that the City has available and also the programs that the Housing Authority has available to assist the homeowners directly for the acquisition, these are single-family residences and twin homes but will have a number of homes at $100,000. Mr. Christensen stated this will reduce the amount of money that CAC will have in the future to allocate but it will be a block of money that we have allocated for. Glassheim asked if he is thinking in terms of setting aside $150,000/year for 10 years on a bond. Mr. Hanson stated that was the initial purpose of the Fannie Mae loan that was made when we asked for $5 million because we could use those funds in the same manner but the City can apply to HUD for Section 108 loan which is required to be paid back and the City can borrow - HUD issues a bond and provides the money to the City 5 times the City's annual entitlement allocation so it is about $2.5 to $3 million, that has to be paid back however, so there has to be a funding source to pay it back, in a lot of cases the payback comes from the project itself - the project would generate the revenue to pay the funds back - and what he is proposing is that rather than the project pay it back, that the City grant those funds to the project and that they utilize the program income over the next number of years to pay back that funding source.

Mr. Hoover stated they have opened a major policy debate in his estimation, that he firmly supports the affordable housing project, and is preparing a presentation for the Chamber of Commerce talking about affordability and now by way of example based on some information from the National Low Income Housing Coalition, it takes a family where there is a minimum wage earner to afford a two-bedroom affordable unit, which is $603 in this community and requires them to work 90 hours a week to afford that if they are paying no more than 30% of their income toward their housing expenses - so affordable housing continues to be an issue in this community and we need to look at long-term solutions for that. On the other side of the fence the federal government continues to whittle away at community development block grand in particular and unless the City develops a policy for dealing with program income and how it uses its funds, they look anywhere in the next 5 to 10 years of having absolutely no CDBG money to administer in the community and have to look at the long term, he welcomes this debate and we have to find solutions to both problems.

Hamerlik stated first of all we have to be careful as to the amount that we take out of programs such as they talked about today because he has been reminded that some of these programs, as good as they are, don't have any or very little income and therefore we would be canceling some of these programs or greatly reducing them. He asked Mr. Hanson how they arrive at $105,000 home with special assessments paid over 15-20 years, usually when he talks in terms of price of his home, he doesn't add or subtract his special assessments, and if the $105,000 or less, is that including or excluding the special assessments that would be paid if you had $1.5 million. Mr. Hanson stated that if they did not receive the $1.5 million, the home owner would be obligating himself to pay those special assessments; the $105,000 to $95,000 is the price they will be able to offer that price as "here's the home with no specials", but the home owner will then be able to borrow that much more money for the principal for the purchase of the home because the lender, when they come up with 30%, it's PITI and the special assessments today on a home like this would be $150/mo. Mr. Hanson stated in moving forward what they are concerned about is not how much the home costs, it is what is his monthly payment, and that is what they are going to sell these homes on. He stated they have those programs available for them as well and that is what is going to allow them to get that 51% and make these homes available is 51% and 80% of less than median income. Christensen stated maybe they don't get the money for infrastructure but maybe we opened the debate to get this moving so that you are in a position to hit the ground running throughout the year and in the spring start construction. Mr. Hanson stated they have put this off because they have some deeper drawings on some concepts for them out there and stopped the bidding process for this year and want to have it ready to go next spring - the intent was not to have any funds necessarily come out of this year's allocation of CDBG but to have this go through the process so that the City would then borrow the Section 108 over the winter months with the idea that they are going to start paying that 108 funds back from program income. Christensen stated that he accomplished his goal to get it to the front of the group.

Glassheim stated he liked the idea of us obligating $150,000/year for a decade to pay these off, whether we can do it now or not until next year, that who was concerned about the decline of CDBG funds, looks like about $500,000 of the recommended total for low income housing, different ways of approaching it, the home rehab programs $200,000 and Grand Forks affordable housing is $200,000 and property management will go away, $75,000, once they are all sold - and those are for low income home purposes, that we have a certain amount and put $300,000 to $600,000/year into housing of one kind or another and for us to take $150,000/year out of the pot that is competed for but to put for 85 homes for low and mod and that's okay and still leaves a big pot for the committee to distribute year to year and for project to project and so even if some of the housing projects went down, it is still accomplishes the same goal with a different delivery system.

Christensen stated that staff allocated no money to Storefront Rehab Program, and that it seems to him that has been rather successful, have Highway 2 area and people there doing some things; Hamerlik stated he would like that to continue, however, we did have a lot of applications and they have dwindled, and when he saw the area which was Washington and Gateway Drive was hoping that would be changed so they could open up downtown or some other areas, thinks it is a great project, but were short on viable projects. Glassheim stated he never really cared for those they were approving for the corridors, one kind of advertising or another rather than the downtown rehab of older building but there was political interest in extending it out there and making it available to people and going to try a corridor and keep at it for a couple years to see if it helps, the project on Gateway Drive is nice and improves it, and finds it hard to pay for signs on Gateway Drive, but in terms of fairness and extending it to commercial places outside of downtown, okay with modest amount, probably see if put $50,000 back into it by taking it from somebody else.

Mr. Hoover stated he was the individual on staff who moved to have this zeroed out, he has serious reservations about whether meeting national objective with the program, he has been looking for some documentation that would allow us to justify that to the federal government and if we can't find it, may be in jeopardy of going back and having to repay the money we spent from non-federal sources - that hopefully he can find the documenta-tion. Christensen stated he imagined he would put a footnote into your report.

Christensen asked if the committee wanted to meet again in another week as they've discussed several things, as he thought there would be questions about the $75,000; and perhaps the corridor and made kind of a commitment to the group that designed the corridor (Gateway) and difficult to get involved and then your ability to see the results because there is no money.

Glassheim stated that if staff talks to Denver and they say it is not eligible, we will comply with that and was wondering if it was a low income area but thought we had it defined so that it was legitimate and thought it had been approved and unless have a clear ruling from Denver that we can't do it, that we would like to do it. Christensen stated they would like to go back to the $75,000 but if that is not possible, go no lower than $50,000 as that is only 5 projects.

Hamerlik stated that we wouldn't have to meet for this but based on the storefront we should meet on that topic or get an e-mail from Greg and bring it forward. Hamerlik stated if we don't have to meet but committee and the chair charge them with the responsibility of reviewing some way that we could help Terry's project and in couple 3-4 weeks when that is ready to go, then should meet.

Christensen stated the consensus of the group and as chair asked for motion to approve the recommendations made by the staff with the addition of $50,000 for Alternative Sports, Inc. from additional program income and ask staff to find out whether or not the Storefront Program is eligible for funding, and if it is, to make recommendations among the projects so that we restore $50,000 to Storefronts. Glassheim moved the motion; Hamerlik seconded.

Hamerlik stated he was having trouble by reducing these projects by $50,000. Glassheim questioned why, that they are not written in stone, people applied for amounts and staff goes through them and allocates them. Glassheim stated they are eligible but whether they get $150 or $160 or $190 is discretionary matter, not killing any programs. It was noted that staff's recommendation was purely subjective.

Upon call for the question and upon voice vote, the motion carried.

Christensen stated that he wanted a process and would really like to engage in a policy debate and get that on the table re. affordable housing, Promenade is going to be our poster child, and would like a comprehensive plan as soon as we can so that they have something they can actually bring forward so can get started this spring, wants to see the money coming through and wants to see that big chunk of money used as best we can for 85 to 100 homes - because that will leave a big print here, and would ask as chair that they get on that if can within the next month. Staff agreed.

ADJOURN

It was moved by Glassheim and Hamerlik to adjourn. Motion carried.

Alice Fontaine
City Clerk