Committee Minutes
Growth Fund Committee
Tuesday, February 14, 2006, 4:00 p.m.
Urban Development Committee
1405 1st Avenue North, Grand Forks, ND 58203
Vice-Chairman Eliot Glassheim called the meeting to order.
Roll Call:
Present: Gerald Hamerlik, Eliot Glassheim, Jon Ramsey, and Doug Christensen. Also present: Keith Lund, Klaus Thiessen, Peggy Kurtz, Judd Graham, Jonathan Fu, Hal Gershman, and Jim Melland.
Approval of Minutes (1/10/06 and 1/19/06):
Jon Ramsey moved and Gerald Hamerlik seconded to approve the minutes of the 1/10/06 and 1/19/06 meetings. Voting “aye”: Gerald Hamerlik, Eliot Glassheim, Jon Ramsey, and Doug Christensen. Voting “nay: None. MOTION CARRIED.
Project Update:
Klaus reported no project update at this time. He informed the Committee that Jim Melland has found another job and is leaving the EDC. His last day is Friday, February 17th. Klaus said they will miss Jim but this is a good opportunity for him. There is an ad in paper for the position of Vice President.
Monthly Report – January 2006:
Keith distributed the January report, adding that Mayo-Harriston was the only project acted upon during this time period. Doug Christensen attended the meeting at this time. Keith said that the cash availability on the second page of the report showed fund balances as of 12/31/05 and estimated cash available for loans as of 12/31/06. Keith said that this means if no more deals were done and Council didn’t expend any additional monies out of 2163, we would have (1) a little over $2 million in Fund 2163, (2) $2.7 million in JDA (which reflects $500,000 for EERC, the $1 million that has been tentatively set aside for REAC Park, and $1.4 million in proceeds from the Hood sale that hasn’t closed yet); and (3) $853,000 in EDA RLF funds. Doug asked what the cash balance was as of 12/31/05. Keith replied 2163 had $1.4 million, 5996 (JDA) had $2.3 million, and the EDA RLF funds, which we isolate out of the JDA funds, were $1.2 million. The EDA RLF funds are reported separately because they have stricter lending policies. Doug asked how much was obligated and Keith replied $500,000 had been obligated for EERC, which is being processed now, and $1 million which has been “earmarked” for REAC, based on tentative approval by this committee. Jim Melland attended the meeting at this time. Doug said the Committee earmarked the money for REAC if they got $5.5 million from the State, which did not happen. Eliot stated he didn’t think the Committee talked about a specific amount, only if REAC wasn’t funded through the State. Doug said it was understood that if they weren’t funded to their entire request, they couldn’t come back to the City for more money and Eliot agreed. Doug said our budget is about 21% of whatever the sales tax collections are, less the money we pay to EERC, and less the money we have allocated in our budget. Keith stated that 2163 is the sales tax dollars and we haven’t accounted for the EERC or REAC projects out of this fund. Doug clarified that we have about $5 million and Eliot stated this is the fund balance as of 12/31/05. Doug asked Keith to explain the $2.7 in JDA funds. Keith stated, in the JDA, we have $2.3 million cash in the bank at the end of 2005. The $2.7 million number is the cash that we will have at the end of 2006 if no additional deals are done. Included in that is projected income of approximately $1.4 million for the sale of the Hood manufacturing facility which hasn’t closed. In addition we’ve earmarked $500,000 for the EERC project as well as $1 million for the REAC Park. When we add in the rental and loan income, it brings it up to $2.7 million. Keith stated this report gives you a snapshot of a month ago and 11 months from now if no additional deals are done in any of those funds. Doug asked what we have in the EDA RLF. Keith stated the majority of this is the $500,000 committed to the Cirrus expansion project that hasn’t been drawn yet. Doug asked if the equity account was in any of these numbers and Keith replied this was all cash.
Mr. Hamerlik asked if we are attempting to collect any of loans over 90 days and Keith replied that we have sent letters to everyone in default asking them to come in to discuss their loan and possible restructuring. We have also forwarded the companies that have not responded to the City Attorney’s office for action. We will bring the restructuring proposals to the Committee next month. The loans in bankruptcy have already been written off, but we will bring any future bankruptcies to the Committee for action. Eliot asked if the collections were anticipated in the projections and Keith replied they were.
Matter of prospective location, relocation, or expansion of business or industry:
(Committee may adjourn into executive session pursuant to NDCC 44-04.19.2.)
It was moved by Gerald Hamerlik and seconded by Doug Christensen to convene into executive session as provided by NDCC 44-04.19.2 to consider and discuss closed or confidential records and information, negotiating strategy, or negotiating instructions as provided by NDCC 44-04.19.1, 44-04.19.2, and 44-04.18.4. Voting “aye”: Gerald Hamerlik, Doug Christensen, Jon Ramsey, and Eliot Glassheim. Voting “nay”: None. MOTION CARRIED.
The Growth Fund Committee convened into Executive Session at 4:20 p.m. In attendance were Peggy Kurtz, Keith Lund, Eliot Glassheim, Gerald Hamerlik, Doug Christensen, Jon Ramsey, Jim Melland, Hal Gershman, Judd Graham, Klaus Thiessen, and Greg Hoover.
(Executive Session)
The Committee reconvened after executive session at 5:19 p.m.
Other Business:
Keith stated he had informed the Committee previously that staff made a proposal to the General Services Administration (GSA) for Social Security Administration (SSA) to rent the third floor of the Corporate Center. He stated we showed them the entire third floor of 402 DeMers, which is roughly 10,000 square feet and quoted them a lease rate of $11/square foot for the third floor. They responded stating that they can only rent 7,000 square feet because that’s all they could justify with the number of their employees. We submitted a second proposal which raised the lease rate. Their response was an offer that would buy the 10,000 square feet down to $8.25. We have been told that, by the end of the week, they are going to go out for private proposals unless we can be somewhere close to that. Hal asked how many employees they had and Keith replied 15, stating that they are moving from their current location on the 200 block of North 6th Street. We set our rate of $11/square foot based on current lease rates around community and tried to be at the market rate, especially for a non-job creation type of project. Keith stated he was looking for feedback from the Committee and asked if there was any interest in reducing our lease rate down to the $8.25 range to get this deal going. Keith informed the Committee that Noridian had previously leased the space for $8.50/square feet. The current proposal would be a 15-year lease, 7-year firm. Hal stated that a good side to this is that we’re not taking them out of the private market because it’s a government building they are moving from. Greg asked if the Mayor would have to approve this and Keith replied that this was his understanding that the Mayor would have to approve them relocating from the central business district. Doug asked how many feet are on each floor and Keith replied about 10,000 square feet with common areas. He stated that they are basing their proposed rate on 7,000 square feet, but our only option is third floor, which has 10,000 square feet. Doug asked what the building costs us on our bonds and Keith replied $280,000 per year. Doug asked what could we do with the extra space on third floor and Keith said that it was not enough space to be marketable and we that could not put people up there because it doesn’t have a second egress. Keith stated that Schoen Associates prepared a proposed layout and we found there is no way to carve 7,000 square feet out of the third floor and have any space left over that could be used for any other purpose. There is no other way to do a second egress without putting a new tower on the outside of the building. Keith added that the SSA needs to have a very secure place space they can lock down. Doug said he felt we should rent it out because we would like to start cutting our losses. Jon asked what space is left in the building and Keith replied 27,000 square feet for the entire building. Jon asked what our break-even rate is and Keith replied that $8.36 is the break-even point. Gerald felt that the perception that something is moving downtown is important. Hal added it would also free up another building that could be occupied by another firm. Greg felt we could justify a lower rent for the SSA because it’s another governmental entity. Keith stated this building came into service in 1999 and it’s been vacant since 2003. Keith added that the fit-up SSA requires will be paid for 100% by them.
Adjournment:
Gerald Hamerlik moved and Doug Christensen seconded to adjourn. Voting “aye”: Gerald Hamerlik, Eliot Glassheim, Jon Ramsey, and Doug Christensen. Voting “nay: None. MOTION CARRIED.
Respectfully submitted,
Peggy Kurtz
Community Development Specialist
Eliot Glassheim
Vice-Chair