Committee Minutes
Growth Fund Committee Meeting
Tuesday, April 18, 2006, 4:00 p.m.
Urban Development Conference Room
1405 1st Avenue North, Grand Forks, ND 58203
Vice Chairman Eliot Glassheim called the meeting to order.
Roll Call:
Present were: Eliot Glassheim, Gerald Hamerlik, Jon Ramsey, and Terry Smith via conference call. Also present were: Heather Usiski (Wells Fargo), Peggy Kurtz, Keith Lund, Klaus Thiessen, Duaine Espegard, Greg Hoover, Jim Satrom, Brian Osowski (Bremer), Greg Hoover, and Hal Gershman
Approval of Minutes from 3/21/06 Meeting:
Jon Ramsey moved and Gerald Hamerlik seconded to approve the minutes of the 3/21/06 meeting. Voting “Aye”: Eliot Glassheim, Gerald Hamerlik, Jon Ramsey, and Terry Smith. Voting “Nay”: None. MOTION CARRIED.
LM Glasfiber Financing:
Greg stated that two proposals were submitted, which Mr. Ramsey was kind enough to review and provide an analysis. We also received a proposal from Wells Fargo via e-mail after the deadline date. Wells Fargo staff stated they had delivered the proposal to the Urban Development office before the deadline date and left it at the front desk, which was unmanned at the time. However, Urban Development staff could not find the proposal, once the follow-up e-mail had been received, alerting them to the missing document. Jon included the e-mailed proposal from Wells Fargo as he did not know that it had been submitted late, and discovered that there was also missing information. Jon explained his analysis for the Committee and felt that the proposal from Bremer was the best offer for this project. Heather Usiski from Wells Fargo said that they take full responsibility for the missing proposal, in that they did not wait to get confirmation that the proposal had been received. Greg said that it is the Committee’s option to choose to accept the proposal but they must have reasonable criteria on which to accept it, adding that it was staff’s recommendation to not accept this proposal. Jon agreed with Greg that it should not be included. What he thought was missing from the Wells Fargo proposal was some of the terms. Eliot added that the difference in estimated costs between the Bremer proposal and the Wells Fargo proposal is $3,000. Jon stated that, in his analysis of the Wells Fargo proposal, he made certain assumptions for them because of the missing information. There was a question of the requirement of title insurance and Ms. Usiski replied that this was a stipulation of the Bank of North Dakota and would cost approximately $2,000. Terry felt we should be careful in our decision to accept the proposal because it will create precedence for future projects. Mr. Hamerlik felt it was more a matter of receiving the proposal late rather than not receiving the missing information.
Mr. Hamerlik moved and Jon Ramsey seconded to not consider the Wells Fargo proposal because it was received after the deadline. Jon Ramsey seconded the motion. Voting “Aye”: Eliot Glassheim, Gerald Hamerlik, Jon Ramsey, and Terry Smith. Voting “Nay”: None. MOTION CARRIED.
Eliot stated that we have before us the bids and it appears that, by significant amount, the Bremer bid is lowest.
Jon Ramsey moved and Gerald Hamerlik seconded to recommend to Council to accept the Bremer bid for the LM Glasfiber financing project. Voting “Aye”: Eliot Glassheim, Gerald Hamerlik, Jon Ramsey, and Terry Smith. Voting “Nay”: none. MOTION CARRIED.
Mr. Hamerlik asked what the next step would be. Greg replied that this would go before the JDA on Monday, April 24th.
Full Application – PS Doors:
Keith reintroduced Jim Satrom, owner of PS Doors. In summary, PS Doors has two divisions – one for retail sales and distribution and the other manufacturing of commercial doors, which are sold nationwide as well as worldwide. 95% of all company sales are to customers outside North Dakota and the vast amount of revenues are a result of the manufacturing division. PS Doors has realized 70% sales growth since 2002. They have outgrown their existing 15,000 square foot manufacturing facility and have determined that an expansion is in the company’s best interest. They have identified land in the City’s Industrial Park for that project and have secured a $1.6 million loan from Wells Fargo. The balance of the project, approximately $2 million, will be provided as equity by the company. They are requesting a PACE loan from the City of $135,000 on a 15-year real estate loan. This will leverage a $250,000 loan from BND. The company is also asking to purchase 2½ acres in the Industrial Park for 60¢ per square foot with an option on 3 additional acres at $3,000 nonrefundable earnest money down payment that would go towards the purchase price at 65¢ per square foot. The company is also seeking five-year declining tax abatement. The GFEDC Board considered this request and recommended approval of the PACE loan, acquisition of 2½ acres at 65¢ per square foot, and a little bit more for the five-year option. Klaus asked if Terry Smith should recuse himself from this portion of the discussion. Mr. Hamerlik stated he should recuse himself when its time to vote. Greg stated we follow Council rules where someone is allowed to participate in the discussion, but not in the vote. Mr. Hamerlik commented that the EDC made a recommendation that was different from the offer by PS Doors. Keith agreed, stating that the EDC Executive Committee recommended 65¢ per square foot as opposed to 60¢, and recommended that the company either purchase the balance of the land or be provided the option of the balance for $20,000, which is considerably more. Keith stated this is an important company for the region and the EDC Executive Committee fully supports the company and their efforts to expand.
Jim Satrom stated his offer was made contingent to soil borings. He received verbal preliminary information today that isn’t very good on the soil borings indicating that there may be a significant amount of work to do on land. The site was used for a FEMA trailer park, which was subsequently decommissioned. Jim stated they were going forward with the assumption that they would need to scrape the top level of soil and weeds and continue from there. Keith did provide him some preliminary estimates on soil work based on the Cirrus project. Jim stated the 60¢ offer was made based on what he thought was the last cost. They are trying not to tie up cash because they have an alternate cost for another bay on the building, which would add another 6,500 square feet. He stated he doesn’t know how to go forward based on the soil conditions. They have a very tight timetable so to delay it a month would kill the project. He expects to have the written report on the soil by Monday and to get costs if they have to do extra changes might take another couple of days. The land has to be replatted but Greg and Keith felt we could draw up some legal documents, which would allow them to start turning dirt. Eliot asked what was the nature of the soil issue. Jim stated, with the preliminary soil report, the footings would have to go down an extra 3-3½ feet deeper than what was estimated. Terry Smith disconnected the conference call at 4:25 pm. Jim stated if they have to dig down further to bring the dirt up 3-3½ feet; they would dig down 6 feet for the footings and they are encountering water at 5 feet. There is also about 2 feet of fill that may have to be removed. Keith stated we assume it’s a similar condition to what we found on the Cirrus project. The FEMA trailer mobile home park was set up on both sides of 12th Avenue South in the Industrial Park. When Cirrus did the same soil sampling they found that the decommissioning wasn’t done appropriately. We chose the option that was more expensive but provided the best timeline, which was to dig a little deeper and bring in engineered fill and do a structural slab. The cost of that remediation on a 93,000 square foot addition was $180,000, which is a little under $2 per square foot for the building. Klaus felt it was very difficult to discuss/negotiate the price of the land and the terms of the sale with this out there. We don’t know exactly what the cost is going to be, but we also have a client that is looking at potential future expansion and an option on that additional land, which would encounter the same problems. Jim asked if it was possible when this information gets back to you that you could meet again in a week versus a month. Duaine Espegard asked if Mr. Satrom was asking for a cheaper price on the land because of the soil issues and Mr. Satrom replied that he may find that it’s not economical to build there. Maybe if the City agrees to pay for any work to make the land ready, then he could pay the purchase price. Greg suggested, given the uncertainty of the soil issue out there, that we delay this up to two weeks depending on when we get the soil condition information and allow EDC to work with him on a package. Gerald felt we should meet on the earliest convenient date when we can get a quorum to review new information. Jon agreed.
Mr. Hamerlik moved and Jon Ramsey seconded to table the application until the earliest convenient time. Voting “Aye”: Jon Ramsey, Eliot Glassheim, and Gerald Hamerlik. Voting “Nay”: None. MOTION CARRIED.
Project Update:
Keith introduced Bob Sween from Concrete Inc. Keith stated Concrete Inc. intends to construct a new stand-alone batching facility to house all the equipment necessary to do updated work. It will be a 6,900 square foot facility. They will be requesting a $135,000 PACE loan, which will leverage $250,000 from BND. Additionally, they will be seeking a standard declining tax exemption for the project. We would like the Committee to invite a full application. Mr. Sween stated this facility will allow them to proceed with plans to enter the architectural markets and increase the quality of their projects. Their current batch facility is crumbling and this will be a new state-of-the-art-facility, which will take our operations into the next 40-50 years. This will allow them to produce products they cannot produce now. For example, they couldn’t bid projects such as the City Hall expansion or the construction of the Corporate Center because they didn’t have the capacity to produce the required products. The equipment is about $2.7 million of this project and then the building is the remainder. Klaus added that Concrete Inc. covers a much larger region than most people anticipate. Mr. Sween stated he has shipped product into Wyoming, Montana, Wisconsin, ND, MN, and SD. A significant amount of their sales are outside of Grand Forks. Eliot stated the information he reviewed shows their wage ranges from $11 to $20. Mr. Sween added that they have crane operations that are making $29/hour. Keith stated the company is scheduling this debt to be paid back in five years which means the City gets their PACE investment back that much sooner. Mr. Hamerlik stated the purpose of this discussion is to consider whether or not to request a full application.
Mr. Hamerlik moved that we request a full application and that it be brought forward at the appropriate time. Jon Ramsey seconded the motion.
Mr. Hamerlik added that we may have another meeting some time next week. Jon added that the information provided is very complete for preapplication and he would have no problem in approving their request with this information. Technically we have to go through our process of a pre-application and application. Hal stated the main issue he had at the EDC Board was the 100% tax abatement rather than a declining. He added that we’ve done declining tax abatements with everyone except Concrete Inc.’s prior expansion project. Hal stated he would like to get back to the five-year declining because it helps the City move things back to where they should be. Keith stated the request was changed to a declining tax abatement. Hal thanked Mr. Sween, adding this was good corporate citizenship. Keith stated that we would like the Growth Fund Committee to recommend to the JDA to approve a tax exemption when the application is made. Jon stated we just approved the pre-application/application process as part of the Policies and Procedures. Jon felt there was not much more that needed to be added to this application. Eliot called for the vote.
Voting “Aye”: Jon Ramsey, Eliot Glassheim, and Gerald Hamerlik. Voting “Nay”: None. MOTION CARRIED.
Greg stated he will put it on the agenda with PS Doors.
Monthly Report – March 2006:
Eliot asked if there were any comments or questions on the March monthly report, which was distributed with the agenda. Mr. Hamerlik asked what the timeline was for loans written off and Connie replied this includes all loans written off.
Other Business:
Greg distributed some information from trade journals indicating that the number of manufacturing jobs are decreasing due to the increased technological productivity.
Klaus stated he would like, at some point, to discuss the actual need for the pre-application process. He stated that the EDC Executive Committee does the initial review of the project and provides a recommendation, so the pre-application process may be an unnecessary step. Greg stated he will put this on the agenda in June. Jon asked Peggy to review past minutes for discussions about the need for a pre-application. Mr. Hamerlik stated it is apparent with the Concrete Inc. situation that we could have approved it today, but things are not always as cut and dried. Greg stated it is an issue of a “heads up” which we can do through the project update.
Adjournment:
Mr. Hamerlik moved and Mr. Ramsey seconded to adjourn. Voting “Aye”: Jon Ramsey, Eliot Glassheim, and Gerald Hamerlik. Voting “Nay”: None. MOTION CARRIED.
Respectfully submitted,
Peggy Kurtz
Urban Development
Eliot Glassheim
Vice-Chair