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Committee Minutes

Growth Fund Committee

Wednesday, May 24, 2006, 4:00 p.m.
Urban Development Conference Room
1405 1st Avenue North, Grand Forks, ND 58203

Doug called the meeting to order.

Roll Call:

Present were: Gerald Hamerlik, Terry Smith, and Doug Christensen.

Also present were: Keith Lund, Peggy Kurtz, Judi Paukert, Klaus Thiessen, Mayor Michael Brown, Rick Duquette, and Greg Hoover.

REAC:

Doug said that the purpose of this meeting is to review the proposal submitted by staff regarding what we believe to be optimal offer to UND Research Foundation. Also, we didn’t address Mr. Smith’s issue about a tax exemption. Mr. Hamerlik stated that the tax exemption was not in the motion of the previous meeting and perhaps should have been. At the time of the last meeting, they requested a 10-year deferral of taxes, but we didn’t embrace that concept. Then someone suggested a 5-year deferral in order to be consistent. Terry discussed a 10-year deferral on collecting property taxes on the whole complex versus a 5-year exemption just on the taxable entities. Doug stated, the way this project is structured, the Research Foundation is a non-profit 501c3 and won’t pay any taxes. Terry interjected with the exception that the for-profit businesses renting space will have to make a payment in lieu of taxes. Doug stated 35% of the space in the building will be rented by UND, and 65% will be rented by the private sector, so the only part that would be subject to the tax abatement, if we give them any, would be the 65%. As far as consistency for everybody else we’ve addressed in the private sector who participates in any Growth Fund project if there is tax abatement, it’s generally been a five-year declining. Gerald said he felt we were all in agreement with the five-year declining tax abatement on only the rented property because when Concrete Inc. asked for 100%, Mr. Gershman felt we should get back to all the same. Terry added that’s what we are doing for PS Doors. Terry said that UND is willing to pay that 30% after 10 years. Doug replied he was not sure that would be the case because the State doesn’t pay taxes. This is structured with a 501c3 which means they are going to own the ground. Klaus said for clarification we are talking about the private sector component with the Foundation-occupied space not being taxable. If other University-related functions other than Petell’s are in that building, then that’s included in the 35% component, which is not taxable. Doug agreed, adding that we can’t tax the State of North Dakota. Greg asked if this was consistent with what we did on the Bronson property with University-related activities. Doug stated we are taxing the buildings that sit on Bronson. Greg stated that an argument has been made in the past that certain businesses are University-related and he just wanted to make sure that we’re all clear on what we mean. Greg asked about Borders and Klaus felt, if they are incorporated, they would probably take up private space. Klaus stated if the faculty of the Engineering Department were to take up space in this building, they would not pay taxes. Greg said he wanted to avoid a situation where a company hires a University professor on contract and this professor has a space in that company’s area, that that is a private sector business and is not being used by the University to not pay taxes. Mr. Hamerlik agreed. Rick stated the intent of the Committee is to provide those sections of facility that are 501c3 a tax-exempt status. Further, the Committee’s intention is that those parts of the facility that are in leasehold arrangements will pay taxes but those taxes are being exempted on a declining amount. Doug agreed. Terry Smith moved and Gerald Hamerlik seconded that we recommend that the City grant the private sector entities in this REAC building a five-year declining tax abatement. Voting “Aye”: Doug Christensen, Terry Smith, and Gerald Hamerlik. Voting “Nay”: None. MOTION CARRIED.

Mr. Hamerlik stated he had a question on the wording about the contingent loan but found out that the balloon and interest rate were spelled out in the previous motion. He said his other question was on the statement “the City would be the joint applicant and would commit 15 acres for the application”. We talked at the last meeting about a sunset clause or a right of first refusal. Right now, if we say we are committing 15 acres, that could mean forever. Our idea was that if we had a chance to sell part of that, we would want to be able to. Doug stated that we would have a joint application for the EDA grant and the 5 acres we are giving the University and we would also put up our 15 acres in that joint application. They will either get the EDA grant or not, and if not, then we will withdraw our land. Mr. Hamerlik asked at what point are we still bound by the 15 acres. Doug stated that our 15 acres goes into this tech park and the tech park would be subject to a PUD. Once we get that going, Mr. Hoover will make application for a grant to hire someone to help us figure out the governance. As we move forward, and they build the building and our 15 acres is in tech park, we will own it and if EDC or REAC come up with another deal to either buy, grant, or for some other use, they will bring it back to the Growth Fund. The 15 acres is only for the EDA grant for infrastructure. Greg asked if it would be clearer to say that we commit the 15 acres for purposes of the EDA grant and Mr. Hamerlik agreed. Doug said it has to be clear that they know that the 20 acres goes into the park and, if we get the grant, we build it out. Mr. Hamerlik asked if we need anything in this motion having to do with the PUD that has some governance over the whole operation. Greg stated we talked about this and decided, as far as the master plan, we wouldn’t get too involved yet until we find out if this will be a do-able project. Mr. Hamerlik asked if there needed to be something in this motion that pertains to that so it doesn’t come up later. Rick stated the staff is taking this proposal back to REAC and it should be in there so that it’s clear. Doug stated the remaining 15 acres will be made available as part of the EDA grant and will be committed by the City as part of the tech park, so collectively there will be a 20-acre parcel. UNDRF will own the 5 acres and the City of Grand Forks JDA will own the other 15, but it will be in the park. Before they commence the development of the property, we will have achieved the governance aspect of the park. Klaus stated he was of the understanding that the JDA was going to undertake a master planning process of the whole 77 acres which would include the governance of the acreage that is not under the ownership of UNDRF. Doug stated that’s aggressive, according to Al Grasser, because we have drainage and ponding issues, and as part of the PUD, there has to be a proposed storm pond. Greg felt that should be in the master plan. Doug stated this whole project might work, but questioned whether we want to commit this 77-acre area in perpetuity. A master plan is a PUD, which can always be changed, but the City of Grand Forks will always own the other 57 acres, adding that we don’t want to have the tech park governance people controlling the other 57 acres. Doug said we are going to commit the 20 acres on the southerly portion of the Amazon tract to the tech park. We will submit the 77 acres to a master plan PUD, which will include the 20 acres. The governance of the tech park is to be developed and they will have governance over the 20 acres in the tech park. Rick asked if this makes it bankable for them on their end and Doug replied he is certain that they don’t need any more than the five acres, adding that they are going to get a deed for the five acres and they’re not going to pledge our land for their loan because they don’t need it. They were trying to get the other 15 acres to sell so that they could keep part of the proceeds of the sale of the land to fund their 501c3 that doesn’t have any money.

Doug moved that, as far as the land portion of the offer the City is about to make to the REAC park, (A) the City will give them 5 acres which will be part of and adjacent to a 15 acre parcel that the City will retain as the JDA. These 20 acres will then be subject to governance rights to be determined for the tech park. The second portion is (B) the City will submit the full 77 acres which will include the 20 acres referenced above to a PUD which will then lay out the proposed development of the 77 acres to include the initial 20 acres of the tech park. It is understood that the 20 acres, which will include the 5 acres to be given to the applicant and the 15 acres to be retained by the JDA, will be subject to a governance regime to be determined later, will consist of the land most adjacent to 32nd Avenue South. And (C), as to the 20 acres to be included in the tech park, the City will, along with the applicant, include its 15 acres as part of the application to EDA for the $1.5 million infrastructure grant match. Terry asked about the location of the 20 acres and Doug replied it was south of an adjacent to 32nd Avenue South. Greg said we could describe it as the northeast quadrant. Further discussion ensued. Doug added to the motion that the 20 acres in question is described in Appendix C, page 27, in the applicant’s submission. Terry Smith seconded the motion. Voting “Aye”: Doug Christensen, Terry Smith, and Gerald Hamerlik. Voting “Nay”: None. MOTION CARRIED.

Greg stated it should be noted that Mr. Ramsey, if he were here, would have recused himself. Doug asked Keith and Greg to get the final offer done and to him for review and then they can get it sent out. Rick asked what happens next. Klaus asked when they could expect sign-off on the offer. Doug replied as soon as he gets it. Greg said if they counter the offer, we will bring it back to this Committee, and if they agree to the offer, it will go directly to the JDA.

Adjournment:

Mr. Hamerlik moved and Terry Smith seconded to adjourn. Voting “Aye”: Doug Christensen, Terry Smith, and Gerald Hamerlik. Voting “Nay”: None. MOTION CARRIED.

Respectfully submitted,

Peggy Kurtz
Urban Development

Doug Christensen
Chair