Committee Minutes

Minutes-Finance/Development & Service/Safety Comms.
Monday, August 7, 2006 - 5:00 p.m. - Council Chambers

Roll call: Kreun, Bakken, Brooks, Glassheim, Gershman - 5.

1. Matter of 2007 Community Development Block Grant (CDBG) Program.
Greg Hoover, Urban Development, reviewed material sent out to the committee, there was a request for both committees to meet re. this item prompted by some concerns about whether doing something in the area of public works; that they have the map of the low to moderate income areas showing 3 areas that have been designated by HUD as LMI areas, on the south end a lot of that is due to some of the public housing projects we have and some of the LMI people that go in there, one farthest to the west is primarily due to University population and the one closest to the river, north of Demers, is what he would call low and traditional low and moderate income area. He stated that is important because when do infrastructure projects there are a number of ways to do them and comply with the federal objectives, but usually the easiest way is to do it in a low and moderate income neighborhood, and to do a CDBG project, have to have an eligible activity and meet national objectives - two thresholds to meet. He reviewed projects that have been done for infrastructure since 2002 with CDBG funding. Estimated revenue and suggested expenditure and would want to focus on that. He reviewed projections for CDBG program income and that we get program income from past activities that we funded where repayments of loans or sale of houses that we acquired after the flood and some rental rehab money that we had out in the past; and totals are for program income, and can estimate that we would get $425,000/year in our regular entitlement from HUD but that the President's budget this year actually changed the formula and Grand Forks would not get an allocation directly from the federal government, would have to go to the State of North Dakota for money and would hope they would do as they do in the HOME Program and have made Bismarck and Grand Forks entitlements and will give as close to what you have in the past you could get through the State program but there is a move afoot under current national administration to eliminate the program and to eliminate most other community development programs.

He stated for 2007 we should receive $427,000.

He reported information they have done in public services

Gershman asked what they have done in program income and if looking at 85% projections, and in 2007 $1.118 million is what we would get from program income and asked council members if they had any other questions on the program income at this point.

Kreun asked where they have projected the spending to be of the $1.1 million of the programmed income. Hoover stated that will come back to the estimated revenue and suggested expenditures.

Glassheim asked what are the property sales line and if we are meeting our 2005 and 2006, how many buildings or properties are left in that projection. Hoover stated that in 2005 made, 2006 too early to tell, but Silverman house will be bid shortly and have had a few others close but the really "iffy" thing here is if in the future depending on when we get the go ahead from the Corps to begin to sell the lots, there is one house with a pending sale on it but are having title issues with it.

Gershman stated he goes by the Silverman house almost every day and would like to get some staff down there to do some watering and trim the shrubs and clean it up before putting it up for sale. Hoover stated they would do that.
Hoover stated he would like to review the 2007 estimated revenue and suggested expenditures, but with respect to the Expenditures the 306 is what they need for Administration of the Program, includes number of staff, assistants doing filing of federal reports, etc. re. grants; and in the past have used the United Way to do the public services and that $200,000 is the same as last year, United Way takes 10% of that for administration and that is funding that is a policy decision, and should the council not want to do public services, they do not have to and we are limited by law to doing no more than 15% of our allocation program income for that and $200,000 is well below that.

Direct Housing Assistance: is our Home Ownership Programs and reviewed some date relative to that and have two pots of money that they draw from, from CDBG and from HOME Program - CDBG is for down payment and closing costs; and in 2004 spent about $252,000 benefiting 65 household; in 2005 spent $347,000 benefiting 82 households; in 2006 we have spent only $57,000 and benefited 20 individuals; and questioned why this year is down - difficulty in finding affordable housing in this community, interest rates have gone up and people more cautious in their decisions in buying houses - there are some things they are looking at that will put more money out there for people buying homes and hope within the next 6 months to start an Employer Assisted Housing Program, where they would work with major employers to provide housing for what generally is their entry level people as an inducement and incentive to stay with the company and also put roots here, it works different ways in different communities - sometimes the business actually puts additional money into an account and they leverage with out funds, in some cases early discussions with some businesses here is for their entry level people rather than putting money away in their 401K, they would put that money in a escrow account where at the end of 3 years they could use that and our program for down payment and thereby able to afford a little bit higher than normal entry level home; and want to begin working that type of program, not with employers, but with the Promenade Development, they just sold another house today, and that brings it to 23 and 51% of those are low and moderate income people and of the 51 that they have for Phase I, 51% of those, have to be low and moderate income people - and that they are thinking that they have a Family Self Sufficiency Program in the Housing Authority where people go through budgeting, etc. and how to save money, improve their job skills, go to school, etc. and work with those people and use this program to get them to buy houses in the Promenade and in the Promenade perhaps giving a little more of down payment and closing costs amount to
people who go there because have a vested interest in this, both Housing Authority and the City. The Housing Authority specifically because if they don't meet that threshold they will have to kick back $750,000 to the City, and that is near impossible. He started from the City's standpoint they have that in a contiguous area of the city, good project and is the only entry-level housing we have in the community and the better off we can get infill people into there, the better off we are and plus it will help sell Phase II.

Gershman stated on the program you have rather than a 401K would go into Home Equity Program, and is assuming they will engage the local banking community in that: Hoover stated they would and are only in the talking stage but principal partners would be the banking community and Fannie Mae, there is a program in Louisville Kentucky where Fannie Mae has agreed to buy the mortgages that are done through those types of programs, and might be possible that the banks that have already made home loans out in the Promenade, Fannie Mae might buy those which then is a further inducement for the banks to make more loans in the Promenade.

Gershman stated you need banks that have a trust department or employee benefit program where they could handle that money under the legal qualifications that are needed. He stated he had talked to Fannie Mae many years ago about home fairs and they have a program of home fairs where they show you how to have a fair, where it is an educational thing for the public to come that do not own homes. Hoover stated they took the tip from him and Fannie Mae has asked them to submit a proposal which they have and it is real generic and looks to receive $25,000 in one of the activities and are considering the home fair.

Kreun stated they do that now on a smaller scale, the people that go through our program are given that same training, but this would be on a larger scale and invite larger group of public and do advertise it but doesn't get out as well as if had $25,000 to advertise it and do it. Gershman stated they might tie in with the Home Show because have a lot of people coming and will draw more people and can work it out.

Hoover stated they have covered the Direct Housing Assistance and some falloff there and if didn't spend the entire amount, but have budgeted for that. The Red River Valley Community Action Program Home Cents that they are in partnership with has dire need of more money but will come back to that and is one thing they could use for it, could use for other activities; that in past years have done a second tier but would look to other eligible projects and bring those back to the council.

Housing Rehab - $500,000
Hoover stated should have information in packet on their brochure and a map of where they have done the projects. Originally they requested $600,000 for that program because city staff and Red River were not certain how this program would take off, and cut it off at $300,000, and that he knew this program would take off, and they have already allocated the $300,000 with 16 applicants and have a waiting list of 15 for $300,000 and would like to talk about what they are working on with the mayor's office for a neighborhood initiative but this has become a very successfully program and also meets one of the needs he has been hammering on since he begin here which is to revolve money, the loan payments come back into a revolving loan account which then accumulates in where able to sustain those types of activities for years to come, very successful elsewhere and will be very successful here as evidenced by the early interest in and involvement by home buyers.

Hoover stated those are the things that he would recommend to the committee or council for 2007 CDBG, and by subtraction based on our projected revenue, that would leave us $287,000 for Bricks & Mortar, and don't know what level of interest there will be until they get applications, heard some feedback from folks but have been doing this since the flood, and have the material from 2002 - Infrastructure, but at some point have done is the nonprofits use this money to upgrade facilities, build new stuff and not diminishing that meets there bit would think that need would be diminishing over time.

Gershman stated he had several observations, and that he is very interested in the social service organizations to start to come together under one or two roofs, they could share utilities, office, telephone, etc. and Pat Burger is going to get some information together, and that one incentive might be, that money for public service and bricks and mortar to go down 10% each year until they start to come together, no incentive for them to do it, the incentive is to save money but they are spending tens of thousands in duplication and if we don't try to get them to start to come together by getting an RFP through private developer to rehab a building downtown where maybe 4 to 6 agencies could come together and sell their buildings and would like the council to think about some sort of an incentive and keep the heat on these people to do it, brought up to them 6 years ago and zero has happened, and that there is a project in Biloxi and this is what is being proposed in Biloxi through the Knight Foundation because there are not enough funds and there is going to be some pressure on them to do it, and would like them to think about that, there was a resolution passed in Eliot's committee to encourage that.
Hoover stated in the motion for this evening on the CDBG program, and will come back to that, but wanted to tell about the mayor's neighborhood initiative but looking at one neighborhood, possibly two, and now housing focused where go in and do rehab, work to make money available for low and moderate income people to buy homes that are normally rented and might be up for rent and/or sale so change the mix there, but as a result of discussion you have had at committee of the whole it seems that another opportunity exists here and that is to put infrastructure money into that particular neighborhood, both underground but curb appeal things and this is a very successful program in many communities across the nation and if want to do something like that, then wants to wrap this up and then talk about policies and other considerations that you have.

The action tonight he would suggest is to approve the process if you want to continue Bricks and Mortar for this year and the United Way and to adopt Gershman's notion of weaning them off over time and using the Citizens Advisory Committee, etc. and can approve that tonight and when come back if there are changes you want to make, can do that later in the process but need at least to adopt timeline here to move forward and would be his recommendation that if the council wants to go to public infrastructure in a targeted neighborhood(s) then the Bricks and Mortar which is where that money would come from is those things are traditionally reviewed by the CAC and if you want to direct that, then would be working with Al and the engineering department so there would be no need for the CAC., that he believes public participation is very good but in this scheme he doesn't think the CAC would add anything.

Kreun stated we are always short on infrastructure funds and 95% of the time it is in LMI areas and our entry-level housing program is the only one in town, and can't get the private sector involved in entry-level housing and if we can take some of these dollars and put in an infrastructure fund together so we can buy down the cost of living at some of these homes in the LMI areas by providing streets, sanitation, water, repairs to the infrastructure which keeps the special assessments down and make the housing more affordable. That if all these funds are dwindling down and what we are doing is giving away our ability to take care of the basic needs that we have to have and that is infrastructure and housing, plus police and fire that goes with it. He stated in one or two of these funds that we redirect some of the funds into an infrastructure and to work with our engineering department because in the last two years we got zero out of that amount of money and certainly could have used that in those LMI areas to do that, some of those projects didn't get done, some paid for out of Highway User funds and general fund monies, and to put more money into that so that we keep our infrastructure strong and would think we should have $200,000 amount of infrastructure put into that category under suggested expenditures.

Hoover stated the point he makes as we go forward, is recall with the diminishing resources they are trying to replenish it and with the public infrastructure we don't get that money returned to us but also have a competing objective and that is affordable housing and improving neighborhoods esp. for low and moderate income, and as trying to strike that balance need to decide and thinks the $287,000 and would have no problem with that into infrastructure though doesn't know what the nonprofits have out there, ideas for fixing up buildings, etc. and wouldn't know until asked. Kreun stated that maybe that is one of the items just exchange and put infrastructure in there as serving the same people just in a different manner but with our responsibilities as a council, they said the Direct Housing Assistance has been good up to this year and Rehab Housing has been real good and administration and have two funds to look at and that is public service and Bricks and Mortar and thinks it is important to utilize those funds in infrastructure.

Bakken stated that a lot of this started after the flood and wasn't meant to be long-term founding source, meant to help out in a very difficult time which is just about 10 years ago and would take $100,000 out of Public Service and $150,000 out of Bricks and Mortar and move it down to Infrastructure and let them work with the lower numbers this year and that it is going to keep dwindling here because we are going to have to take care of our infrastructure for those LMI areas, and this is the way it was meant to be done and agrees with it, that if don't start won't get there.

Glassheim stated this is not flood money but a program, CDBG program, that has been going for a long time and it's purpose is not to replace normal city functions, and most of doing that is illegal, but ways to get around it but not supposed to be replacing -- Hoover stated you cannot take a service that is currently funded by the City and replace the funds, if it is a new activity or an expanded activity and since this is minutes would encourage you to use a different term than get around unless federal comes in -- Glassheim stated he didn't think the purpose of it was to replace street work and sewer work and other normal city functions for which they have taxing powers, this is money coming from Washington that is dedicated to low and moderate income people and organizations and activities but not really supposed to be used to replace what the City is supposed to be doing and although you can do it, that is not its intended purpose and that is why said get around, and we certainly had a good reason to do it when we did the sewer separations in the low income neighborhoods because so many of those individuals would have been badly impacted but to fill potholes in a low income neighborhood, that is an infrastructure project , but asked what they are intending to do with this money, infrastructure is a nice word but what is going to be done with the money.

Kreun stated that last year there were five projects, northend storm sewer replacement, LMI mill and overlay area, watermain replacement area and none of these were considered and are all in LMI areas, there was a northend storm sewer improvement in 2006, and several of those projects that have been overlooked by the CAC and they feel that the City should take care of that but the same thing applies as when did the sewer separation because it injured people greatly, and in this case it injures them the same way, can't have it both ways, and that we are taking look at our responsibilities as council rather than giving our responsibility to somebody else to make that decision, and feels need for infrastructure is greater need than some of the other areas that they put money into.

Glassheim stated he thinks basically what is going on here is an attempt to since we don't have enough funding for doing what we need to do and have been cutting back on our mill rate funding for years, and are looking for anyplace to get what we can to replace city obligations. He stated that the nonprofits that don't want to fund them are part of the glue that holds the community together, made up of ordinary citizens, volunteers and pay their people less than city people are paid, get services from them that we need in this community and CDBG funds are good way to make sure they are sustainable and that they continue, without B & M no Mission, no Sr. Citizens Center, that we always talk about amenities and things that make this a good community and if looking for money and rather than taking it out of nonprofits and low income organizations that serve low income people, lets do away with the Arts, do away with Beautification and put it all into infrastructure. He stated he thinks this is a misplaced idea and especially as the amount decreases that shouldn’t be putting very much into infrastructure projects and taking them out of what the purpose of the funding is for. He stated if going to do this would call for well announced public hearing so can see whether people who run these nonprofits that waste so much money want to come in and make known what they do.

Brooks stated that the CDBG funds, $425,000 for 2007, we have two amounts, one that we get from the federal government and the remainder of the $1.18 million are program income from flood funds. He noted that the $100,000 for Public Service and $150,000 for Bricks & Mortar and for administration; and that if look at some of the figures we are using we are maintaining that every year, and look at flood funds and continue to use them. We are no different than towns throughout Minnesota and North Dakota that are in a bind as to how do you fund for infrastructure, general funds on either side of the river are not large enough to do that, the funds are not there, some have gone to utility levy to try to do this, this is a chance for us to try to do something to try to ease some of that , something we have to look at.

Gershman stated institutions do a lot of excellent work and his point of trying to get them to start to consolidate their facilities and overhead is because they don't have enough money, that they pay their people very little because they don't have the money and if came together to save possibly hundreds of thousands of dollars they would have more for their constituents and more for their employees; and would be willing to start with 10% off this year and little more off Bricks & Mortar, that when put the money into these areas that help people buy a home, once they have a home, their family changes and you begin to address the very issues that many of these agencies are trying to solve; and it is important for us to get people into homes and all trying to get to the same place and all have the best interest of those constituents at heart but how we do it.

Hoover stated that before the flood we didn't have the program income so we were limited in how much we could put into Public Service and that we did approx. $60 to $70,000 per year but did one or two agencies and that is historical perspective - and that he has to look at the total pot of money and can't segregate it into what we get from HUD and the program income, but if look at program income, what were the activities that really drove that money coming in - housing and infrastructure. He stated he would support Gershman's notion of too much of a shock to system but some phase, 10% this year, and little more each year until priorities change but would no compunction about rather than doing B & M to put it into low/moderate areas for infrastructure, that his preference is going to be in the primary area in which they identify for the mayor's initiative., and that staff is exploring the low/mod. area near the river plus an area around Winship School, and the one near the river has from housing perspective the most deteriorated housing that is out there and would suggest that. He stated in conclusion where they need to go from here - if you adopt the staff recommendations then put them on a track for issuing applications tomorrow, etc. and if make a radical change here, that we would reduce the Public Service's sum, do away with Bricks & Mortar and put that into infrastructure along with whatever amount we do for reduced public services, and owe it to the community to table this action tonight, and have staff come back with an alternative based on the feeling he is getting from committee.

Gershman asked if they want to have a discussion tonight about this or have staff to take the sense of this and come back to both committees again and hash it out and go to council. Hoover suggested it would be beneficial if have an abbreviated discussion saying we have considered these ideas but put it out there so citizens know, and then table the action.

Kreun suggested that rather than eliminate either one, take $50,000 from Public Service and take $150,000 from B & M, and have something left in each one and that would be a recommendation that he would make if bring it back to staff.

Glassheim stated in talking about the source of the funds, but suppose we had none of these monies coming back from flood money, $425,000 with 15% or $60,000 for Public Service, about 20% or $85,000 for administration, and $280,000 for B & M; and that is another way of looking at it, and administration comes out of flood money and question is whether you want to take some of the money from flood money to put back into public service to increase from $60,000 or some reduction in B & M but quite as severe as proposing because if took the CDBG funds would have about what you are proposing here for B & M.

Kreun asked if there is an administration fee on B & M, $287,000 and who administers B & M. Hoover stated they don't take admin. for that, but his staff administers B & M and that is why that all goes to projects; that if the combined group wants to suggest a little less for Public Service and then a certain amount for B & M and then for Infrastructure, then can go forward with the process that is outlined and give new numbers for this evening.

Committee stated organizations need a chance to voice their opinions.

Bakken moved to take $50,000 from Public Service and $150,000 from Bricks & Mortar to go into Infrastructure. Brooks seconded the motion.

Glassheim stated that when this goes forward would be nice to have a list of what talking about for infrastructure. Gershman stated recommendation to staff to come back so there is an opportunity to go before COW again so agencies have a chance to voice their opinion.

Hoover stated that the final action this evening will be to table to come back to COW with recommendation and that word gets out and people know, and this evening discussion about what considering and why.

Upon call for the question the motion carried, with Glassheim voting against the motion.

ADJOURN

It was moved by Brooks and Bakken to adjourn the meeting. Motion carried.

Alice Fontaine
City Clerk