Committee Minutes

Minutes of the Grand Forks City Council/Finance/
Development Standby Comm. - January 24, 2007 - 4:00 p.m.

The city council of the city of Grand Forks sitting as the Finance/Development Standby Committee met in the council chambers in City Hall on Wednesday, January 24, 2007 at 4:00 p.m. Present t roll call were Council Member Christensen, chair. (Glassheim and Brooks absent). Others present were Gershman, McNamara, Kreun. Also: Brad Gengler, Branden Bartholomew, Chief O'Neill, Chief Packett, Mel Carsen, Roxanne Fiala, Daryl Hovland, John Schmisek, Don Shields, Rick Duquette, Todd Feland, Maureen Storstad, plus other employees.

1. Preplanning.
Mr. Duquette stated that they are still trying to assemble information that had been requested re. benefits of employees, etc.
Christensen stated he put together a list of things that he thinks the council should review, and has asked council for their comments; and that he has asked for a complete review of our employee benefits, not to say that you will lose your benefits, but wants to know what they are and what they cost us. He stated there is lot of conversation at state legislature re. capping property taxes, that Mayor Brown wrote a letter based on things we feel. He stated that the 2% cap on property tax isn't a real big issue but of how we run the city, budget of $13.7 million in property tax with $1.4 for the dike, not going to hurt us very much, and for us to increase fees or what we charge for utilities, and move the monies from utilities over to realign the use of sales tax. He stated everything is on the table, have $100,000 for special events, $100,00 for promotions, beautification; and it was noted that our core business is the most important.

He stated he is concerned that we have a healthy pension plan, that $1.3 million/year is the unfunded liability, and believes it is their job to make sure that we are adequately and accurately funded, no one has ever suggested taking pension away. Mr. Duquette stated he was comfortable with words of the pension committee and discussion re. working with index funds approach and comfortable with the long term amortization of this liability; the market and market accountability and thinks Pension/Insurance Committee has done good job of looking at it and working with our experts that we bring in.

There was discussion relative to the unfunded liability of the pension and that in discussion with Mr. Schmisek they can find another half million to put in there each year, because if have the half million dollars doesn't have to take the $1.3 million, only $800,000, and if can find a way to front load that $800,000 or part of it, this will be much better funded because if we don't do that, a future council will have to take when 10-12 mills go off the dike, roll them over to fund the pension plan. Mr. Schmisek stated that they have included in the 2007 budget the amortization of that $1.3 million plus the normal contributions so that is already in the fund, that was brought up at the Pension Comm., looking at the index funds where you probably pay a 30 basis point fee instead of the 1 and if we do that, that is simply $500,000 in expense per year that we don't have and if multiply that over the 30-year timeline, and talking about amortizing this, that will help us make up the unfounded liability. Christensen stated only real issue is the $1.3 million and if can cut that down by $800,000 that gives us 6 mills and translates into money for salaries and benefits and capital equipment. Kreun stated that is still part of the long term plan, is amortized now over 29 years and subject to changes in that period of time, next step is to possibly take away some of the managers, so don't have to pay the fees, that we are doing better than in the past; and that a lot of the people programmed to retire aren't necessarily going to retire and have to take that history into account. He thinks that we have to be concerned but are on the right program to manage that. Christensen stated we are moving more towards elimination of managers and getting those fees down.
Christensen stated his list includes review of employee pension, review benefits, review pay for performance and salary ranges and at some point in time should get a report on that so have an idea of where we are at. Mr. Duquette stated that they bring PSP report in every March to the city council and will be doing that, possibly in work session so get everybody clued in at one time of how it is working; that there has been some contact from folks about how they came out on the pay raise situation, as there is a mathematical reason why some don't do as well as others, and part of that is available funding.

McNamara stated as learning, more comfortable that the situation is not as bad as he initially heard. Schmisek stated that they have pushed the actuary this year and should have that in the next couple weeks, that will give us the most current numbers to work with - they have to use the 8.25 because that is in the plan but he will give us the cash flow statement over the next 29 years for an 8, and a 7 and a 3/4 assumption. McNamara stated his personal preference would be a little more conservative rate of return and therefore cash flow into the plan would be that we never have a problem with it again. Gershman stated that some are using 6. Schmisek stated that 50% of the plans are at 8% and that is why we went there also; that the more conservative interest rate to use minimizes the downside of the loss because of your base contribution; that historically had some reports in that were seeking those too because the Wilshire Index covers so many more pieces of the equity market showed that over the last 20 years that 8% and 8.25 was not that far out of line but we asked for since we have a 30-year timeline is to give us a 30-year look because we want to know if it is 6, 6.25, 7 or whatever and that is why all the discussions we are presently having in the Pension Comm. are very valid discussions to see what will it take that volatility out of this as much as possible.

Christensen stated if we put $5 million and run invested funds and have those funds in our enterprise funds and if we move that money over there and if take that assumed rate, 7.25%, generates $362,500 and that is $720,000, and now taking from every source around here, $1.3 million/year for 29 years, but if did those two things, would have $720,000 for the next 29 years to fund payroll, salary and benefits; that he will be pushing to put $5 million into that plan to get the interest working on it; that have $10 million in Water Fund. Kreun stated not to take that money because that is what going to use for water treatment plant at some point in time. Schmisek stated that what use for CIP going forward and there are legal restrictions.

Christensen stated that Mr. Schmisek brought along the CIP that has been adopted in the budget, and should think about that because it is important that they remember what they have budgeted for the next 5 years, some would like to fix some roads.

Mr. Duquette stated his sense of what want to do, begin to assemble some of the information that was requested relating to benefits, etc., and recommended that it might be helpful for us to hear those in a work session where you can put to a majority of our city council members, can assemble information and start looking at projections on revenues, expenditures, and get a sense of priorities, and thought that this was a meeting to discuss having those meetings and get a sense of what the council's priorities are as it relates to the budget.

Gershman stated that is his priority is economic development, that we are not replenishing that enough, that we are out of land, have 8.35 acres left in the Industrial Park, talking about developing a master plan through the OEA money for a master plan on the Amazon land, and where do we get the money. He stated if you look at economic development and if look at the money that has been used, but when look at the deals that have been done by the EDC in the last 3 years all of that has been done through PACE loans, low interest loans, job development except for the grants given to the EERC, etc. He stated it has been run without handing out money, only to University for projects, and had meeting with UND officials and told them that that has to stop and laid out what the University has received since 2000 from Economic Development - $500,000 for student retention, $500,000 for seed money, $500,000 for EERC, and years ago got $1 million from City and $500,000 for Park, $3 million, and his point is that we need to separate what have done for the University and have them understand as we go forward that it is short-sighted of them to keep coming for grants because it is going to be over, aside form the Airport, which has their own sources of funds and they have to handle that, other than the $40,000 we gave for Frontier bid, and leave that for now.

Mr. Duquette stated on legislative committee there is position taken related to the property caps, etc. and we need to be very careful in not breaking ranks on that because the League of Cities and the municipalities in the state are going to fight that because it is taking away authority from Home Rule decisions, no matter what house priority is with economic development, will have to focus on the core business. Christensen stated he is concerned about meeting obligations to employees, curious about benefits and concerned if he can free up some money to meet core business by minimizing his $1.3 million makeup in the pension plan, that we do it and if he loses that vote, that is fine but it will be a consequence of another council to bear and will have to be raising fees or taxes. Our core business is fire, police, streets, water, etc. and have healed ourselves from the flood and have to get on with business of fixing up our streets, equipment and meet commitment, and know sources of money that are going to meet these obligations, and whatever else wish lists will throw in and go with it, and moving money from the 1% sales tax, obvious place is economic development, only place because can't take it out of infrastructure and only place is 1% sales.

Gershman stated that he doesn't want that but wants to see that grow.because we are growing; and job growth in Grand Forks is maybe in top 100 in the country, that is what it was in October, there is excess sales tax that everybody wants and decision is going to be by council and recommendation of the mayor as to where is the best use of that money, 50% going to property tax relief, 30% for infrastructure and 20% for economic development. This year the private section has paid $173,000 into economic development, the City pays $195,000, and we are trying to get that up over $200,000, and wants to put on the table that some of the excess dollars go in there.

Mr. Duquette stated that people at the state are making decisions about how we should handle our local financing, there is political will to do something at the state legislature, and concerned about potential impact because it goes back to the core business, and how do we pay for our core business, not sure where we are at on this. It was noted, that the City wouldn't get any property tax on Canad Inn because 100% exemption for 5 years, some tax this year because buildings not finished. .

Christensen asked if they want to talk about CIP - Schmisek stated that information is in the back of the budget book, the 5-year CIP, and keep in mind that on December 18 this was the next list that was submitted to the State for portions of CIP for add-on year, etc. for paving projects - and after submitted this to the State and part is the 48th Street consideration and we are now doing process and analysis as we move forward and if possibility of advance funding that somehow the State guaranteeing us that they will remit this back to us if that is the key project. Christensen said perhaps shift focus to the Alerus land. Gershman stated something else we should consider buying the land north of the Alerus. Schmisek stated the Alerus Finance Committee met this morning and that maybe need to look at controlling the land around the Alerus, they have asked UND to give us what they think the needs are at the Alerus and in talking to the Commission there is a sense that we aren't going to pay for it, and want complete listing and talked about looking at a 25-year capital needs of the Alerus. Bonds run through 2029 and that sunsets. He stated that with 3% growth is that by 2009 in the debt service fund we will have paid back to the water department monies for the parking lots, etc. to 2169 the money we used for doing the infrastructure that had to change out for Canad facility for fire wall, etc. and at that point all were funding capital needs for the Alerus is their $400,000 or $500,000 of major capital (chairs, tables, etc.) and they are thinking that they need to look at that, and if talk to the council about those to see if there are ways of funding that. If the tax continues to grow at 3% by 2010 we would be generating something like $2.5 million more in revenue per year.

Mr. Duquette stated he and John have to leave at 5:00 and if they can put some costs together on what they can do for next steps or meetings.

Christensen stated his thoughts on the benefits, that they can have a savings account for health insurance, self funding deductible. Mr. Duquette stated that this came up before and are doing serious looking into it, Daryl is putting together some facts and information and will get that to committee so they can look at that to see if it works or not. Christensen stated that if have a $250 deductible and kick it up to $2,000, then premiums are going to go way down, and that frees up more money. Schmisek stated one of the reasons they went with the State was because we did have self insurance fund, did buy the stop gap insurance over and above that, and within 3 years after started that plan, went belly up with $200,000 in the hole. Gershman stated that he did that at his store. Christensen stated that is lot different then self funding the insurance; and that he is trying to find ways, but not take away any benefits, to free up money so can meet other needs.

Christensen asked if they would have information for meeting next Wednesday; Daryl Hovland stated they would try to get that done but also that they were waiting for info. from Blue Cross/Blue Shield and have some outside sources coming but can try to try to get done by next week.

Christensen asked if staff had any comments/priorities to make. There were none.

The meeting adjourned at 5:00 p.m.

Alice Fontaine, City Clerk