Committee Minutes

Minutes of the Grand Forks City Council/Finance-Development
Standby Committee Wednesday, May 7, 2008 - 5:30 p.m. (following Growth Fund mtg.)

The Finance/Development Standby Committee met on Wednesday, April 2, 2008 at 5:30 p.m. in Room A-101 in City Hall with Chairman Christensen presiding. Present at roll call: Christensen, Glassheim, Hutchison.

Also present were Greg Hoover, John Schmisek, Todd Feland, Mel Carsen, Pete Haga, Mark Humble, Betty McDonald and Rusty Wysocki of Forx Builders.

1. Development of 500 block of University Avenue.
Greg Hoover, urban development, stated they were to bring some decision point to this project - 4 sites that council gave authorization to particular developer to develop and have been working on this since time of Brownstones and Current Apts., and at the last meeting the committee asked that Mr. Ritterman come forward with a proposal. Mr. Ritterman stated they are looking at redeveloping the 500 block , that this would be publicly financed, that the house on the corner lot is an issue, and would need that lot to make project work - question was who would pay to remove the building.

Christensen stated that rather than grants, our money is in there, $200,000, and would like to share the profits, and rather than just giving the money away, share it. He stated with proposals, would be bringing a lot of housing in. Hoover stated one thing in favor of following this proposal is that our real estate markets are a bit insulated from the national perspective, and that some additional time might allow that to settle down, that Mr. Ritterman has expressed concern on the condo side of sales in price point given the current market, and that the rental would make more sense but that is another factor for committee to consider. Ritterman stated there probably would be 6 units; and perhaps they should take more time to study it. Glassheim stated he was concerned about City granting large percentages for housing, primary business is one thing, likes the downtown but seems like a lot of housing; City's money would buy out the additional lot. After further discussion, the committee held this matter.

2. Reconsideration of the new home exemption.
Mel Carsen, city assessor, reviewed information in his report and that there has been some interest in change in new home exemption, that he put together report showing numbers of properties in the last four building seasons: in 2004 built 215 houses with 41 exemptions granted - 19%; in 2005 built 196 houses built with 42 exemptions - 21%; in 2006 155 houses built with 42 exemptions - 27%; and last year 83 houses built with 20 exemptions - 24%; and in the neighborhood of 20-25% of new homes that quality for exemption based on current policy. The policy is that only homes that have a post-construction value of $150,000 or less on the building only qualify for exemption. He stated there is some interest in raising that exemption to some other number - State statute is silent on that and can be granted to all new homes, exemption would be the first two years after the beginning of construction. He stated that they send out an application to the property owner, that they have to have their taxes current and on a single family home it has to be owned by the builder or the first buyer after the builder and he has to occupy it. He stated that in 2007 there would have been another 30+ homes that would qualify if raised ceiling to $200,000.

There was some discussion as to whether the exemption helped create new housing, and they have studied this over several years and cannot determine relationship to increase building or decrease building - not a direct relationship. Mr. Carsen stated it is hard to measure but thinks the impact is greater for the lower priced homes than on higher priced because budgets much tighter and look for every chance to same some tax money. Other cities in ND also grant exemptions, and that Fargo has just changed their exemption to apply to the first owner after the builder - that the builder gets no advantage - but exemption applies to all homes. Major cities grant it without limitation, Fargo and Grand Forks only two that put a limitation on construction cost. Mr. Carsen noted that East Grand Forks has lucrative incentive to build in their city.

Rusty Wysocki, Forx Home Builders Assn., stated across the nation there is a lot of gloom and doom but in our territory with the economy with agriculture, etc. we seem to have strong economy, and would support a change in the cap, and their position would be to eliminate it completely and also that it is hard to find correlation between whether houses built with exemption or without it. He stated they feel that the $75,000 that is exempt is about $1,650.00 decrease in tax bill for 2 years. He stated that the State probably would be pressured in next legislative session to look at the $75,000 exemption and possibly increase that. He stated with the $150,000 cap for the City to enhance the affordable housing situation, that a few years ago looking at affordable housing of $100,000 to $125,000 and now surpassed the $200,000 mark - average cost $250,000 without land; and that they would like to see that cap eliminated.

Christensen stated that he would like to see the exemption go only to the homeowner and not the builder; wants incentive to go to the people that buy the houses; Mr. Wysocki stated he would agree and that the abatement go to the homeowner from date they take ownership of it.

Glassheim stated that the pressure is great as to what the mill rates are and give some a break, and that is 1 or 2 or 3 mills for everybody else, doesn't make people build houses, thinks under too much pressure to give away money that we should be collecting, have negotiations soon and every $25,000 is going to be on the table and not be giving it away, and that it sends a false signal, the property owners should know what they are in for, and from the start it is going to cost them x dollars in taxes and shouldn't have 2 years when it is less - that if can afford a $250,000 house then pay taxes on it, and everybody else who is paying taxes is going to have to pick up this difference of money that is not collected. Mr. Wysocki stated he didn't agree and that by granting or eliminating it does create economic development at no cost to the city - that property owner will spend that money even if not on taxes. Glassheim stated he wouldn't disagree with raising cap to $175,000 or $180,000.

John Schmisek, city auditor, stated that in 2001 had no exemption, in 2002 with the $75,000 on value of $110,000, that in 2003 value went to $135,250 and in 2005 went to $150,000, and was just a matter of realizing had to raise it for base house. Glassheim stated that in-fill houses in Riverside are between $100,000 and $140,000, two and three bedroom houses. Rusty Wysocki stated they can build a $150,000 house but don't have any place to build those in Grand Forks, did build a number of them in East Grand Forks - flood properties - that the average home builder in their 20's want 1400 sq.ft. split, finished up and down, with granite counter tops, 3 car garage that is insulated and finished, that what we perceive as affordable and what somebody is willing to live in quite different.

Todd Feland stated that lot of people that work in Grand Forks live in East Grand Forks - that we lose families with kids that move and build homes in East Grand Forks because of incentives.

Interest rates may be down but what inflation will be doing - that when have slow growth or no growth have to make incentives. It was noted that exemption should be consistent, not have it one year and not the next.

Hutchison moved to allow the exemption on all new houses, with exemption only to the first property owner after the builder. Christensen seconded the motion.

Mr. Carsen stated that the two years of eligibility under the State law is the first two years after the beginning of construction, cannot change that - State dictates the two years which start the first year is year after the construction starts.

Glassheim moved to amend motion to raise the post-construction value to $200,000; motion died for lack of a second.

Upon call for the question and upon voice vote, the motion carried 2 to 1. Glassheim voted against the motion. This matter will be placed on the agenda of next committee of the whole meeting.

3. Taxi flag rates.
Vern Bentz, manager of Grand Forks Taxi, and Mark Humble, owner of Grand Forks Taxi, and Rudolpho Delgardo, Jr. of City Cab, were present. Mr. Bentz stated that last time they requested rate increase was 2 1/2 years ago, just before World Jrs. and gas was around $1.65 to $1.75/gal. and received an increase of $2.25 on flag rate and 0.30 cents every 1/8th of a mile and comes to $2.40/mi. within city limits. Since that time gas has increased to where it is right now, doubled - that in their fleet of 11 vehicles expending what they used to do at $4,500 a month, doing at $8,500 to $9,000/per month - fuel is killing them. He stated they have a contract with the City but not discussing that and would not affect the City at all - strictly money for flag rate for private sector but because it is a cab service it is regulated by city council, that they are licensed by the City. He stated they are looking at $3.00 for the flag rate which is an increase of $0.75 per rider and keeping the 30 cents per 1/8th of a mile in town, and believe that the 75 cent increase help offset to a large degree the cost of their fuel. He stated the drivers still get a percentage of the flag rate as part of their salary, all drivers are paid on a commission, with exception of management. He stated it is only small increase on what charging the customer but helping to offset fuel - that a lot of customers not using their cars anymore because of the cost of gas, taking taxis, and the more taxis out there, the more fuel we are using and still having to pay $3.60/gal. City contract is a 5-year contract, and are in 2 1/2 years of it, but get yearly CPI increase.

Motion by Glassheim and Hutchison to amend the City Code to raise the flag rate to $3.00 with 0.35 cents for every 1/8th mile thereafter. Motion carried.

Adjourn

The meeting adjourned at 6:30 p.m.

Alice Fontaine
City Clerk