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Committee Minutes

FINANCE DEVELOPMENT STANDBY COMMITTEE

January 20, 2010 - - 4:00 p.m. - - A101
Minutes

Present: Glassheim, Christensen (via phone), McNamara (joined meeting in progress)

1. Matter of two-way communication between the Audit Committee and the auditors with reference to fiscal year 2009 audit.

Saroj Jerath, Director of Finance, stated that Brady Martz & Associates will be conducting the annual audit for the City. It is required that the Audit Committee and City Council be made aware that it is their responsibility to directly report to the auditors any knowledge of fraud that they are aware of and the auditors will then adjust their audit procedures accordingly.

2. Grand Forks Tax Increment Financing Policy.

Mel Carsen, City Assessor, stated that he had worked with Howard Swanson, City Attorney, to redraft the policy and believes that the draft document they have brought forward clarifies the policy without limiting the Council and sets some benchmarks to evaluate projects.

(McNamara joined the meeting.)

Carsen reviewed some of the parameters listed in the policy with the Committee. Christensen stated that the draft addresses the intent of Council and the hope is that it can be used to stimulate development along some of our corridor roads, but noted that it is not limited to any particular area.

Swanson explained that he had contacted other North Dakota communities to get information on the policy that they have, if any, and in reviewing the information received looks that our old policy was similar to what others had. He continued with a review of the changes that were made in the policy and noted that Section IV is new and gives Council the discretion to approve and reject any project and that action will not be viewed as a precedent for to be used to judge similar projects in the future, which is something that was not specifically stated in the old policy.

Swanson stated that he had looked into the clawback option that Council had previously discussed and can find none that include this. He continued that there is not an ability to use this retrospectively, but could include a forfeiture of exemption for future years left in the agreement. He recommended that this not be included in the policy, but rather be considered on a case by case basis as an agreement is brought forward. The group discussed whether this is an effective tool to consider. Swanson noted that overall there are not many North Dakota communities using TIF’s, that some may have a policy but not approved any, and that some had asked for copies of our updated policy once it is passed.

Motion by McNamara, second by Christensen, to recommend to Council approval of the revised Tax Increment Financing Policy. Aye: All. Motion Carried.

3. Knight Foundation Grant.

Meredith Richards, Community Development Manager, explained that last July the City of Grand Forks received a four year, $1 million grant from the John S. and James L. Knight Foundation with a primary purpose of increasing property values and home ownership in the near northside neighborhood. She continued that the intended use of these funds will be to establish a revolving loan fund that will be used to acquire and rehab distressed properties that are either single family or rental properties which would have the potential after rehab to be attractive homes for single-family owner-occupants. She added that they will probably be able to do 1 to 2 projects per year and will focus on curb appeal improvements and this program is not designed to make these homes move in ready, but to make them attractive for entry level buyers and to improve their value in the neighborhood. There may be some work that can be done by maintenance staff, but it is anticipated that most will be contracted out to local companies through the normal bid procedures.

Richards continued that grant funds will cover the full costs of these projects as well as staff administrative costs so there is no use of City funds involved in the projects. If approval is received, the proposed first property for acquisition would be 604 N 6^th Street, which is a large single family home, but has fallen in disrepair due to vacancy and frozen pipes and is listed on the MLS service currently. Committee requested that staff make contact with the local Board of Realtors and make sure that there are no concerns from the realty industry with the City taking on this type of project and bring that feedback to the Committee of the Whole.

Motion by McNamara, second by Christensen, to recommend approval of program description and authorizes staff to proceed with its implementation beginning with the purchase of 604 N 6^th Street. Aye: All. Motion Carried.

4. Redevelopment of Civic Auditorium Parking Lot.

Meredith Richards, Community Development Manager, gave a brief background on the history of this project. She explained that as part of the project MetroPlains will be submitting an application in the LIHTC Program which has a deadline of February 26 and therefore is requesting that Council approve this agreement with MetroPlains, contingent upon their approval in the LIHTC Program. She added that MetroPlains must have site control in order to have approval of their project. Richards outlined the proposed agreement as listed in the staff report and includes: conveyance of the land which has an estimated value of $165,000 to MetroPlains for no cost, City provides $375,000 in HOME funds for the project, and City approves a property tax exemption for up to five years as allowed under NDCC 40-58. Richards stated that the proposed development will be built according to Green Communities standards and be similar in nature to The Current project that MetroPlains did on 3^rd Street.

Richards pointed out that if the agreement is approved as proposed, it will require a future action to redefine the homebuyer assistance program that we have, as that also uses HOME funds and this project will use more than we are allocated for a year and will bring this matter to a future Finance Development Committee meeting for discussion but wanted the Committee be aware of that in determining what action they take today. Christensen asked what the minimum is that would be required today for MetroPlains to proceed with their application to the State. McNamara stated that he is in agreement and that at this time is not comfortable with the whole agreement as proposed and would agree with a resolution, but would like to have further discussion on the financial details.

Rob McCready of MetroPlains and Jim Steiner of JLG provided a handout on the development to the Committee and reviewed basic site design and floor plan information. He included information on potential future development of the current greenspace lot, which the City is currently working to acquire. McReady stated that the rent will be capped on these properties so there will be a revenue gap to fill. He continued that there is getting to be more competition for tax credits and as such would like to put together the best most complete project so that they have best chance for getting approval, but if not approved this spring will need to look at refining the proposal and coming back in the fall. If spring approval is given, would like to begin construction this fall.

McCready explained that the minimum they would need at this point is an idea of what the funding would be and a purchase agreement giving them site control. He added that if approved by the State they would need to come back very quickly to the City for commitment on the remaining aspects of the proposal or would not be able to secure lender support. Based on that, he stated that they would like to come to agreement up front on the entire proposal so that if they are approved at the State level could continue on smoothly with the project. Christensen replied that his concern is there are some other potential funding sources besides the HOME funds and would like the opportunity to discuss that, even though staff is recommending HOME funds.

Glassheim commented that would like to see some dollars coming in from the City each year, so will probably not go with 100% tax exemption, but rather sliding scale with at least some percent due each year.

Swanson stated that the proposal has this set up as a TIF and not sure what items may qualify under that program, but can review it. He asked whether the intent is for the property to be fully taxable at the end of the five year term and McCready responded that it will be. Swanson also pointed out that if the greenspace lot is to be a part of this project that may also be a replatting issue before this can be approved. McCready replied that is not included in the project that will be submitted at this time, but that if the City does acquire that lot, there would be an ability to restructure the project for a short time to shift the location of the building or make other adjustments, or if not there is work being done on a future development for that lot.

The Committee consensus was to call a special Finance Development Committee meeting for next Wednesday, January 27, 2010 to discuss this item, with revised information then being forwarded to the Council for its meeting on February 1. McNamara asked that the meeting time be adjusted to 4:30 p.m. due to a conflict that he had and committee members concurred. Christensen requested that staff also provide an update on the acquisition of greenspace lot. Richards replied that an offer was made to the owner and he has not responded at this time.

5. Letter of Request from Grand Forks Airport Authority.

Patrick Dame, Executive Director, stated that the airport has experienced increased traffic and flights with the addition of a new airline and as such has a need to make room for additional parking and move up needed repairs to the Airport Road. He continued that they had discussed the need with the FAA to see if it could be included as part of the terminal project, and was advised that if the need for the repair is due to new revenue, then it would not qualify for federal assistance, however if it is added to the terminal project they could look at discretionary funding to assist with the cost. The breakdown would be 95% federal and 5% local share, with the FAA requiring a team approach to cover the local share.

Dame continued that the street is a City street and as such he was bringing forward the request to the City to partner with the Airport on this project. He added that the Airport has tight cash flow at the moment and participation from the City would also help with this and would be requesting that 50% of the project cost would be covered by the City as either a grant or a loan to the Airport.

Al Grasser, City Engineer, stated that this road is not covered under the City’s street CIP plan, as the Airport has their own plan, however the road is a City street on City land so seems appropriate that we assist in some way with the project, especially if we can get 95% covered by federal sources. Jerath stated that may be able to use funds from Infrastructure sales tax dollars.

Christensen stated that we are also looking conservatively on cash now and wondered if there was any ability to use increased revenue to cover some of the airport’s share and if it was done as a loan what the airport would be looking at as a repayment start date. Dame provided information on the additional revenue estimates and the way they are already being factored into the project. The committee discussed that seems there are not enough infrastructure dollars for necessary road projects and concern with setting a precedent since the Airport does have the ability to levy taxes as well for their operations.

Grasser commented that if the FAA is looking for a collaborative project they may not recognize the loan as qualifying and should confirm that. Dame stated that the FAA was preferable to a grant from the City, but put in the loan option as is aware that funds are tight for all entities. He continued that they have worked with their tenants to increase rates and charges to the extent possible and believe that they have gotten them to a point where it is an appropriate level.

The Committee stated whether this is something that could also be looked at as an economic development project, as it does bring more to the community. They also discussed that this is a regional airport so perhaps the County should also be contacted about joining any partnership on the local share funding. Dame stated that they will need to have the project fully designed by mid-March and would need to know City action within three weeks.

Jerath provided details on a loan financing option to the Committee. The Committee discussed perhaps extending the term of the loan proposal from 5 to 10 years. Dame will take that information and review it. Glassheim suggested that if the County does not participate the City could look at perhaps $50,000 from City as a grant and loan for remainder. Dame was encouraged to contact the County regarding participating in the project and bring information back to the Committee.

Consensus of the Committee was to add this item to the agenda for the special meeting on January 27 as item 2.

Meeting adjourned at 5:30 p.m.

Respectfully submitted,

Sherie Lundmark
Admin Spec Sr.