Committee Minutes

Minutes of the Grand Forks City Council/Finance-Development
Standby Committee Wednesday, April 8, 2009 - 4:00 p.m.

The Finance/Development Standby Committee met on Wednesday, April 8, 2009 at 4:00 p.m. in Room A-101 in City Hall with Chairman Christensen presiding. Present at roll call: Christensen, McNamara, Gershman

Also present were Rick Duquette, Greg Hoover, Meredith Richards, Peggy Kurtz, Saroj Jerath, Candi Stjern, Emily Fossen, Chief O'Neill, Chief Packett, Brad Gengler, Roxanne Fiala, Council Members Bjerke and Kreun.

1. Neighborhood Stabilization Program.
Meredith Richards, urban development, presented information relative to the program, that minimum allocation for states was $19.6 million which is what North Dakota received, the State allocated the three entitlement communities an opportunity to request funds and the Housing Finance Agency would do the funding basically through the balance of the state. That the low-mod benefit has been extended to middle income which 120% of area median income rather than the usual limitation of 80% of area median, including the requirement that at least 25% of the funds must benefit very low income households or household at or below 50% of area median income - it was meant as neighborhood stabilization to address the foreclosure crises - purchasing, rehabbing, reselling foreclosed properties is the emphasis of the federal legislation.

There is a breakdown of how the $19.6 has been allocated throughout the state, our projects total $4.38 million and have divided that into line items, the first requirement of the funding is that we spend 25% of the funds on foreclosed or abandoned properties that will be used to benefit those very low income households at or below 50% of area median income - that 25% is the $1.192 million that is our first project recommendation for approval. The second portion is program administration; and the other major project and biggest part of the budget would be for the development of an SRO (Single Room Occupancy) downtown in the vicinity of the Shelter for Homeless, that was the state directive, and is one of the components of our plan to end long term homelessness and a great opportunity to do that without using local funds. Council endorsement is needed for these projects, submitting a more detailed application to the State, with an 18-month expenditure or obligation timeline on these funds and need to move on that.

Christensen stated that the City must spend $1.2 million for purchase, rehab. of foreclosed residential properties, and asked if we have $1.2 million worth of foreclosed residential property in the city. Richards reported they have been tracking foreclosures and as part of the HUD process in their application process designated target areas in our older neighborhoods, Near Northside and Near Southside, and have a not for public consumption spread sheet of properties that are somewhere in the foreclosure process in that neighborhood, have been tracking for 6 months and some great properties have come and gone - our approach is we should buy properties that would tend to destabilize the neighborhood if they are not reacquired and rehabbed and used to improve the neighborhood - have $1.3 million within our target areas that have been foreclosed or are in the process of foreclosure - the spread sheet is as up to date as it can be but some of the homes on the list maybe gone.

Christensen questioned the time period to get this done - 18 months - Richards stated they don't have to get everything done but have to have the money obligated or under contract to buy $1.2 million in foreclosed property - can't use NSP funds until it is owned by the bank - can't intervene in a foreclosure or prevent a foreclosure.

Richards stated they have 14 foreclosed properties - the foreclosure amount is $1.31 million and the true and full value off tax rolls is $1.33 million. By December of this year, the State will want to see good progress, and if not, possibility of losing funds, or we will be submitting an amended project request to make it work. Appraisals have to be done before we make an offer, NSP regulations require an offer of at least 15% below market value because this is meant to assist distressed neighborhoods.

Richards stated when projects rehabbed and sold - that we have to expend $1.2 million on acquisition and rehab - that we will lose money on the sale, because we will put more money into the property than end up what being worth because dealing with lead paint abatement, etc.
That if we do make money, we can revolve it back in and do more of the same kind of activity. Duquette stated that if we don't spend the $1.2 million, but spend $800,000, are we responsible for the other $400,000 - Richards stated that no, we don't get the money in advance, get reimbursed after spending it.

Christensen stated that they have recently approved a plan for the downtown, and assuming we approve this, do we have to go with the recommended project, or could take this money and go with an RFP in the redevelopment of the downtown in the area of the civic center. Richards stated they have to submit something to the State if go with something other than a downtown SRO. State wants to know how we are going to spend the money before we can spend any of it, but we have to spend 25% buying housing and have no choice, and once get that done frees up the balance of the money but have to have plans for the balance of the money. She also stated the State won't give us the $1.2 million until they approve our plans for the $3 million as they want plans for the whole package.

It was suggested by Christensen to start thinking about the $3.2 million for one building or lever it up with private sector. Richards stated that the project recommended by staff was based on the fact that 1) don't have any choice of the $1.2, but on the $3.2 million were told by the State that should use this money to implement the homeless plan, and was a good project and is a great funding source for that but that it is not the only project but have rules to deal with. Christensen stated that he would like to do something besides implementing homeless plan when have the Southend of the downtown to redevelop - and have more opportunities for the second phase of the development of downtown, and asked that they reconsider some other projects. Richards stated that have staff recommendation and timeline considerations - have an 18 month expenditure requirement by the State - and clock started ticking in March..

Gershman stated re. SRO what is the operation and maint going forward and how do they fund that, could build this for $3.2 million but how do we pay for the on-going expenses, would need to see that; and what other types of projects might qualify for construction or rehab. Richards stated that if were to proceed with an SRO have had preliminary discussions with Prairie Harvest as potential program operator, Northeast Human Service Center has funding - will proceed with an SRO but not give full blown approval but if they don't want to talk about an SRO, won't waste any time with Northeast or any of the other non-profits providers.

Gershman asked if they could perhaps flush out a couple plans for committee to look at - housing plan. Richards stated in the process of developing their initial request to the State, were very greedy and submitted the $19.6 million worth of projects, knowing we wouldn't get it but showing them that Grand Forks is ready to try stuff, and some were pretty far out, but do have some fallback but not $3.2 million projects but would be $2 million here and $1 million there and our hands tied in what we can do, if we wanted to assist the Housing Authority in additional development of the Promenade, new construction on undeveloped or redevelopment would work, have some vacant lots within southside flood lots and that was our second place use of these funds, there are other things out there but for lot of reasons an SRO is a good choice and first choice of a lot of people on use of these funds, but understands reluctance to say go ahead.

Questions were raised if NE Human Services or Prairie Harvest would own the facility or turn that over to them to operate and maintain - Richards stated that 201 S. 4th where Center operates the old Metro Federal Building, the JDA owns the building, Housing Authority provides the physical management and management of the programming is by Center, Inc. with funding from Northeast. She also noted they haven't even scratched the surface of the variations on ownership, management, administrative costs - any number of non-profit owners would be an option.

Bjerke questioned if house goes to people that are equal to or less than 50% - they are not going to be able to maintain that house - has concern about looking at things long term and cost to maintain, would like to see the plan to maintain those houses, whether rented or purchased. He stated the Mission on a yearly basis comes to the City for CDBG money to maintain their building, and if build an SRO building that won't be maintained either and would like to see the plan of how that building would be maintained - who is going to manage that building, staff for the building - lot of questions before we become involved with this, and just because get money, don't have to spend it. - would like to see details on long term ramifications of these programs.

Hoover stated that if we get the money, we have to spend it. Bjerke stated we don't have to take money - that if take it we spend it -but how maintain that. Gershman stated need to make sure that when we do this, that they are self-sustaining through other agencies, City can be facilitator but trying to hold the budget - no mills up or down. Kreun stated that when we passed the plan, part of that requirement was that another agency take on the responsibilities so that it doesn't put the burden on the City and that is still part of the process; that this doesn't become a building that the City owns and not a program that the City sponsors, other than the pass-through dollars we would get to have it built and/or some of the programming that takes place to begin with, but other agencies would be ones to maintain and run the program and that was the plan when they passed the plan. Hoover stated that was correct.

There was discussion as to other way of handling this, which is to lever this money and get it into the private sector and get it completely out of public sector's hands - that when developing the area that is now part of our downtown development plan, a private sector came in and said that they would build 48 units and just wanted the parking lot; had people from Minneapolis who said they would build a current structure and just wanted tax credits, that the same thing can be done again as have $3.2 million. Gershman stated that the issue is in addition that 25% of NSP funds must be used to benefit households of 50% AMI and if this isn't a blend of that or can you segregate out for the 120% and then do 100% and do 50%. Richards stated that their intention is that they will meet that 25% benefit for the very low income through the foreclosing, rehab, acquisition; the other part if were to blend it with private money that private money would be tainted in that the whole project would then have to meet that 120% max. cap. Christensen stated the private sector would be interested in something like this, and this could help develop the downtown, and would like staff to work on something like that, because we get the money, public is out of it and private sector runs it.

It was suggested that they should talk to people that built The Current and ask how would they do this because 60-65% loan to value could get mortgage and see what do with $3.2 million, not against the SRO but could have an $8 to $10 million project. Richards stated they have to be careful about the income generated by these projects because if generated through NSP money, it is like CDBG program income, would have to do research, the profit, or program income would then come back to the City or the State or the Treasury Dept. Hoover stated that if he gets the general sense of the conversation, its to look at the $3.2 million and see how they can leverage that and as matter of policy, if it generates program income, comes to the City is really great but if goes back to the State or Treasury that is okay. Gershman stated they would have people living downtown in better conditions and is on the tax rolls.

Hoover stated he likes the suggestion of meeting with people from MetroPlains who did a good job on The Current. Gershman stated that developers already thinking about these stimulus packages, as that is their business, and that's who you want to talk to. It was suggested that if that doesn't work, then go back to the second plan, where someone else will run it, not the City.

Hoover stated they will come back with something, more concrete, doesn't need anything from the committee - just general direction and look at all those options.

2. Civic Auditorium Update.
Ms. Richards reported they have de-construction consultants coming to town April 21 and 22 to give them some info. how to RFP and will report back.

Hoover stated he had meeting with some of the individuals that President Kelly designated from the University, with two approaches, first one is trying to find some departments or units within the University that would lease up the bottom two floors of the Corporate II building at 402, and second goal is to look at whether we can find a place to locate the University system IT building.

In the University budget that is going through the State, money was allocated for the renovation of the education building on Campus and were going to use stimulus money if it came through from the federal government, but because stimulus money has to be used more quickly, going to do the education building through the stimulus money and then use the IT building through the State, so that have more time. That he has had initial discussions with local architect who has been doing some preliminary work for them, that it is a 40,000 sq.ft. building, two stories, that could fit on the civic auditorium parking lot and as part of that discussion he had preliminary discussion with the Townhouse Motel and they are interested in City purchasing almost all of the lot between the motel and parking lot for about $90,000. He also talked to John French re. property that might be another location for the IT building, and if not that, then for some future development (residential because you can have the overlook). He stated they are working with the University to try to get something going and would expect a decision on the Corporate Center within the next 90 to 120 days, then work on the IT building.

It was noted that cooperation from the University, President Kelly, has been excellent and their willingness to come downtown with part of the Campus is very important. Hoover stated they are concerned about public transportation and if they do get a campus presence down here, that they would like to see some cooperative talks between our transit people and their transit people on how they be better served getting people to and from downtown, whether University students or citizens.

Christensen suggested at next meeting in two weeks putting together a "task force" for the development of the second phase of the downtown with the University presence - have funding for the IT building downtown over the next 2 years and have funding for some housing downtown within the next 18 months, and could put this together with a public/private sector. Hoover stated that the sitting of the IT building will be the University, there are places on campus that it could go and they are looking at some of those things. Christensen stated to get our directions and our task force going and work on this so can bring it to market in the fall of 2009.
Mr. Duquette stated that if the city council decides to deconstruct that facility, would like to have city departments look at items in that building - there are emergency generators, elevators, kitchen facility, and would like to salvage that extensively, Mr. Hoover is on this, but would like to emphasize the importance of that.

Bjerke stated there had been discussion on municipal parking and were going to have a plan, and that as part of budget planning, wants the subsidy for downtown parking to end in 2009. Mr. Hoover stated that by the meeting after next, will have a full range discussion on the parking, that maint. crews have been writing tickets in the ramp and with tickets have more people wanting to sign up for leases but not a good use of our maint. crew and will come in with changes for that - one problem is that whatever the gap is between what the leases bring in and our operating expenses, how going to assess that on a equitable fashion to the businesses or property owners downtown. Christensen stated they will address the issue.

3. Statement of Changes in Cash Balances as of December 31, 2008.
Saroj Jerath, city auditor, reported there are some negative cash balances in several funds and brought to committee for informational purposes.

Fund 3204 - 1986 Tax Increment Bonds
The bonds have been paid off but had a negative cash balance because there are some tenants (Social Security) that are tax exempt; will remain a negative cash balance unless we get a tenant that is not exempt from taxes; will take time but will leave it there and will become positive.
Fund 3440 - 2006 Refunding Improvement Bonds
Negative balance because of delinquent special assessment payments, mainly because of one property owner, Crary Development Real Estate, they are 3 years behind and once at that point will begin paying so will always be 3 years behind in collecting taxes on that property - assessments are for infrastructure that went in area where their new building is off Washington, delinquent in tax payments but we have enough collections to pay the bonds.
Fund 4120 - Clearwell Construction
Fund has a negative cash balance because project is not complete, State holds the last 5%, and when receive from State Revolving Loan Fund, will be covered.
Fund 4202 - Wastewater Construction Fund
This is the same, State Revolving Loan Fund.
Fund 4909 - 2009 Special Assessment Projects
This Fund is $700.00 negative but it will be covered once we sell the special assessment bonds for 2009.
Fund 5700 - Alerus Center Fund
That is operating cash in our books and has about $67,000 negative cash balance because when the Alerus Center was started, the City was making payments of some bills and they were paying some bills and we were getting reimbursed after we billed them, but they were behind in the billing though they are all paid up now - the operating cash was negative and because of the negative cash it got charged the interest, and plan is, if you allow us to keep the negative cash as it is, the 1/4% sales tax which we get and before we disburse the funds to them, it will be earning some interest every month, and will keep applying to make it positive.
Fund 5997 - Municipal Parking
This fund has a negative cash balance of $5,170.00 but have outstanding accounts receivable and will be covered.
Fund 6102 - Central Garage Fund
This fund has negative cash balance of about $53,000 but has good inventory of about $66,000 and as sell inventory to other departments, it will be covered.

The committee will allow finance to cover the negative cash balances.

ADJOURN

Motion by McNamara and seconded by Christensen to adjourn. Motion carried.
The meeting adjourned at 5:05 p.m.

Alice Fontaine
City Clerk