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MINUTES/GROWTH FUND AUTHORITY (JDA)
Monday, June 4, 2001 - 6:45 p.m._______________

The city council of the City of Grand Forks sitting as the Growth Fund Authority met in the council chambers in City Hall on Monday, June 4, 2001 at the hour of 6:45 p.m. with President Gershman presiding. Present at roll call were Council Members Brooks, Bjerke, Hamerlik, Burke, Glassheim, Lunak, Christensen, Bakken, Gershman, and Mayor Brown - 10; absent: Council Members Kreun, Martinson - 2.

TABLE PROPOSED LEASE FOR 201 SOUTH 4TH STREET
FOR 2 WEEKS AND REQUEST FURTHER INFORMATION

a) Lease for property at 201 South 4th Street

Terry Hanson, Urban Development, reviewed the changes to the proposed lease agreement with Centre, Inc. after reviewing with the city attorney: 1) that the lease with Centre, Inc. is for 15 years, however, it is agreed that if the program loses its funding through the State of ND Human Services Department and have added on Page 1, “..subject only to continued funding being provided by the State of North Dakota through the Northeast Human Services on a biennial basis.”; 2) a minor correction on item 2. on page 2, under Use of Premises they would like to have it read, “..the demised premises shall be used and occupied only..” and add “..as a residential facility for the purpose of conducting mental health, counseling and treatment and addiction counseling and treatment.”; 3) on last page of the agreement with Dakota Medical, to delete item 2(b). He stated that Dakota Medical Foundation is not obligating itself to make the lease payment in case of default of Centre, Inc.

President Gershman opened the matter for discussion.

Council Member Bjerke asked if any portion of the rental goes toward property taxes for the building. Mr. Hanson stated they had discussed having property taxes on this building or paying fees in lieu of taxes, however, it doesn’t specifically state that in the lease and if there are any funds left over, will probably direct them towards payment in lieu of taxes. He stated that because Grand Forks Growth Fund is exempt from taxes, that the non-profit Centre, Inc. may be exempt from taxes also but believes there should be some payment towards the services provided by the City for this facility. He stated they would have to determine at the end of the year after receiving the rents and knowing cost of expenses for the facility to determine how much is available to pay in lieu of taxes. Council Member Bjerke stated if the City is in the business of owning buildings and renting them, should be paying in lieu of taxes. Mr. Hanson stated that all properties that the Growth Fund owns, if a commercial client/tenant in those facilities, they do pay real estate taxes (leasehold taxes and equivalent to the property taxes), and in this case Centre, Inc., may be exempt from taxes because of the type of program because it is residential for disabled. This property is zoned B-4 and is permissible for this type of operation - compatible use.

COUNCIL MEMBER KERIAN REPORTED PRESENT

Council Member Christensen stated if the Grand Forks Housing Authority pays real estate taxes, even though the fact that the ND statute dealing with Housing Authorities specifically exempts that agency from paying real estate taxes, that this facility should pay for the services and come up with ratio that they would pay fees attributed to our general fund levy.

COUNCIL MEMBER KLAVE REPORTED PRESENT


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Council Member Christensen questioned why if Centre, Inc. goes out of business, Dakota Medical Foundation could assume terms of the lease (that Dakota Medical Foundation is in the business of rendering medical services and generate revenues that will be deferred to other aspects of their foundation - because we have Altru Foundation in this community that could render these identical services as an out-patient alcohol center, that this community has funded Altru, and counter-productive for our community to enter into an agreement such as this and allow Dakota Medical Foundation the option of picking it up. He questioned the term of the lease, 15 years - and if the Legislature affords them the funding it is biennial, and should have a biennial lease that is automatically renewed in the event they get their funding, if it is not, the lease is over and we have the building equipped and are in a position to offer this to Altru; and and as we received this on Friday, shouldn’t be voting on this tonight, and would ask to defer this until have an opportunity to review the grant. He stated he is in favor of the facility for alcoholism for minors/teens - not issue of facility but lease.

COUNCIL MEMBR STEVENS REPORTED PRESENT

Council Member Burke asked if there was a default by Centre, Inc. and don’t have paying tenant in that building, if the JDA is liable to repay grants to remodel that building. Mr. Hanson stated that is what the agreement is for. Council Member Burke stated they have received over a million dollars in grant money to remodel that building to accommodate this facility, the grant is based on the fact that these services are provided in that facility, and that’s why we have a 15-year lease is because that’s the term that we have to guarantee that facility is used for some like purpose. Council Member Christensen stated that Centre, Inc. should be responsible for at least a year until such time as we find a tenant.

Mr. Hanson explained the reason for the 15-year lease and the reason for the side agreement with Dakota Medical Foundation, that Dakota Medical Foundation contributed $200,000 towards this project in the form of a grant and wanted to make sure that over the life of the improvements that Centre, Inc. would retain tenancy of that building and owner of the building would not non-renew their lease within the life of the improvements. He stated that if Centre, Inc. or other occupant and facility is not used for an alcohol and drug treatment facility, then have to pay a pro-rated amount back to Dakota Medical Foundation of the grant they contributed. Only grant responsible for payback is Dakota Medical Foundation. He stated the reason for the side agreement is that Dakota Medical Foundation wants the opportunity to help us find a tenant for the building in case Centre, Inc. lost its funding and unable to retain occupancy of building, they want the ability to try to find or assist in finding us a tenant for the building that supplies the same services.

Council Member Glassheim questioned if the rental is paid to the Growth Fund, and if that amount will cover maintenance and other services to the building (utilities). Mr. Hanson stated the lease is written in such a way that the initial term of the lease is until the end of this biennium, and if it is determined that the lease payment does not cover the operating expenses of the building we will go back to Centre, Inc. and re-negotiate the base rate; and rental fees will cover all operations of the building, including utilities and if any balance remaining it will be used for reserve replacement account.

Mr. Hanson reported that the initial grant to the Grand Forks Housing Authority was approved by the former council, but because the Housing Authority was going to be the owner of the building and lease it to Centre, Inc. the terms of this lease were not discussed (perhaps what’s in the lease was discussed with the previous council). He stated that if a default in the lease, Dakota Medical may take over and they’ve indicated they want us to provide them the opportunity to find a tenant to provide the same services - they want to put $200,000 into a drug and alcohol related facility and don’t want it to be converted to another type of facility over the next 15 years, but remain a drug and alcohol facility.
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Council Member Kerian asked for information on Centre, Inc., experiences with this kind of facility and source of funds to pay rent. Mr. Hanson stated this is a program that is funded through the North Dakota Department of Human Services, they currently are operating two small facilities in Grand Forks for adult chemical dependency, and this project will allow them to combine those two adult chemical dependency facilities and have in increase in beds and also giving ability through a separate funding from the State to establish a youth or adolescent treatment facility for the same purposes (today none in Grand Forks).

Roger Johnson, Clinical Services Director at Northeast Human Service Center, stated they anticipate there will be 26 beds on the adult floor and 8 beds on the adolescent floor; that Centre, Inc. is a private not for profit corporation based in Fargo but with service locations in Fargo, Grand Forks and Bismarck; have operated in Grand Forks since 1991 under contract with the Northeast Human Service Center, to date they’ve been operating an adult residential unit for adults with serious mental illness or adults with chemical dependency, and the intent in this program is to move those facilities to this location as well as to establish the adolescent program. He stated that the status of the Dakota Medical Foundation - that they are not a medical service provider and that they are not affiliated with any medical service provider, they are a foundation that was formed at the time Dakota Hospital was sold to a private organization out of state and the funds they received from that sale are funds that are used by Dakota Medical Foundation, however, Dakota Medical Foundation has no affiliation with Dakota Hospital or with any other medical provider, they do not intend to be a medical provider and their only intent in the side agreement is to protect their interest and have this continue as a facility for alcohol and drug treatment but they would not be the ones providing the treatment. He stated the grant would be pro-rated over 15 years and is a condition of the grant; that the intent of this is not to obligate them to take over the lease, but simply to give them the opportunity if they choose to do so - have opportunity to assume the lease in order to protect their interest.. He stated that he thinks that Dakota Medical Foundation’s request is to obligate the City to try to find another tenant for the building in the event of default that is of a similar use if Centre, Inc. is no longer providing the service. He stated this would enable the same terms of the lease to be offered to another provider in event there is a change in provider. He stated that as long as the funding is being provided by the Legislature to the Department of Human Services, they are obligated under this lease to continue to provide the service, the only thing this does is that if they are allowed to switch providers under the same terms of the lease. Council Member Christensen stated it allows Dakota Medical Foundation to pick up the lease and control who the provider is going to be rather than Northeast Human Services and if that’s what they want, should allow Northeast Human Service Center to pick it up to the extent that you have the funding rather than Dakota Medical Foundation. Mr. Johnson stated that if we don’t continue to provide the service there is some payback obligation and provides strong incentive to make sure this continues to be the same use; they don’t want the money back, their intent is to make sure the money gets used for the purpose they granted it. He stated the lease was written in consistency with the terms of that letter that was written by the JDA to Dakota Medical Foundation.

President Gershman stated he would like the leases to be written showing the cost per sq. ft. - Mr. Hanson reported cost would be $4.50 per sq. ft., that the base rate covers the operating expenses of the building, and is a break-even rent; that the lease does allow them to increase the rent or to cover the costs at the beginning of the next biennium and every biennium thereafter.

It was moved by Council Member Brooks and seconded by Council Member Christensen to table this matter for 2 weeks.

Upon call for the question and upon roll call vote, the following voted “aye”: Council Member Brooks, Bjerke, Stevens, Hamerlik, Burke Glassheim, Gershman, Christensen, Kerian, Brown - 10; voting “nay”: Council Members Lunak, Klave, Bakken - 3. President Gershman declared the motion carried.
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Mr. Hanson asked what terms they would like addressed - issue of rent as far as taxes, repayment, and if additional items to contact Mr. Hanson.

ADJOURN

It was moved by Council Member Hamerlik and seconded by Council Member Lunak that we do now adjourn. Carried 13 votes affirmative.

Respectfully submitted,



Candi Stjern, Acting City Auditor