City of Grand Forks, North Dakota

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	MINUTES/FINANCE COMMITTEE Tuesday, January 23, 1996 - 3:45 p.m. Members present: Carpenter, Geller, McCabe. 1. Matter of tax increment financing for Grand Forks Mercantile Exchange (Baltic, LLP) Mr. Schmisek reported that he, Mr. Swanson and Mr. Carsen met with reps. from several financial institutions (American Federal Saving Bank, Community National Bank, First American Bank Valley, First Bank Grand Forks, First National Bank North Dakota, and Norwest Bank) and have found method of interim financing (short-term financing). Mr. Swanson reported that they met with lenders and approached them with premise that City interested in continuing to do tax increment financing for downtown improvement, but there was concern about the cost of doing issuance, concerns about timing, effect on City's bond rating, etc. and discussed wide range of possible solutions (altering use of Growth Fund monies to allow pool of funds to be dedicated for redevelopment downtown, some legislative changes allowing municipalities to do urban renewal type projects using general fund dollars, whether City could through Growth Fund repurchase loans and hold as investment, etc.) He stated that the bankers informed them that they have their own internal policies on qualification of loans: 1) cash flow analysis - that when they discussed tax exemption as opposed to tax increment, all stated that would be positive influence on the cash flow; and 2) loan to value ratio, cash flow has no influence on that - all stated that a loan application is viewed on both, have to have solid foundation on both; however, with further discussion they did state that if they knew there would be a tax exemption or TIF in the future, they would be receptive to build into their loan package interim financing until such time as the City is in position to combine tax increment sale with a scheduled general obligation sale. He stated they came to a conclusion that the lenders weren't in a position to change their analysis of loan applications, that if the loan to value ratio didn't improve, they wouldn't fund additional funding based upon tax exemption, but that they would be in a position to exceed on an interim basis their normal lending policies if there were a commitment from the City, upfront, that there was a TIF going to be sold at some time in the future (probably talking 6-9 months as the interim) providing that the following conditions are met: 1) that the lenders be involved upfront in the sharing of information when an application comes in to the City for a TIF, to compare the information given to the City with their loan review; in return they would provide City some information on their analysis. He stated that what the City would do is go through its normal steps: take application (go to Planning and Zoning if urban renewal for consideration if fits within the urban renewal district), whether consistent with long-range plan; come to finance committee for decision on whether to move forward with the TIF (whether it's a building which warrants redevelop- MINUTES/FINANCE COMMITTEE January 23, 1996 - Page 2 ment, whether project which warrants TIF and to what extent; and once those decisions made, and ap. receives preliminary approval through city council, City would then enter into a three-way agreement with the lender, developer and the City, lender would then lend on that basis for the interim; and City would periodically have bond sales, and can tack on the tax increment sale with the larger bond sale; it reduces our concern from going out to the market several times each year for very small issues, that there is still concern re. rising debt level. He stated there will be some interest costs for developer in that interim period which will be off-set by savings on bond costs. He suggested that the City formalize process on how applications received, should have flow chart, uniform and standard application form, etc. (Bank will take amount generated by TIF and treat as equity when they do their loan to value ratio.) The committee asked whether this idea can be used for application before the committee and what time frame is. Mr. Swanson stated that policy issue is for committee and council to decide, and this may be opportune time to roll into an existing planned sale to give it a try; not sure effect on developers; but felt that a point where could treat this application under either old or new policy. The developers in the audience stated they didn't see problem if get commitment from the City to take to the bank, interest costs saved by bond costs, only problem is time. Mr. Schmisek stated that they don't have specific dollar amount or term on this application, that Springsted working on this. The committee stated that they were agreeable to pooling, but just amount and term uncertain about. Mr. Schmisek stated he would take that information back to Mr. Dornfeld so they will know that's approach being taken. After further discussion the committee held the matter until a meeting prior to council meeting on February 5, 1996 - 7:00 p.m. Mr. Swanson stated that all lenders should be thanked. The committee also thanked Mr. Schmisek, Mr. Swanson and Mr. Carsen as well. 2. Matter of mayor's salary. Bob Gustafson, president of Chamber of Commerce, stated that this noon Lloyd Omdahl addressed the council. department heads and the public re. the matter of form of city government, and the Chamber of Commerce had presented a resolution which offers some recommendations based on current status of the City's operation, that what they are proposing is that a committee be formed, that to have a full and considerable public discussion on forms of city government seems beneficial, and before making decisions on what funding levels should have in this position. MINUTES/FINANCE COMMITTEE January 23, 1996 - Page 3 He stated that the resolution basically recommends that the council form a suitable committee consisting of council members, department heads and citizens to explore the issues and questions surrounding the council and what should do from an administrative and organizational leadership standpoint. He stated they are prepared and interested in helping in any way they can with discussions re. these issues. He stated they felt that a part-time citizen mayor is in the best interest of the city, and also some beliefs re. chief administrative officer; and that in the best interests of the city should hold on this issue and make it a part of a larger scope discussion re. the structure of city government as a whole. Mr. Swanson stated that his memo to the committee did not address agenda item, but information concerning changes in present council form of government, statutorily authorized forms of municipal government (modern council, city council, city commission and city manager plan), and change in number of city council members; and provisions under which the form of government could be changed and process for doing so. He reviewed memo with the committee. Mark Larson, chair, Chamber of Commerce Civic Affairs Committee, stated committee should be aware of region-wide visioning that is going on, and one of their key performance areas is "responsive government" and should hear concerns from that group re. city government before making any decision re. salary. Mr. Larson stated his committee is willing to help in any way they can. Mr. Geller stated it is hard to give increase in salary without job description, etc., that issue bigger than salary, deals with structure, process, etc. and issue doesn't belong in this committee. He then moved to receive and file. The motion was seconded by Carpenter. Motion carried. Moved by McCabe and Geller that we establish a committee to study the issue of form of government in the city of Grand Forks, with the committee to be appointed by the mayor to consist of no more than fifteen members and to represent city council, general public, University of North Dakota, the business community, city employees and others as appropriate. Motion carried. 3. Matter of adoption of ordinance implementing events center sales tax. Mr. Swanson reviewed proposed ordinance which would implement the authority granted under the amendments of the Home Rule Charter to impose an additional three-quarters percent general sales tax and a one-quarter percent food/lodging tax. He stated that the ordinance has been drafted in consultation with the State Tax Commissioner's Office. He stated that in the defini- tion of prepared food they utilized the definition that was pro- MINUTES/FINANCE COMMITTEE January 23, 1996 - Page 4 vided by the Tax Commissioner's Office and for purposes of continuity went with that definition. He stated that the second area of judgment exercised appears in Section 6 of the ordinance and that is the distribution of the funds; it is difficult because dealing with partial percentage of the tax and it will kick in at different levels of sales, to come up with a true audit trail of which percent goes where and comes from where, so had State Tax Commissioner's Office do some computer modeling, utilizing figures obtained over the last few years, and they advised that percentages included are what they see as the impact of the new tax and his office (city attorney's) has rounded to a half percent, that would be the dedication of the funds. He stated that after consultation with Mr. Schmisek and the Tax Commissioner's Office they have come forward with a defined break out of those funds based on computer modeling. He also stated that the effective date of the ordinance is April 1, 1996. Moved by Geller and McCabe to introduce the ordinance for first reading. Motion carried. 4. Matter of city use tax (for June election). Chairman Carpenter noted that Grand Forks is only city in the state that has sales tax that does not have use tax, and committee suggested directing city attorney to draft amendment to Home Rule Charter to bring back to committee at its next meeting for consideration. Mr. Swanson stated that the sales tax applies to every sales transaction that occurs within the city limits, that if the sales transaction occurs outside the city limits and the product is delivered inside the city limits you cannot collect any tax; however, if you have a use tax, the tax would apply to products, materials or items coming into the city regardless of where purchased; and that State Tax Commissioner would collect tax from business/entity, etc. and obligation on them to make that report. He stated largest impact on builders, contractors, building suppliers, etc. Moved by Geller and Carpenter that the June election contain a provision concerning an amendment to the Home Rule Charter to include a use tax. Motion carried. 5. Matter of fixed asset capitalization policy. Mr. Schmisek stated they are requesting a change in present policy, which states that any items valued over $100 will be capitalized and depreciated, and they are asking for a change in that policy for items over $500. Moved by Geller and McCabe to amend the policy to raise the capitalization level from $100.00 to $500.00. Mr. Geller questioned consequence of this change; and Mr. Schmisek reported that it would enable his office to keep less items on the depreciation schedules, and keep track of MINUTES/FINANCE COMMITTEE January 23, 1996 - Page 5 depreciation in the utilities and keep track of fewer items on fixed assets for the general fund; will eliminate considerable amount of bookwork for very small value items. Moved by Geller and McCabe to amend policy to raise capitaliza- tion level from $100 to $500. Motion carried. 6. Matter of allocation of appraiser III positions. Chairman Carpenter reported this item had been pulled at council at the mayor's request in order to have discussion on council floor. The committee's recommendation to receive and file will be placed on the February 5 council agenda. 7. Budget amendment. Mr. Schmisek reviewed request to amend budget for Mayor's Office in the amount of $12,812.00 for 20/20 visioning. Moved by McCabe and Geller to approve the budget amendment. Motion carried. Temporary and overtime report for December, 1995. The committee reviewed report; Mr. Schmisek reported that monies have been moved in all categories to clear up negative balances. Moved by Geller and McCabe to approve the report. Motion carried. (committee only) Meeting adjourned at 5:10 p.m. Alice Fontaine City Clerk Dated: 01/25/96.