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MINUTES/GROWTH FUND AUTHORITY
Monday, September 28, 1998 - 7:00 p.m.

The city council of the city of Grand Forks sitting as the Growth Fund Authority met at the council chambers at City Hall on Monday, September 28, 1998 at the hour of 7:00 p.m. with Chairman Carpenter presiding. Present at roll call were Council Members Brooks, Polovitz, Lucke, Hamerlik, Bouley, Carpenter, Lunak, Klave, Beyer, Babinchak, Bakken, Hafner, Martinson, Owens - 14.

APPROVE PROPOSED INTERIM LOAN TO GRAND
FORKS HOMES, INC.

John O’Leary introduced Sally Page, chair of the Grand Forks Homes Board.

Sally Page stated on behalf of the Board of Grand Forks Homes to extend appreciation to the long standing support that the City has provided their organization and the various community functions they have been a part of and this has been a very important project, not only for the City, their involvement in its recovery process and the continued development of replace-ment homes for the community. She stated that the concern has not only been their short term activities but certainly the longer term of assuring that there is adequate housing within the community as they continue to economically develop and to bring new individuals into the community so they’ve got adequate housing to choose from, and on that note stated their apprecia-tion to the members of the city council and the staff of the city as well as others their since appreciation, and turned the matter back to Mr. O’Leary to let him respond to specific questions and issues concerning the latest funding.

Mr. O’Leary stated that a week ago the city council approved a referral back to the Jobs Development Authority for a loan of $1.5 million to help bridge a funding cash flow problem that the Grand Forks Homes project currently has, that the sale of the homes in Congressional I and II are slower than what they had anticipated; the original projection was that they would be using the proceeds from the sale of the initial homes to pay for the construction of the homes later on in the project period. He stated that because the sale of the homes has been slower than anticipated they are currently in a cash flow crunch with their contractors. He stated that the staff has been talking with Fannie Mae to increase their participation in the project, Fannie Mae has been very receptive to the initial discussions
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and late last week they stated something to the effect that it’s not a matter of if but when Fannie Mae will participate in increasing their loan from $7.5 million to $10.5 million on the project. He stated they are requesting a short term note of $1.5 million from the City, that the project will be paying the City interest and in talking with Mr. Schmisek these funds are currently invested and they propose to pay the City 6% interest on the funds that are borrowed. He stated in discussions with Mr. Schmisek and this is the council action of last week, $1 million would come from the excess sales tax funds and $500,000 from Loan Reserve Fund; that the people from Fannie Mae will be in town this week and feels confident that this is a bridge financing technique that will be used to help satisfy the temporary cash flow problems. He stated that Grand Forks Homes has done a number of steps that as these homes are becoming completed, and homes are looking like neighborhoods and much more inviting than were a couple months ago as potential sales, that the realtors as well as staff believe that sales will pick up as the neighborhoods become completed. He reported that every Sunday they are having an open house in these neighbor-hoods and bringing in number of people to look at these houses. He stated there are a lot of people looking at these houses and feels optimistic that these houses are going to start to sell now that neighborhood is nearing completion.

Mr. O’Leary reported that they started the advanced marketing three weeks ago, increased realtor’s fees from 3 to 6%, both contracts go back to them about a week and a half ago, and thinks that increasing realtor’s fees will help their sales. He stated they have also done some other things, started marketing more heavily in newspaper, radio and television, open houses every weekend, and have a lot of interest in these houses right now, and that there’s a wonderful blend of housing out there - lot of different prices, sizes and lot of neighborhood opportunities here. He stated they only thing they can’t replace, and biggest complaint they have in this neighborhood, is can’t replace canopy of trees; but have developed a product that the Maxfield study told them, that 10% of the total housing stock built in the last 10 years is less than $120,000, and $120,000 is where median price is. He stated that they are where they need to be on price point, these are affordable houses to the average consumer in the city of Grand Forks, and with the stepped up marketing efforts, and biggest thing can do is completion of the neighborhood itself. He stated they tried
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to sell these houses in June and July and wasn’t finished pro-duct, now see whole block where all the houses are done, land-scaping is completed, and talking about a marketable product. He stated they were looking to sell 20 houses in the next 90 days approx. and that’s dueable deal and will take Fannie Mae out of their $3 million short-term note or extension of their note at that point.

Council Member Martinson stated that there are some rumors on the street that these homes are poorly constructed, and he stated he can assure that they are not, these are quality built homes under the close scrutiny of the Uniform Building Code and the City of Grand Forks’ building code.

Mr. O’Leary reported that the money is to pay the contractors and the short-term and next 30 to 45 days, not to buydown the interest rate; that this is a loan and borrowing $1.5 million from the City at 6% interest and the City will get a return for equivalent for what they are receiving now on their investment. He also stated that 9 homes sold, and will give better report on that in 30 days; goal is to sell 20 houses in 90 days. He stated they have about 90 houses completed out there now, and balance are under construction (in some phase of construction - from framing to final finishing work); there will be 235 houses in both subdivisions, Burdick’s and Congressional (Congressional I and II includes 190 homes) Mr. O’Leary stated they are working out a maintenance strategy, that the Housing Authority admini-strates something like 1400 housing units across the city, that Housing Authority and their maint. staff will be responsible for security on the houses, inspections, and will cut down on the number of houses that they have on the market at that point over the winter months; will have representative sample of the houses that are completed that will be available so realtors can continue to show the houses, however, won’t keep entire number open all winter.

COUNCIL MEMBER GLASSHEIM REPORTED PRESENT

Council Member Klave asked to be excused from voting on this issue. It was moved by Council Member Babinchak and seconded by Council Member Bakken to allow Council Member Klave to abstain from voting on this matter. Carried 13 votes affirmative.

Council Member Martinson asked to be excused from voting on this
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matter. It was moved by Council Member Babinchak and seconded
by Council Member Bakken to allow Council Member Martinson to abstain from voting on this matter. Carried 13 votes affirma-tive.

It was moved by Council Member Bakken and seconded by Council Member Babinchak to approve the loan at $1.5 million for 90 days at 6%. Upon roll call vote the following voted “aye”: Council Members Brooks Polovitz, Lucke, Hamerlik, Bouley, Glassheim, Carpenter, Beyer, Babinchak, Bakken, Hafner, Owens 12; voting “nay”: Council Member Lunak - 1; abstaining their vote: Council Members Klave and Martinson - 2. Chairman Carpenter declared the motion carried.

REPORT ON LM GLASFIBER

Pat Downs, Grand Forks Economic Development Corporation, stated they were last before the committee on July 6 about this project and wanted to update you where they are and how progressing. He stated that the project has expanded and is increasing the size of the building they need to manufacture the blades, hence more employees and up to over 140 plus individuals they will need in the plan. He stated lot size and physical number of acres needed to house the plant will be a little larger than anti-cipated in July, to 9.5 acres; they hope to begin operations on April 1, and other than that negotiations are still underway to get the RFP to construct building; and hopefully get in the ground yet this fall and have these people in production in the spring.

VIDEO BY ECONOMIC DEVELOPMENT CORPORATION
UPDATING ON ECONOMIC DEVELOPMENT EFFORTS

Dick Olson stated they have been criticized by their Board for the fact that they never stop and tell community what has happened, and presented video which really reflects on the Growth Fund. He stated since the flood has been enormously productive; have had close to $37 million of new property, new capital investment in the city, more than $10 million in new payroll. He stated they will develop video into something they can take out to the alumni groups around the country and help people throughout the country understand what our recovery is all about.

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Mike Mikkelson, 2271 26th Avenue South, stated he wanted to express his disappointment to the vote that was taken earlier with the allocation of $1.5 million to Grand Forks Homes; that taxpayers are ones responsible for this, they are being account-able and not sure the taxpayers were the ones encouraging this development. He stated that maybe the responsibility should be towards the lenders for this, they were the ones who lined up the financing and asked whether they were going to be back here in another four or five months asking for another $2 or $3 million for the interest payable on this.

Gene Schneeweis, 1004 University Avenue, stated that the money lent Grand Forks Homes to operate is a bad move, these houses are overpriced and market is saturated and should formulate a plant to reduce the price and take a loss because it’s all free money to the City of Grand Forks and to get them back on tax rolls. He stated this money given to Grand Forks Homes who is a non-profit organization, City manages $25 million of property for all of it and improper and hope reduce the price so can sell houses so don’t have to have burden.

Chairman Carpenter stated that item has been voted on, and will not take any more discussion on the matter.

ADJOURN

It was moved by Council Member Beyer and Hafner to adjourn. Carried 15 votes affirmative.

Respectfully submitted,



John M. Schmisek
City Auditor