Print VersionStay Informed
MINUTES/GROWTH FUND AUTHORITY (JDA)
Tuesday, December 14, 1999 - 7:00 p.m.__________

The city council of the City of Grand Forks sitting as the Growth Fund Authority met in the council chambers on Tuesday, December 14, 1999 at the hour of 7:00 p.m. with Council Member Carpenter presiding. Present at roll call were Council Members Brooks, Polovitz, Lucke, Hamerlik, Bouley, Glassheim, Carpenter, Lunak, Beyer, Hafner, Martinson, Mayor Owens - 12; absent: Council Members Babinchak, Bakken - 2.

Council Member Carpenter asked for a motion to waive meeting notice requirements; it was moved by Council Member Hafner and seconded by Council Member Martinson. Carried 12 votes affirmative.

COUNCIL MEMBER KLAVE REPORTED PRESENT

CONSIDER MATTER OF PENDING ECONOMIC DEVELOPMENT
NEGOTIATIONS

Mr. O'Leary reported that since they met last there have been a couple developments that are worthy of your examination; first, continue to get further clarifications on needs of the client in terms of the size of the building, the optimal minimum size remains at 500,000 sq.ft., and the client would prefer to see a building constructed at 770,000 sq.ft. with expansion capabilities on that site; secondly, he has received encouragement from the public as well as many council members to examine ways to do this project which would open up the project to a variety of proposers; that the second item on the agenda tonight deals with that issue, which is a suggestion that the Jobs Development Authority issue requests for proposals for this project, the RFP's would be issued to local, regional and probably national companies who may have the interest and capacity to construct and finance a building of this magnitude; that impacts a couple of other issues. There is a premium whenever you build over the winter months, esp. when you have a compressed construction schedule at the same time as you're trying to build a building of this size during the winter, and are still suggesting that the building be constructed or at least footings be constructed during the winter months; however, with the issuance of an RFP should the JDA decide to do that, the building would be ready for occupancy at a later date. He stated he thinks there are a number of advantages, disadvantage of course is that it slows the RFP, slows construction and the implementation process for the project; the advantage is that it certainly opens the process to a number of developers and financial mechanisms and hopefully believe that it will save the JDA as well as the client some money. He stated there has been a lot of discussion in recent weeks about the quality of the jobs and whether or not this is a project that warrants the JDA's consideration. (A number of years ago the University of New Mexico did a study on the impact of primary sector jobs on local economies and that he has taken the liberty under the handout - Economic Impact of a Thousand New Primary Sector Jobs to adopt some of those functions that the UNM put out to our local situation here. A thousand new primary sector jobs at $9.50/hour would generate $19 million into the primary sector of economy into our local economy - most economists would use a number of different multipliers to figure out what $19 million or nearly $20 million of new payroll really means to a local economy - the multipliers that are used range on the low side of 1.5 to a high side of 2.7, Simplot has a multiplier of 2.6 for their economic activities here in the Valley - if we use a number of 1.5 to 2.7 it means that the $20 million in new payroll will generate an additional $10 to $30 million in secondary kinds of impacts - this doesn't include what the Small Business Administration usually
GROWTH FUND AUTHORITY (JDA) - 12-14-99 - Page 2

terms roll-over dollars in a community, SBA implies that new primary sector jobs generate 5 to 10 times their base payroll just because those dollars turn over a lot of times in goods and services within any economic environment. Assuming that out of that total payroll that 25% of the net would be disposable income the direct impact to the local sales tax would be from $130,000 to $233,000 per year and Grand Forks' share of the sales tax, which is 1.75% and that's a very conservative number - at the end of 15 year period if we constructed a building and had a residual value of $40 million, which he thinks is a conservative number, that $40 million facility would generate rents on the low side of $2.5 million per year to a more realistic number of $3.6 million which is a conservative number - that in terms of mills, $3.6 million per year in rents received from this building translates into 50 mills. In addition to that also have construction payroll and construction sales, those are estimates based on conversations had with contractors and probably will find contractors that will estimate a higher number than that and others estimating a lower number - those numbers depend on how many of those construction jobs are awarded to local firms and how many local firms get contracts for provision of various kinds of services and amenities to the building. He stated what is not included in this analysis is the number of new retail businesses - the University of New Mexico estimates for 1,000 new primary sector jobs, that those jobs with the kind of payroll talking about here would create somewhere between 30 and 40 new retail businesses and also what is not included is the spin-off in terms of what those retail establishments would generate in property taxes, people buying homes, additional apartments being rented, etc. - also not included is the impact this kind of a project might have on secondary taxes, such as gasoline taxes.

Mr. O'Leary stated he would like to brief the committee on a revised time schedule, should they decide to issue a request for proposals for this project: the time schedule drafted for their consideration would call for the release of an RFP in next few days, subject to the review of the city attorney's office and the chief financial officer for the City. The RFP deadline would be January 7, 2000; during the week of January 8 - 16 the staff, city attorney's office, finance office and his office and the EDC would do the due diligence on review of those proposals; January12 a press conference would occur to explain the status of the proposals and to update the public on the development of the project; January 19 the review committee would submit their recommendations to the JDA for consideration and on January 19 a joint meeting of the city council and the JDA would take place to take action on the proposal. He stated they've tried to take 3 weeks for the preparation of the RFP's and that 3-week process is consistent with our bidding process, although in conversations they have had with the city attorney, that period could be longer or shorter, depending upon JDA's consideration, nothing in the Code or in Century Code that they are aware of that puts time specific restraints on the RFP process. He stated those were his preliminary remarks and would try to answer any questions.

Council Member Lunak stated that Amazon.com will do a half billion dollars worth of business in Grand Forks - Mr. O'Leary stated that he didn't remember that he said that. Council Member Lunak stated that everything is starting to change from number of jobs - from 700 to 1200 - and were talking anywhere from 1,000 to 1500; and asked if there have been any guarantees from Amazon.com. Mr. O'Leary stated they have not. Mr. O'Leary stated this is a proposal from the JDA to our client, never any guarantees until the execution of a developer's agreement, and the developer's agreement spells out what the JDA would do, what our client would do, how many jobs would be brought to the table, the

GROWTH FUND AUTHORITY (JDA) - 12-14-99 - Page 3

value of those jobs are, the timeframes of the creation of those jobs and in turn for the JDA would define what incentives, if any, we're offering, what kind of support services that we
would offer; it must be remembered during this whole process this is a negotiation process, a proposal process like any other contract; we are in the process of preparing a proposal to submit to our client and whether or not they accept it is their prerogative, there are other financial indicators here that really drive this - some of those are the cost of doing business, their shipping costs are a big number, and whether or not we can be competitive no matter what we put on the table is an issue that is yet to be resolved. Council Member Carpenter stated that the identity of the client has not been specifically done to this stage and at this point inappropriate to assign a name to that client. Council Member Lunak apologized for that.

Council Member Lunak stated at the first meeting they talked about annexation, and that all of these things would be premature, haven't made any guarantees to anybody but right now out there tearing up the property. He asked if Economic Development is involved in any way; Mr. O'Leary stated they were. Council Member Lunak asked why director of Economic Development wasn't at this meeting. Mr. O'Leary stated that the lenders have had discussion with Mark Krauseneck, and his office has held 6 meetings with him to explain to him what our understanding of the parameters of the project were.

Council Member Martinson stated that under the assumptions, construction would not -- Mr. O'Leary stated he would prefer the assumptions are proprietary information that is in your packet; and Mr. Martinson stated he didn't think his questions would be out of order; and that his question would be that we would not begin construction until it was inked. Mr. O'Leary stated absolutely - that one of the things they talked about at our last meeting is that prior to the commencement of construction, that there would be an executed lease and an executed developer's agreement between the JDA and the client. He stated that Mr. Lunak stated they have prepped the site for construction, the purchase price of the land if this project will not proceed, would go into their land inventory for economic development, the JDA owns the land in the Industrial Park and in other parts of town for that purpose. Council Member Martinson stated that if the client entered into the lease and backed away, how long would it take for us to lease a building of this magnitude and cash flow it. Mr. O'Leary stated that's one of the issues that makes this project difficult to finance, using traditional financing mechanisms - there aren't, that he is aware of, an industrial building in ND of 770,000 sq. ft. and very few in the mid-west - some in Minneapolis, Detroit, Kansas City, and that makes a project of this size hard to finance - there are some options here, that if this building not used after 2 or 3 years for whatever reason, there are some options about subdividing the building into smaller base - the building would lend itself to that (long rectangular building that would have sufficient parking to do that as well as sufficient access to a variety of tenants. Council Member Martinson stated he understands we are short of space for industrial development; Mr. O'Leary stated we are out of industrial space in Grand Forks that really suits the needs for this kind of activity, etc. He stated there is an interesting article on the back of the handout that might be interesting (why the commerce businesses are interested in large warehousing activities). He stated one of the discussions they've had with potential financing resources is that - how do we utilize the building in the event that the worst case scenario came about - that we need to look at if the building goes dark, how would we re-utilize it - that we have a number of choices - 1) resubdivide it; go out and pitch it to another major user because our client isn't the only client that is interested in these kinds of activities.
GROWTH FUND AUTHORITY (JDA) - 12-14-99 - Page 4

Council Member Lucke stated that the earlier proposal had job incentives that were quite a bit higher than what he sees here, and asked if there was a reason why that was reduced - Mr. O'Leary stated that later in this meeting he would hope to be able to get your feedback on what you think is an appropriate job incentive package to put on the table. Mr. Lucke stated that JDA would inject (number of million dollars) as equity to reduce debt service and allow for financing - equity is term you use but basically it's money we're going to have to put into this facility and won't be able to charge a rent amount for - and equity, if we ever get it back, maybe not - have we considered asking this particular client for some kind of equity position in their company to make up for this and perhaps get shares of stock - Mr. O'Leary stated he agrees, and that an interesting thing has happened with a number of other companies that we've acquired equity positions in that have turned out to be remarkably good investments for the JDA and will probably hear more about that in the next couple months; that is something we started doing several years ago, in looking at equity positions and that is a possibility; and that none of these issues have hit the table yet.

Council Member Brooks stated this probably has tremendous potential but without that team effort can't go into it - team includes the city council getting some of this data ahead of time, and if this goes, we're going to empty the bank to do it; and asked when the client would sign the bottom line, understands it is a proposal. Mr. O'Leary stated that the proposal that would be prepared would specify a date certain for response from the client, and now anticipate that date certain would probably be in the second week of January; there is no intention of asking the JDA to obligate any more funds for this project until a proposal is submitted and accepted by the client. Council Member Martinson asked if we are still fast tracking the site and making ground prep. and proceeding with that to get as much of that earthen work done prior to freeze-up; Mr. O'Leary stated the scraping of the site, removal of the black dirt, the berm and the site and covering the site with straw to prevent deep frost is completed.

Council Member Carpenter request that we go into closed session to update the committee on the specifics of the status of negotiations with the client and request some advise in those negotiations, and asked if there is a motion to that effect.

Mr. Swanson, city attorney, stated the appropriate motion would be to convene in executive session pursuant to NDCC 4404-19.1 for purposes of negotiation, consultation and preparation. Council Member Hafner moved and Council Member Beyer seconded the motion. Mr. Swanson stated whether or not it was appropriate and provided by statute to go into executive session for purposes of discussing settlement or rather proposal and negotiation strategy and guidance, etc. it is clearly provided by statute. He stated the statute allows the group to collectively meet in executive session to identify parameters in negotiation, discussion topics, strategies, tactics, etc. and to give those instructions to your negotiator.

Council Member Carpenter stated that ultimately all of this would surface at the appropriate time. Council Member Beyer stated that if fellow council members are uncomfortable with that, that we can turn over the ability to negotiate to the head of the Growth Fund; however, she didn't know if she was willing to commit what we are going to discuss here to one or two people and that is why we should go into executive session and discuss what everybody here has on their mind.

GROWTH FUND AUTHORITY (JDA) - 12-14-99 - Page 5

William McKechnie, 203 Cleo Court, individually here, opposed going into executive session, shouldn't do public business behind closed doors, and disagrees with Mr. Swanson's interpretation of the Century Code section, and his concern is that they have a time line for an RFP that is going to go out on December 15, want response from national companies or international companies, regional companies to kick it back to you all prepared on January 7, and not going to happen except for the deal that you are already "cooking" somewhere else that you don't want to talk about - nobody else is going to come in with another plan to build a giant building for you and put somebody in there in two weeks time - doesn't happen in the real world that the private sector deals with and time schedule is a joke - should put it out on a public bid and if want to build a giant building, go ahead and build a giant building, get it spec'd and planned out and put it out for public bid - that's how we build giant public projects in the U.S., this is not an RFP kind of project if building a big government owned building that you're going to lease out to somebody else - if do with public money, do with a public bid and not doing that with an RFP, an RFP allows anybody who wants to come in with any kind of project they want to build and then a group figure out what you want to do - want to bring in some bid outfit to occupy this building, that's what the economic report has to suggest, the problem is that you don't have a tenant for your building and have the cart before the horse - get yourself a deal to put Amazon.com or anybody else you want in the building at a lease rate that makes any sense with the number of people you're going to bring in and when you have that deal or ink, bring that back to the JDA and then go ahead and put the little bit of government money in there to make the deal happen - that's what economic development is about - you assist the private sector in getting involved in business - not building a private business - that's socialism and we don't need any of that - if Amazon.com wants to come to Grand Forks, you want to build a big building to put them in, that's wonderful but need a deal in place first, get your economic development people in place, get financing in place and then bring it here - this is backwards - this isn't the way to do it and still have to come down to pay bills and taking CDBG money that came in for flood recovery, sucked it out of downtown and rest of Washington Street and Columbia and put it out on the other side of the interstate for some outfit that hasn't made any money - Council Member Carpenter asked that Mr. McKecknie cut it off as he is way the topic of the motion. Mr. McKecknie stated they should be discussing this is in public and where everybody gets to see the information - and not get it off the website and ought not to sell the people in Grand Forks down the road because we're a bunch of fools and don't know what you're doing - that we know what you're doing and going to watch what you're doing and figure it out.

David Thompson, 416 South 6th Street, while a member of the bar appears tonight in his individual capacity and asked if the entire substance of the request for proposals that appears as 1-2 on the agenda will be disclosed following the executive session; and has a couple matters of concern relative to the matter of request for proposals, but issuing request for proposals - Chairman Carpenter stated that the motion before them right now is in closing the meeting and if want to come back and talk about requests for proposals, you can do that after they come back in public session. Mr. Thompson stated the entire matter of closing the meeting pursuant to 4404-19.1 is not as cut and dried as counsel has stated and that we've been down that road in the last month, thankfully the council came back and did meet in public undid some of the what he considers to be illegal procedure that originally was undertaken on that Friday - that he is disappointed that it seems that this seems to be executive session where there is really no plan, no grand design where council members receive the information packet which is the substance of this meeting, and thinks that makes
GROWTH FUND AUTHORITY (JDA) - 12-14-99 - Page 6

the executive session a sham, where the council members have received the information, the factual predicate for that meeting, just before they go into executive session and thinks that calls into question the legitimacy of using section 19.1 under the law for negotiation strategy; thinks this is a disaster and thinks it still is a disaster, is in favor of good economic development and not against Amazon.com as long as good paying jobs are brought to this community and that we don't break the bank to do that and sell our economic development souls for a great period of time in order to do good economic development.

Upon call for the question to go into executive session and upon voice vote the motion carried 11 votes affirmative; Council Member Lunak voted against the motion.

Chairman Carpenter asked that everybody, please leave the room; and the council convened in executive session at 7:45 p.m.

RECONVENE AS GROWTH FUND AUTHORITY (JDA)
AT 10:00 P.M. AFTER 5-MINUTE RECESS

Chairman Carpenter re-opened the meeting for consideration of item 1-2 which is the matter of authorization to issue request for proposals, with all members present except Council Member Glassheim.

Mr. O'Leary stated the request for proposals invites interested contractors to submit a proposal to the Jobs Development Authority for the construction and ownership of a major industrial building on 32nd Avenue South, the RFP asks for the developer to finance the building, lease it to the JDA at a fixed rate with appropriate escalator clauses and the RFP also request the opportunity for us to purchase the building at appropriate timeframes that fit 10th and 15th year, the proposal is modeled somewhat after the RFP that we've got on the street right now for the Aurora project which is very similar.

COUNCIL MEMBER GLASSHEIM REPORTED PRESENT

Mr. O'Leary stated the Aurora project is seeking out a developer to do the same kind of activities, the question if you decide to go this way, that we need a discussion on and perhaps clarification, first of all are timeframes appropriate, some comments from the public commented they weren't and if that's the case now would be a good time.

Council Member Hafner stated it seems like a narrow timeframe, and asked what would be the effects if we added a week or 10 days. Mr. O'Leary stated what we do is move the completion date back whatever it is, 7 days or 14 days; Council Member Hafner stated it would give the potential developer a little more time to gather their forces. Mr. O'Leary stated they are finding that there are a number of developers who are interested in this and have a capacity to put together a package like this - if gave them another 7 days because of the comments and because of holidays thinks that would be appropriate. Mr. O'Leary stated another issue which is more difficult, that they've bid a number of properties that the City has acquired for one reason or another in the central business district and when put RFP's out like this, they didn't commonly stipulate whatever level of subsidy, JDA was the owner of those buildings, was interested in, let the level of subsidy be proposed in the responses that they were receiving, and that is another issue he would like some guidance on if you decide to pursue this. Mr. O'Leary stated that from time to time Mr. Lucke points
GROWTH FUND AUTHORITY (JDA) - 12-14-99 - Page 7

out that you get more proposers on the table if you have a clear indication of what kind of subsidy level the JDA maybe interested in. Council Member Hafner asked if there could be some kind of maximum level or minimum level that would be a subsidization and let there be competition with the rest of it, don't know if that's good strategy or nor. Mr. O'Leary stated this is a proposal and not a bid, and would hope in that final week that JDA would sit down with the proposers, discuss what their expectations are out of the JDA, what our expectations are out of them, what kind of capacity they have to put the package together, and some of those issues be resolved at that time. He stated that other than those two issues, thinks the RFP is self-explanatory - request under this draft the name of the development team, explanation of their capacity, qualifications and experience the team has in developing similar kinds of financial capacity, any consultants or support services that they are bringing to the table, personnel requirements, etc. and pretty standard issue RFP in terms of what we are requesting from the developers.

Chairman Carpenter stated one comment on the opportunity for us to purchase the project, he personally would like some additional opportunities other than just 5, 10 and 15 and was thinking that years 3, 7 and 12 as well be added as other option dates for us to purchase the property, and not just dealing with 5 -year increments of other opportunities as well to purchase it.

Council Member Beyer stated with the timeline, if push it back to response submission January 14, how quickly can he get this out, and if it will go out this week; Mr. O'Leary stated that Mr. Swanson needs to respond to that in terms of what his schedule looks like for the review and polishing of the RFP, this is a rough draft and doesn't take long for it to hit the streets, Dodge Reports and other organizations like that, distribute it very quickly to developers and contractors. Council Member Beyer stated her concern was that if it doesn't go out until the end of next week, January 14 isn't going to be enough turn-around time and end time has to coincide with the time it has to be on the street. Mr. Swanson stated he hadn't reviewed the draft until tonight and during discussion, was marking it up, and most of his comments, some grammatical, some substantive or content, and doesn't see any reason why his suggestion can't be incorporated literally tomorrow morning. For the most part the RFP and this isn't too far off from content of the Aurora, and doesn't see any thing that would unreasonably delay getting it out fairly quickly.

Council Member Brooks asked if they request it be 30 days from the day it be released is the deadline. Mr. Swanson stated if you look on page 5 where it lays out time schedule, there is no need to identify in that time schedule, the date of release of the RFP, what's important in the time schedule are subsequent dates, and his point is when it is due back, within 30 days, and if that is the direction staff can incorporate that into the calendar. Council Member Hamerlik stated that January 7 is on a Friday and if we could give it over the weekend, that would give them additional time and maybe worth considering. Chairman Carpenter stated he is hearing the idea that we want to give 30 days basically from the day it is released, which will be tomorrow, which would add 7 days onto each date and extend everything on the time schedule add 7 days to it; and asked what would be the thoughts of disclosing a dollar amount of JDA assistance, and that his thought is not to put anything in there, get the proposals back and based on rental rates they would propose, then negotiate that down by how much we are willing to invest. Council Member Lucke stated that was a good idea and asked if there would be a clause that would disclose that so they know those are ground rules we are using. Chairman Carpenter stated there maybe
GROWTH FUND AUTHORITY (JDA) - 12-14-99 - Page 8

additional equity contributions to reduce rental rates, etc. Mr. Swanson stated that on page 3, the sentence now reads "..that the proposer requests financing assistance through the JDA, they should be noted in the type, amount and security to be installed..", we can expand on that and that was one of the items he had marked to indicate that those requests could be entertained and would be subject to negotiation. Chairman Carpenter asked if by consensus is it, that we won't disclose a dollar amount but will put some similar languages that has been discussed in there; and not hearing objections to that. He asked if the timeframe, the 30 days basically using the 14th and 15th through 23rd would be for due diligence, the 19th for press conference, talking about some of the information and 26th of January for decision-making, assuming we get it released on the 15th, and if not to the 17th then those dates will change by 2 days, to give us our 30 days; and no objection to that; and the idea of adding additional option time, no objections to that.

Council Member Hafner moved to accept the draft proposal with the changes of adding the 3, 7 and 12-year to the buyout dates, that we would have 30 days, and have language referring to potential subsidizing to reduce rental rates, subject to city attorney's review. Council Member Glassheim seconded the motion.

David Thompson stated he had some fairly significant concerns - allowing for the fact that no draft copy of the RFP that the council has had available this evening has not been made available to the public. He stated that as pointed out as bidding process, this is not a bidding process but a request for proposal and reason for going that route is because there is federal community development block grant money involved in this project, and that involves certain requirements concerning proposals, obviously there is a time element here given this is flood recovery money, but he has a deep concern, given his reading of the proposal, draft proposal, was on the internet made to Amazon.com - the point is very simple for him - that since the flood we have had a very dominant construction management firm, M.A. Mortenson out of the Twin Cities, involved in virtually all of the major CDBG funded projects in this city, whether it be the Corporate Center or County Office Building, other buildings as well and the Aurora is in a different category; that Mortenson's had a very dominant role in this city, has worked its reps. and its corporate people have worked very closely with members of this governing body, but more specifically with Mr. O'Leary on an on-going basis - reading the internet version of the proposal to Amazon.com where a representation is made to Amazon to the effect that Mortenson will build this and own it, given what appears to be a very short time period, even by the lengthening and thinks that's a minimal lengthening of time that Mr. Hafner and others have proposed, and thinks that a step in the right direction, we have Mr. O'Leary acknowledging that he's been working on this project, although he wasn't economic development director since last summer, presumably involving M.A. Mortenson and Amazon.com, the advantage that Mortenson will have in the connection with the making of a proposal, specifically because of its presumably on-going close relationship with Amazon, the client, and gives it a dominant, perhaps prohibitively so, advantage in making a proposal under the RFP, and deeply concerned about the dominance of M.A. Mortenson in this community, deeply concerned with the amount of money in terms of aggregate dollars that have been involved with capital projects that Mortenson has construction managed - Mortenson is a very large company, not without its controversies in the Twin Cities, perhaps some violations of law; and concerned that at the end of the day we're going to have a situation where the client, Amazon, says we'd rather work with Mortenson (Mortenson has a close relationship with Amazon and with Mr. O'Leary and other people in Urban Development and throughout
GROWTH FUND AUTHORITY (JDA) - 12-14-99 - Page 9

this city, and it's going to be an RFP because there is going to be grant money given to the proposer under this RFP, that is why we're doing an RFP and not bidding - and thinks there is the potential for corruption and says potential and says so very seriously, and deeply concerned about this issue and have appreciated some of the oversight that he has seen tonight on behalf of some members of the governing body, but thinks Mortenson's role since this flood in this city cannot be underestimated, knows that all of you know of its dominance and where there have been discussions with Mortenson and representations made to Amazon.com in a proposal drafted by Mr. O'Leary, that Mortenson will build this thing and help own it, we're going to be giving whichever proposer is selected, equity from our flood recovery funds; and has deep concerns about that proposer being successful if it's Mortenson, and that he intends to be looking very closely at everything Mortenson has done since the flood with the city government and hopes that the kind of oversight that is necessary with regard to Mortenson does come from this governing body because you are the guardians of our public trust as citizens.

Council Member Lucke asked what are the plans and specs. and if each is supposed to design what this building should look like, or what kind of guidance do they have to come up with a competitive proposal on short notice. Mr. O'Leary stated there is a listing of 5 or 6 pages of specs. which describes the size of the building from everything from sidewall heights to the thickness of the concrete, the specs. do not describe specific materials, etc., there is a pretty elaborate description about candlepower, air exchange systems, general lighting in the building, number of square feet and office space, etc. ; those specs. came from discussions and site visits we've had (site visit to one of the clients' distribution centers elsewhere), those descriptions would be attached to the RFP to assist proposers. Mr. Swanson stated he would slightly disagree with Mr. O'Leary's description of them as specifications, they are not specs., they are not plans, in the RFP they referred to as minimum requirements - they describe what type of building but specify construction techniques, materials, etc. and those will be left up to whoever wants to make a proposal, but enough description of what we are looking for so that they should be able to compare relatively like end proposals but the proposals require them to submit their own information on what it is they are planning on.

Council Member Brooks asked because of the size of this project, publish these in builders exchange, etc. and if a listing of possible developers or companies that could send this to. Mr. O'Leary stated there is the usual list of Builders Exchange and Dodge Reports and use them to distribute the proposal as well as direct mailings to know contractors and developers in the area and region, and have quite a few contacts about this project from regional developers; and noted that lenders have been very helpful in this regard and use their resources as well.

Council Member Martinson stated if this is a generic spec., how could we determine that it's going to run about $40/sq.ft. with so many unknown factors. Mr. O'Leary stated they don't know what it's going to cost and that's one of the reasons why requesting proposals. Mr. O'Leary stated they issued things in the Dodge Reports that have gotten attention from contractors and developers from all over the country, but not sure what their distribution network is. Council Member Beyer stated she would like to see this go into a national publication.


GROWTH FUND AUTHORITY (JDA) - 12-14-99 - Page 10

Mr. McKechnie asked for an answer as to why we are using an RFP and why not doing it by the normal bid process, that Mr. Thompson intimated that it was because you had to spend $15 million by the end of the year, and if that is true - have to spend the CDBG money by December 31 and this is a way to do that as a matter of public policy. Chairman Carpenter stated a couple reasons why using RFP, one is timing of the obligation of CDBG funds which potentially could make up a large portion of this project and those have to be obligated before the 25th of February; and if not obligated for this, needs to be obligated for other projects, committed to a specific project by that date. He stated another reason would be is that we want somebody to put together a financing package for this project as well to bring in the other funding that is necessary for the project, and can best be done through the request for proposals method, not a bid type of arrangement. Mr. McKecknie asked if they normally don't get a better deal if you bid it, take a public project that you're going to build, give them a spec. and get multiple people to bid on it and then take the lowest bid that meets the spec. and if that is normally the way we build projects in ND and if there is a compelling reason to deviate from that process of bidding a large public building. Mr. Swanson stated two reasons - one it is not a public building, would be privately owned with the City having an option to repurchase, and not time to do the plans and specs. required under ND law to do a public bid and also do the three-week publication, etc. This puts a build-design package out on the street for any developer or contractor that wishes to consider it and move it forward. Mr. McKecknie stated that one developer has a three-month lead time and has already been identified as the developer of choice in the website proposal; that Kraus Anderson, and Becktel and the other bid companies in the country that can do this are going to have 30-days but Mortenson has had 6-month run at it and looks like they got the deal here, that is the problem he sees with it and why not just tell them that. Mr. Swanson stated that he didn't think any decision has been made and that's what the request for proposals are for, and those comments would be appropriate at time ... Mr. McKecknie stated he would be surprised if they come back here in 30 days and not sitting with Mortenson building a building that they're going to own with us investing in it in some fashion and Amazon.com or some other person in there - that he's saying they already have the deal done and figuring out a way to spend the money legally, maybe not in the best political way or the best ethical way but legally can do it this way, and thinks should put it out on a public bid. Mr. Swanson asked and the City own the building, that one of the other components is if the City owns it, the City has to finance it and that additional debt on the City impacts the ability to build flood protection facilities. He stated the City can't put the money into the building without impacting its bond rating and that is an additional reason why you do request for proposal to transfer that financing, and also a risk on the developer. Mr. McKecknie stated and who is going to occupy that property if they walk away from it and then come back on the City tax rolls and we will have to figure out how to fix it, better to publicly bid it and better to have somebody who is going to occupy that building lined up before building it, that's where cut the City's risk. Mr. Swanson stated the RFP are time consistent with a proposal to the economic development client, wouldn't move forward with accepting request for proposal if you didn't have a development agreement with a client. Council Member Glassheim stated that a request will not be acted upon until we know whether there is a development agreement, this is a request for proposals and nothing will be done and if no development agreement, we will not proceed and there will be a public meeting at which this will be voted on and discussed at length.


GROWTH FUND AUTHORITY (JDA) - 12-14-99 - Page 11

Upon call for the question and upon roll call vote, the following voted "aye": Council Members Polovitz, Hamerlik, Bouley, Glassheim, Carpenter, Klave, Beyer, Hafner, Martinson, Owens - 10; voting "nay": Council Members Brooks, Lucke, Lunak - 3. Chairman Carpenter declared the motion carried.

ADJOURN

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

Respectfully submitted,



John M. Schmisek
City Auditor