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MINUTES/COMMITTEE OF THE WHOLE
--Monday, April 21, 2003 - 7:00 p.m.__________

The city council met as the committee of the whole on Monday, April 21, 2003 at 10:00 p.m. following the city council meeting in the council chambers in City Hall with President Gershman presiding. Present at roll call were Council Members Brooks, Hamerlik, Christensen, Kerian, Kreun, Gershman - 6; absent: Council Member Glassheim - 1.

President Gershman announced that when addressing the committee to please come forward to use the microphone for the record, and advised that the meeting is being televised live and taped for later broadcast.

COMMITTEE DISCUSSION ITEMS

2.1 Acquisition of Lot 3 and Lot 5 of Dank's Second Resubdivision.
Rick Duquette, administrative coordinator, stated they were bringing request forward re. purchase of property adjacent to the Alerus Center - that in the late summer of 2002 Mayor Brown in contemplation of the need for additional parking, land for additional future development, directed him and Mr. Swanson to begin discussions with property owners owning lands which are known as Lots 3 and 5 of Danks Second Resubdivision (map showing location). That in September, 2002, Mayor Brown and the chair of the Alerus Commission, David Evenson, appointed a committee to begin work with a proposed hotel developer and that committee became interested in the progress and discussions with the property owner, esp. re. Lot 3, for parking and future potential development.

Howard Swanson, city attorney, stated each had copy of memorandum dated April 18, 2003 to Mr. Duquette that outlines the terms of the agreement, tentative agreement that is subject to final approval by the council:
1. identified that the City would pay approx. $1,865,000.00
2. this has the City conveying certain lots that are on the east side of 42nd that the City presently owns, Lot 2 is a commercial lot and wraps around the Valley Dairy site, and Lots 7, 8 and 9 are undeveloped residential lots to the east of there. There is a fourth lot (Lot 6) on the corner of 11th that is not involved at all, and is the site of a future lift station.
3. the City will be paying the closing costs for the transactions (closing fees, updating abstracts as necessary, recording deeds, etc.)
4. the seller has not identified yet, but has agreed, that if they are going to use what's called the section 1031 exchange or other provisions that would allow them to make some tax savings, will accommodate those and doesn't impose any particular risk to the City.
5. the City will agree to sign a form with the IRS that we have received as additional consideration certain value but will not warrant or guarantee the value, the City has obtained an appraisal dated the 31st of March that shows a value of Lots 3 and 5, substantially higher than the total value of what's being exchanged, and the property owner is seeking to claim a deduction or tax advantages for the difference between the value that the City has conveyed to him in exchange for the total value of the properties the City is receiving, Lots 3 and 5. At the conclusion of closing, and not before, we will provide Mr. Danks a copy of the City's appraisal; neither Mr. Danks nor his associates are aware of what the City's appraisal value is and are holding that as a protected number pending completion of negotiations and the closing of the transaction. He stated they are requiring that the transaction must be closed on or before April 30, 2003, there has not been a purchase agreement signed and will not be until council acts on it, which would be next Monday, but are in the process of drafting that purchase agreement, drafting closing statements and other documents to be prepared to move rather quickly, and are also in the process of reviewing the title at this time. He stated he did hand out tonight two faxes he has received, one is dated April 16 and received on April 17 where he is confirming and identifying some discussion that is moot because we are not paying any special assessments on prior lots, and a more recent one to Mr. Christensen and is fax of today, but as he understood the intent of the agreement on Friday, April 18, he outlined it in the memorandum.

Council Member Hamerlik asked what the sq. footage and acres for Lots 3 and 5, and cost per sq.ft.; and what was sale of surrounding lots. Info presented: Lot 3 is 215,254; Lot 5 is 224,436 sq.ft. - for total of 439,690 sq. ft., price rounded to $5.00/sq.ft. Mr. Swanson stated there has only been one sale that is a protected sale as far as the sale price and is not able to identify that price, could do in an executive session, that was reported to the ND Tax Commissioner's Office. Mr. Swanson stated the sq.ft. purchase price for what is known as the Valley Dairy site was somewhat less than what the cash purchase price for Lots 3 and 5 would be). Sq. footage on Lot 2, 88,764.sq.ft. Acreage of the property: Lot 3 is 4.94 acres; Lot 5 is 5.15 acres, slightly in excess of 10 acres.

Council Member Christensen asked what the assessed value of Lots 7, 8 and 9 and what is the est. fair market value of those lots. Mr. Carsen stated Lots 7, 8 and 9 are tax exempt so actually do not have them assessed but did make an appraisal of those 3 lots about a year ago to put them up for sale and at that time valued them at $31,000 per lot and is comparable price. Mr. Christensen asked if Lot 2 at 88,764 sq. ft. , could assume that if the Valley Dairy was worth $5.00 sq.ft., this would also have a comparable value. Mr. Carsen stated that was probably correct. Council Member Kreun stated they did have an appraisal on that property and didn't want to give out the dollar yet until the sale is completed, but was it above or below the purchase price. Mr. Swanson stated the appraisal on Lots 3 and 5, was apparently significantly higher than the purchase price; that they did not acquire an independent appraisal on Lots 2, 7, 8 or 9.

Terry Bjerke, 5356 5th Avenue North, reviewed the items re. numbers on value of land that the City is going to be exchanging: $31,000 per lot or $93,000, and approx. $400,000 to $450,000 for the 88,000+, and would be in addition to the purchase price of approx. $1,865,000 and what is source of that money. Mr. Duquette stated they are considering using excess sales tax dollars, there is a balance there of approx. $2.2 to $2.3 million. Mr. Bjerke stated when he was on the council and tried to get some property tax relief concerning that $2.2 million, it was repeatedly brought up to him that money was being saved for when the City was audited on the $171 million it received for the flood damage, that the citizens could not get relief for that money but now going to spend it and apparently the audit has been taken care of or no longer a worry. He stated he has a problem that this is Alerus infrastructure (parking for the Alerus), the voters specifically voted for a special tax to build the Alerus and if you choose to add on that could come out of that money but now taking money from a different source to add infrastructure to the Alerus project when the citizens were told and it was clearly implied to them that the Alerus was not going to be built with money other than that 3/4% and beginning to break that bond of trust. He also questioned the cost of paving and source of that money - if taken from other funding sources within the city and not from the 3/4% Alerus tax and would be additional tax placed on the citizens for the Alerus project. He stated in his opinion this is tied to the hotel and the water park and if it is or strictly for new parking for the Alerus. Mr. Duquette stated it is obviously related - are obtaining this property for parking and future development, that on Lot 3 were they to build an Alerus hotel it would lie directly in front of that hotel and don't want something jumping up in front of the hotel that they have no control over.

Mr. Swanson stated they also approached the owners of Lot 6 and 7 which border on the south entrance road to the Alerus parking lot and attempted to negotiate for the acquisition of those lots as an alternative to Lot 5, but not successful in reaching agreement and was considered to be substantially higher value land by those owners (different owners); there have been other negotiations that have since ceased.

Council Member Hamerlik stated as member of the Events Center Commission, they are short of parking for the major events. Mr. Bjerke stated he agreed that there isn't enough parking out there, but wanted to remind them they passed a 3/4% tax, and spent $83 million and ran out of money and now taking money from other sources to finish this and doesn't think that is fair to the citizens. He stated that on item 4.16 took away the $400,000 from the CDBG money and aren't going to use that, one of the selling points of the hotel bill was that they were going to use this $400,000 of federal money so the City wouldn't have to spend as much on this project - that's gone now and all coming from City coffers, and is additional cost of the hotel water park deal. He stated when finished will add up all the costs and this is one of them.

Mr. Duquette stated that on the comment on the $400,000 CDBG funds, that was his recommendation to the council and staff to not do that, thinks certain areas re. utilizing job service and others for staffing and not sure best use of CDBG dollars at this point for this community. Mr. Bjerke stated he doesn't disagree with the recommendation but just wants it brought out that was one of the selling points of the hotel and weren't going to use City dollars and now are. We are still building the Alerus, and what are wants and what are needs - and wait until the 3/4% tax building up more money than what the payment is every year and take excess and fund capital improvements.

Council Member Christensen stated he shares concerns, the problem this council has is when the Alerus was built those that preceded us didn't buy the land, there is some concern by some members of the council and by the Alerus Commission that they want to control the frontage of the Alerus (hence 2 lots that are being bought), that perhaps these lots should have been purchased at the same time of the vote - to answer his question as to the source of funds, the 3/4% sales tax. He stated at the last budgeting round he brought to the council and to the Alerus Commission that their capital funds budget suggests that in the next 5 years, they are going to need $1.5 million to handle capital needs excluding this. He stated that Mr. Schmisek has told them that there is some excess built up in the bonds that are being amortized by the 3/4% which will fund some of the Alerus Commission's capital needs in the short term but doesn't believe it will be $1.5 million over the next 5 years and there will be an issue between this council and the Alerus Commission in its budgeting process as to how they are going to fund the balance of their projected capital needs because he thinks they need this in their CIP process because it is part of the city and to the extent that they do not have the money in the reserves built up in that bond fund, could see someone coming back in the future looking for more money to handle the replacement cost that the Alerus is going to have because after 5 years, things wear out, and that this isn't the end of what the residents are going to have to pay to maintain a quality facility at the Alerus; and they will be dealing with those issues going forward; and he has some concerns at this point because he was going to ask the question - where is the $1.9 million going to come from if they hit the excess reserves in the sales tax dollars, and his numbers tell him they have no money for economic development because they have $2.3 in there and if take out $1.9, that's $400,000 and have to fund those folks at $165,000, and just heard presentation this evening, so have some issues to address as a council when they look at this on Monday.

Mr. Bjerke stated if go back to the vote, it was implied that this was not going to happen, and now happening, and disagrees with this and if have to wait longer, and not buying all this land if it wasn't for the hotel water park project, and just another cost when all added on and the final number is going to come out.

Council Member Brooks stated there were some FEMA auditors in, and if they've completed their audit and this money has been freed up, someone should have told them about it. He stated there is another thing they can look at - that if the $1.9 million and when ask where it is coming from, probably out of the excess sales tax - maybe other things to look at - there are some dollars related to the 3/4% tax for the Alerus, but come up with some financial plan - and next Monday would like to see if there isn't another possibility of that in source of funds. - that land is crucial but another possibility for funding.

President Gershman stated there is a separate economic development fund that has in excess of $1.3 million and this money is not coming from the economic development carry over, and JDA has a significant amount of money for economic development we could do. Council Member Christensen stated that the fund is 5996 and 12/31 numbers and the fund says there is a miscellaneous of $2.964 million but Mr. Schmisek has told him that at best that's the most money you have in that fund (JDA) and that 2163 as of 12/31 had a cash carryover of $998,083.

Mr. Duquette stated that over the next couple days he and Mr. Schmisek would organize some different sets of numbers to show balances of those various funds; and try to look at Mr. Brooks' suggestions concerning an obligation note to give them some options to look at.

COMMENTS FROM MAYOR AND COUNCIL

Mr. Swanson stated he has two items of information:
1) several weeks ago the city council approved an annexation agreement for the LeClerc Property which is generally south on Belmont Road and reported that as of this afternoon he has yet to have a signed annexation agreement; that he has had numerous conversations or communications with the attorney representing him, doesn't know the status of that and wanted to make council aware of that in the event they wished to follow up on that in any regard.

2) that at the city council meeting of April 7, 2003 the council waived informalities for a bid opening involving United Crane, once that bid opening occurred and their bid was reviewed, they found that United Crane did not actually sign their bid, they then reviewed the bid of Wagner Construction and found that Wagner Construction, despite the fact that they had acknowledged the Addendum on the outside on the envelope, failed to sign and acknowledge the Addendum on the inside of the envelope, that was in fact done by United Crane, both have issues with respect to the bids and will be placing that on your next committee of the whole agenda for next Monday to consider what action, if any, you wish to take with respect to that bid opening.

3) Council Member Brooks stated he has received some calls on 51st Street, south of Gateway Drive, in the matter of semis on the road, blocking of the sidewalk; that he would like to put an agenda item on next week's committee of the whole - discussion of whether we should continue our strategic planning meeting. Mr. Duquette suggested that once they have completed the CIP process, then have initial work done in preparation for the budget for next year and then revisit going back into strategic planning. Mr. Brooks stated he would stay with his recommendation and would like to see discussion.

4) Council Member Hamerlik stated that one of the advantages of a 7-person council, were going to have a committee of the whole one week and following week by city council meeting to give time for patrons or for research - that the committee of the whole last week took about half the time that they took tonight - just doubling up - that there are things that have to be revisited but somewhere going awry on what plan was and how operate - disappointed and may just as well go back to the old way or try something different. President Gershman stated that over last few months the committee of the whole has been working quite well, this one reversed and hopes it doesn't happen again.

5) Council Member Kerian presented matter of curbside recycling and are past about quarter of the year that was given to figure out whether or not we would continue with curbside recycling and asked Mr. Feland for update with recycling agreement.

Mr. Feland stated he would also provide a written summary at the next committee of the whole meeting. He stated with the new contract the first week in May will be a big roll out of different things - a recycling drop site at the32nd Hugo's and one at the Public Works facility, and will be adding cardboard sites to the 6 grocery stores sites that have newspaper recycling; the new system calls for co-mingled system where don't have to separate items as new sorting process is one in which is going to send materials to Minneapolis at co-mingled site where machinery separates the items. He stated this week is Earth Day so Waste Management will be along with City personnel participating in UND event and Air Force Base event. He stated beginning May 5 is Spring Cleanup Week and on May 3 will have an electronics recycling at Best Buy parking lot and Waste Management is going to do that this year (can bring computers or related electronics).
He stated April 1 was start of new roll out but to date behind where were last year. He stated they have been tracking the participation rate, the north end is between 20 and 25%, central part of the city is between 26 and 39% participation and south end at 43%, combined average around 30%. He stated he will give a written summary on Monday but will start seeing some advertisements and door-hangers about co-mingling items within same containers; also some issues related to apartments where have one larger container; and because want to have a backup plan, will in next few months come up with some ideas for drop sites and bring that back to the task force this summer, goal was by September and will report on status and drop site plan and be prepared to bid out at that time. Council Member Kerian stated her first interest is to keep curbside recycling - but that if we do away with it, that people are really aware, that they have had an opportunity and that will be a change that will be happening at the end of this year if things continue on this path.

6) Council Member Christensen asked when they can expect a wastewater plant report; Mr. Feland stated he has a draft that he is reviewing, and perhaps have one on Monday on the committee of the whole.

7) Council Member Christensen stated he has received questions re. the lots in the Elmwood area along the dike that have been platted, and when do they expect to sell those lots, and would like a memo re. that item as people would like to buy them to build houses. He asked what plan, if any, do they have for the lots that are to the east of Belmont behind the Augustine house and the Norby house, as they removed some homes to construct our dike, and if there is a plan to get it to him so can get it to his constituents, and if there isn't a plan and when that plan is formulated, to let him know.

He stated at the last Committee of the Whole meeting Mr. Brooks had suggested that he had some issues with the fourth quarter report, and asked Mr. Brooks if he would give them a summary within a couple weeks.

He stated he would appreciate a copy of wage study re. money that they may have to start paying because of pay for performance criteria - it was presented two weeks ago by Mr. Bunce that most of the information was back, and would like a written report and supporting data and as the budgeting process is going to start June 1 and when hear what additional monies we have from Mr. Carsen, hope that have that information within the next two weeks in raw data form as currently have it so they can began looking at what their anticipated costs as they move through the CIP process.

ADJOURN

It was moved by Council Member Brooks and seconded by Council Member Kerian to adjourn. Carried 6 votes affirmative.

Respectfully submitted,



Candi Stjern
Acting City Auditor