Appointed Committees

SALES TAX AD HOC COMMITTEE February 6, 2017 Page 1 Committee Members Present: Dean Frantsvog, Rick Hedberg, Shannon Straight, Stephanie Hoffart, Robert Schemp Members Absent John MacMartin Others Present: Tom Barry, Shaun Sipma, Stephan Podrygula, Dan Jonasson, Jason Sorenson, Sue Greenheck, Penny Johnson, Kevin Ternes, Kelly Hendershot, Lisa Jundt, Ryan Ackerman, Jim Montgomery, Ron Merritt, Mark Lyman, Jill Schramm, Josh Wolsky Chairman Frantsvog called the meeting to order at 12:02 pm. Minutes Alderman Hedberg moved to approve the minutes from the January 30, 2017 Sales Tax meeting, seconded by Alderman Straight and carried unanimously. Bonding Information The City Comptroller explained what factors rating agencies use to set credit ratings and how that will affect the City, since bonds will be used to pay for the flood control project. She said, one factor that may detract from the rating is Management since there is a new City Manager, new Finance Director and new form of City Council. She also listed the challenges based on previous credit ratings including, the debt which has nearly doubled since 2011, the decreasing sales tax revenues and the dependence on state revenue sources. She said, at this point, the City would not be able to bond because we would not be able to keep up with the payments. Upon questioning by Alderman Frantsvog, the Comptroller stated, the City currently has an Aa2 rating, which is very good. If the rating was downgraded, we could expect higher interest rates. She also said, the City would not be able to bond beyond the amount of revenue for sales tax and there would have to be a reserve of funds. She said, the rating was increased to Aa2 around 2010 and has remained there since. Use of Sales Tax Revenues for the Past Five Years Alderman Straight asked if there was a figure to account for how much the 2011 flood affected the amount of debt generated, to which the Comptroller replied by saying, the largest impact was in the amount of infrastructure which has since been built outside the flood plain. There were also funds from the budget used in building dikes and working to fight the flood. Souris River Joint Water Board Sub-Agreement The Comptroller explained, this information was provided in order to present all of the facts to the committee to help make decisions. The Sub-Agreement between the City and the Souris River Joint Water Resource Board states, the City is only responsible for paying what we can afford. She added, the memo also explains how reallocating sales tax revenue will impact the mill levy and property tax to homeowners. The City Attorney further explained, the only financial obligation to the City is the ½ cent sales tax but that does not prevent the City from contributing more. Other local entities may also participate. SALES TAX AD HOC COMMITTEE February 6, 2017 Page 2 Mr. Schemp asked if the participation of HUD and the Resilience Program is considered local funding to which Mr. Ackerman stated, those sources are federal. Mr. Ackerman also explained, the acquisitions use 75% state funding and 25% federal. When asked for details regarding the Souris River Joint Board’s understanding of the sub-agreement, Mr. Ackerman said, the assumption was there would be a larger federal share which we now know, is limited. The premise was that sales tax would be the best regional source of funding, since Minot is a major hub of commerce for North Dakota. He explained, some other local entities are using local funds for acquisitions for the project, including Burlington and Ward County. He also stated, having a federal project already in place works against the City in securing new federal funding. Mr. Ackerman responded to questions related to legal hurdles by saying, there generally isn’t any opposition to the project and he has spent six years developing a consensus and securing support. It is more difficult to approach rural counties for funding however, since they view the 1969 flood project as a cause for the 2011 flood. Mr. Ackerman explained, the decision is currently with the appropriations committee in legislation and the larger projects may be acted on later in the session in order to use the most accurate budget and revenue projections. Alderman Straight asked if making a recommendation in this committee would affect the ability to secure additional funds. Mr. Ackerman stated, the Chief Architect of budget proposals in the house has said ½ cent is not going to be enough but it is up to the committee and Council to make the decision. Alderman Frantsvog made it clear, the City is committed to doing more but still needs to figure out how to accomplish that. There was a consensus, there are still too many unknown factors to consider so Chairman Frantsvog suggested the committee take a hiatus and reconvene when more information is available. Alderman Sipma then explained how the new flood insurance requirements will affect residents living in the flood plain and emphasized the need to protect those homes in high risk areas. Mr. Schemp said, the first priority is to secure funding for the first three phases of the project. The committee should be able make a recommendation soon regarding reallocating the first and second penny. Alderman Frantsvog stated, the next meeting will be February 21st at noon instead of February 13th. He also said he would invite representatives from other local entities to provide their input on contributions to the basin-wide project. Mr. Ackerman will provide additional information on cost estimates and funding sources. There being no further business, the meeting was adjourned at 12:59 pm. Respectfully Submitted, Kelly Matalka City Clerk