City Commission - Regular Meeting

I think we'll get started. Ian, I don't know if I see an agenda here, but I think you've got an agenda in mind.

I think Shirley is going to start with a few comments, Mayor.

Okay. So what we want to try to do today is continue to make progress on the Convention Center and basically thank you for both proposals or proposers for getting the stuff back that we needed back. I think Ian is trying to give us a summation of that to help the Commission in their decision on Tuesday. So what we wanted with Shirley to do is to make, sometimes the public doesn't understand how this all evolved, and I've been listening to the candidate debates and not necessarily realizing we had a vote on this, and the city has already had that decision made that the community wants a convention center. But I think Charlie was that cheerleader that always said, we need it, we need it, we need it. And I think what we want to truly do just for the public is to re-explain what we think the impact this will have on our community. So that's the first part. Ian and then we'll go through a summation of the two proposals and then we, If he kind of misses something, we wanted the proposals to be able to just add or change or do whatever you want to what he has said. He's trying to keep it kind of equal on each one of you. I had a couple questions that I'll ask as well. But that's all we were trying to do today. So we didn't want any proposal projections or PowerPoints or anything like that. But it's just, you are the two contenders, and we would just like to have a frank discussion. And then, commissioners, if they have any questions, feel free to ask. But we'll start with Shirley.

Mayor, if we could start with introductions, too. I'm Ian McLean. I'm the city attorney. Jim Gilmore, city staff.

Dave Popcorn, city commission.

Denise Kolpak, city commission.

Tim Mahoney, mayor.

John Strand, city commission.

Michelle Turnberg, city commission.

Rich Schlegel, McGough Construction.

Mike Allmendinger, Kilbourne Group. Mike Silva, VenuWorks.

Kevin Bartram, Brujala Project. Mark Bjornstedt, Brujala.

Shirley Hughes, visit Fargo-Moorhead. Shall I? Good morning commissioners, mayor, community leaders, convention center committee members, and members of the public that have joined us here today in person or virtually. Before today's discussion begins and the team from the city shares their findings, I want to take a moment to remind us all of why we are here. This process did not begin because of a building. This began because of a vision for Fargo that has been a decade, over a decade, in the making. Our mission at Visit Fargo-Moorhead is to grow tourism, support local businesses, create experiences, and strengthen quality of life, and to continue to help build a community where people want to visit over and over again. A convention center is not separate from those conversations. It's directly connected. The project represents an investment in Fargo's future as a destination and regional hub for events and experiences and an investment in Fargo's future economic vitality. Adam Sachs, President of Tourism Economics, a leading global provider of economic impact studies, his set of convention centers. These venues are catalysts of economic development as companies and investors descend on destinations and are exposed to the best of a city. As we know, there's huge economic impact with building this facility. Based on the HVS study that we all saw, just as a reminder, an estimated nearly $30 million of direct visitor spending in the first year alone, with over hundreds of thousands of local city tax dollars induced because of the events, we will put into the convention center and it will grow year over year. But beyond economic impact and visitor activity this project can generate, perhaps most importantly, this process has already been guided by the voices in our community. The citizens of Fargo voted yes in November of 2024 on this project. They voted yes on instituting a lodging tax that would pay for this convention center. As a reminder, not a sales tax, but a lodging tax. And again, they said yes. That matters. The voters entrusted all of us with moving this vision forward and responsibly and thoughtfully. And after that vote, a dedicated committee made up of community members by the commission's request, your constituents, Small business owners like Taylor Snelling from Mezzaluna, industry veterans and experts like Kent Kolstad and Caitlin Ballstead, a meeting planner, just to name a few, as well as you commissioners, who all gave hundreds of volunteer hours to studying this opportunity, asking very hard questions, and evaluating the options. That combined with the hard work and time from our city staff across all departments has brought us to this moment. None of this work has been rushed, and none of it has been taken lightly. And while healthy discussion and due diligence are essential, as the mayor alluded to recently, leadership also requires the willingness to make decisions. Today is more than about evaluating two potential partners. It is about demonstrating that Fargo can lead, collaborate, and execute transformational projects that position our community for the next generation. Why is this important? Because there's also a risk in standing still, a risk in losing momentum, and a risk in allowing uncertainty to replace vision. Our peer communities are not standing still. Sioux Falls, one of Fargo's closest regional competitors, is actively pursuing a major convention center investment because they recognize the opportunities they are losing without larger facilities. Other communities we compete with for visitors, conferences, sporting events, talent, and even economic growth across the board, including Bismarck, Grand Forks, St. Cloud, Rapid City, and others, are continuing to invest in these types of facilities and in themselves and in the experiences that they offer. The question before us here is whether we intend to compete or allow those opportunities to go elsewhere. And this is not theoretical. I have actually had in the past few weeks some conversations with organizations and meeting planners that have reached out to me saying, please reinforce how important this convention center is to your community. We do events here year over year, and we are outgrowing Fargo. We will have to move. And we don't want to. But as the world becomes smaller and competition becomes more intense, like I just talked about, we must recognize we need to use every tool available to us to remain competitive. And the Convention Center is one of those tools. This is but more than a facility. This is a once-in-a-generation opportunity to invest in a project that creates the kind of energy and momentum that carries Fargo forward for decades to come. The talented team from the City of Fargo, your team, will now share their findings and extensive review process you asked them to undertake with the two finalist locations, the top recommendation and highest ranked from the committee, Brujala, and the second ranked Kilbourne Group slash Civic Center. I know how much work this took, and I want to thank everybody and again for their time. And again, I know that it's not been taken lightly. Finally, one thing that becomes clear through this process, and regardless of the locations, both of these top-rated and potential partners from Berhala and Civic Center not only believe in the importance, but more importantly, they support each other, which makes me truly proud. Next week, we look forward to having a decision by the Commission on which partner we move forward with, and after today, I am hopeful you'll have more clarity on that decision. Thank you, Commissioners, for your time, your dedication, and your courage to move this project forward now.

Thank you. So before I get into this summary of the reports, I just want to give a timeline of what we've done since April 27th. So on April 27th, the city commission directed city staff and the city attorney's office to begin the due diligence process on the top two rated proposals, which was Brujala and downtown. So right after that meeting, the week of April 27th, the city attorney's office reviewed both proposals and identified various topics that we wish to ask the two proposals about. We sent a list of topics to both teams the week of April 27th. The next Monday, May 4th, Jim Gilmore and the city attorney's office met separately with both of the finalist teams. We went through all the topics. I think the meetings were 90 minutes to 120 minutes each. Following that meeting, the city attorney's office with the assistance from the finance department prepared written due diligence questions so that the responses could be provided in writing so nothing was lost in translation to the commissioners. We were able to draft those questions the week of May 4th. We sent the questions to the teams on Monday, May 11th. We asked for responses the next Monday, May 18th. On May 18th, both proposal teams did send us lengthy, detailed, and thorough responses to our due diligence questions. They totaled about 80 pages. The last two days, the city attorney's office has spent trying to summarize the 80 pages into six pages, which is a summary that we have in front of us today. This is a summary. There are a lot of details that we did not have in here that are in the proposals. We cannot stress enough that everybody should read the actual answers to the due diligence questions and not solely rely on the city attorney's office review. And then the city attorney's office thought it would be a good idea to have a brown bag here today. Because I know how city commission meetings can go. They're fast-paced. There's not a lot of opportunity to ask questions. So both teams will be able to have an opportunity to answer any questions the commission had, which is why we're here today. So that is the process that has been followed in the last 24 days to get to here. I've handed out a six-page summary. I think it goes to a seventh page. Again, this is a summary. I'm going to focus today on the first five questions because I think those are the five questions I've heard most from the commissioners wanting answers on, and they deal with the financial risks of the project and what the city's risk allocation is. So the first topic is, in plain English, would be if the construction costs are more than expected, who's covering the extra costs? Both proposals, Brujala is using Mortenson Construction. Mortenson Construction will give us a GMP, which is a guaranteed maximum price. Any amount above that will be guaranteed by Mortenson and or Brujala. And Brujala will also, I believe, guarantee the completion of the convention center. The only exception to theirs is Project Scope, which is typical. So if the city determines it wants to build something bigger than what the guaranteed price is, obviously the guaranteed price might go up, and the city would be responsible for that. And that will be guaranteed by the Brujala LLC entity, which is Mr. Bartram, Mr. Bjornstad, and a list of other people that are in this summary. Downtown is similar. McGuff Construction will be the ones that are building the convention center for downtown. They will guarantee the GMP. Kilbourne will guarantee the completion. I understand that Kilbourne will also guarantee the GMP construction costs, as long as there's a $2 million center reserve fund built. which I will explain later on. Because Brujala is new construction and downtown is, you're revitalizing basically an already existing structure, there are a few more exceptions in the downtown, including sort of any unknowns. So if we pop in and there's asbestos, the cost may go up for the GMP. So for the most part, their answers are, there is a guaranteed maximum price for both of the proposals for the construction. Number two, the question is essentially asking, if lodging tax revenues come in less than expected, who is covering the shortfall? In Brujala, I want to explain how they go from $45.3 million to $58.5 million is what they would use to build the convention center. So the two main things is right now the tax has $250,000 every year being spent on capital repairs. They would take that out because they would have the First Avenue TIF district, which I will explain in more detail, which would then pay for the capital repairs. That $250,000 could then be used for debt service to build a bigger convention center. Similarly, there's $350,000 that is used in the tax every year as a subsidy, in a sense, to pay for the operating losses. As Brujal is guaranteeing the operating losses, they're saying you can remove the $350,000 and use that for debt service. So those are the two main things. They also use a 5% interest rate instead of 5.5%. And they're also including the Marriott lodging tax of $180,000 plus $75,000 in other lodging taxes to get to the $58.5 million number. If there was no TIF, I believe their answer is that they would have to build a smaller convention center. I'll let them explain that in more depth. I think it's 8,000 feet less is what they said in their proposal. The other key thing on this is Brujala says if there's lodging tax revenues that are short in the years 2029, 30, and 31, they will cover those shortfalls. downtown Their project would be forty five point three million dollars They would not be guaranteeing any shortfalls of the lodging tax They would have a two million dollar though bond in this city convention reserve funds what they're saying by that is they want two million dollars to come out of the bond to go into a reserve fund that reserve fund would be paid to pay for capital repairs it might be paid for to pay shortfalls may be paid for to pay shortfalls and and the operating so that's the lodging tax and Number three, it gets at if the convention center loses money on a given year, who is paying that cost? Who's paying the operating loss? Who's gonna cover that? As I've explained previously, right now the tax already has $350,000 basically being covered every year through the tax, and then $100,000 to $250,000 for capital repairs. So Brujala, what they have said is they will guarantee the operating losses for as long as they are the operator. So right now they're offering a 10-year operating agreement. At a minimum, they'd be willing to do longer. With that said, before their guarantee would come into effect, they would want the TIF, I believe, to cover the operating losses. If the TIF could not, they would guarantee that loss, but they want to be repaid if the TIF ever had enough money to pay them back for that loss. Or if there was profit in future years, that would go to pay back any loss that they had to cover previously. But in a sense, Brujala would be the backstop to any operating losses. downtown they forecast i had here 1.84 million it should be 1.084 million lost in the first three years and then basically going down to 150 000 lost thereafter that would be covered i believe they would say through the uh tax um and then there's this two million dollar convention reserve fund which i've already talked about which would be there if that was created by the city commission theory to pay for any operating losses that exceed 150 000 each year There also is a VenuWorks limited guarantee that VenuWorks be willing to guarantee up to 35% of what they get paid a year to cover any operating loss that goes above and beyond what the budgeted loss is, not including what their fee is. So there is a limited guarantee there. Four sort of deals with what is their plans for the hotel construction and is there any risk that the hotel is going to be built both? Both of them plan to build a Marriott, a different type of Marriott, but build a Marriott Hotel. Both have provided letters either from Bell Bank or First Western Bank saying that they should be able to get the financial security. Both have provided letters from Marriott saying that there is interest. Brujala is not asking for any sort of incentive with their hotel. Downtown is asking for a five-year Renaissance Zone exemption for the hotel. And the difference is Brujala would also be building, the Brujala LLC would be building convention center and the hotel. For downtown, Kilbourne would be the developer of the convention center, Zander Capital, which is Kelly Zander who owns the Radisson, would be the operator and the owner of the new hotel. Five is, what kind of TIF or what kind of other incentives is each one looking for? Subrahala is asking for a First Avenue TIF district. And that TIF district would be used, whatever funds come into that, would be used to pay for the capital repairs to the building. Jim could put more on this. We may have to get creative in how that money would be spent. There's certain limitations on a TIF. But basically, money would go into a TIF that would be given to the city to spend on the convention center, whether it's repairs, maintenance, and others. downtown that tip district does not exist yet so that tiff district we would have to go to the county and the school district to get buy-in and create uh downtown there already is something called a riverfront tiff district i think it has something approximately 20 years left um so they would want it so downtown would want to use that tiff district to support the downtown convention center i think two million dollars of that of that tiff district would go towards asbestos and Demolition and then another two million they would put towards the plaza and outside things both proposals say without a tiff They can still go forward So those are the first those are the five main things I wanted to go over those five topics We do have other topics here land cost convention centers number six Brujala owns or Brujala's partners owned the land that the convention center would go on for they would gift that land to The city and that's where the convention center would go Obviously the city already owns the convention center downtown and owns that land The pro forma applications, that is in the packet. So I won't go through that. The convention center management, hotel management, integrated operations, I've sort of already talked about this. Brujala LLC is a single entity that the city would then contract with. They would be in charge of the hotel and the convention center. Downtown, we would contract with Kilbourne and 3P. They would be the developer. Kelly Zander would own, Zander Capital would own the hotel. They both gave detailed answers on long-term viability and competitiveness of the project, and instead of summarizing that, that is in their 80-page responses. The other thing I want to touch on is, specific to downtown, is they're looking to purchase the old police headquarters to build where this new Marriott would go. In their Phase 2 proposal, I think they said $500,000 would be the purchase price, and their due diligence is as a million. The difference there, though, is we'd be paying the demolition in the million-dollar version. So the $500,000 version, we would not be paying the demolition. Here we'd be paying the million. We don't know the exact cost, but it might be similar. So that's a summary of those topics. Again, that is just a brief summary, and I think the mayor was going to open it up to either team if they think I missed anything or misstated anything to add any context. Mayor, go ahead.

So I think we'll start with Rahali. Ten minutes if you want to take, Mark, or whatever you want to do to comment on things he unsaid.

First, I'd just like to thank city staff. You know, we had a great preliminary meeting, kind of going over all this information. These are huge proposals. This is a giant project. There's a lot of details to get to there. So thank you to city staff for putting these summaries together. You know, we feel that... Like Enos presented that's an accurate representation of the proposal and our our answers We've had a lot of thoughtful conversations about this and our plan really has not changed since round one here We're presenting a true Triple P You know a really unique opportunity for the city and we've talked at length about this I think I just wanted to stress a couple things from there that you know Enid brought up that one of the contingencies of us covering some of the losses on the TIF was I want to be clear about why we put that in there. It's because we want to build a bigger building. We believe that that bigger building is what makes the convention center competitive, gives it the best lifespan to the building, prevents how soon you would ever need to be talking about an expansion. But that's why we're willing to cover the losses, because we believe that if you build a big enough building that competes regionally that's competitive, we're very confident in operating that model. The second thing I just want to point out is just to stress again that we've talked about at length is that the TIF district we're proposing is not an incentive. Zero dollars of that goes to us as developers. In fact, we're gifting the land and we're paying property taxes on day one. That is a city-owned TIF fund used at the city's discretion for the community benefit. You know, I just thank you for the time. We're happy to answer any questions, but I feel like that was a fair and accurate representation of our proposal. Thank you.

Mike. Yes, again, thanks Commission. Thanks Mayor and and the city staff for putting this summer together. We also agree that there's been a lot of work completed in the last couple weeks. There were, I think we clarified the operating loss that was in this document. So Ian, thanks for. doing that. And that was that was an important note to make. So we'd like to just also clarify the we have made you know, good progress on the hotel side of the of our proposal. I don't think that Marriott moxie was identified in here. But we do have a letter from Marriott with their strong interest in putting a moxie in in our proposal or in the location in our proposal. So we feel really good about all those I'd say just a couple highlights. We've talked about the schedule. If you read the full document that we sent over to you, we have some important details in there about our schedule. And I would like to just also highlight our proposal on the riverfront TIF. So for example, Ian stated this, but if there's a $45.3 million bond that the hotel tax we'll provide the debt service for. We're proposing that $43 million of that goes towards the construction of the convention center, and $2 million would be utilized for a city convention center reserve fund, and controlled by the city as well. So I just want to make sure that that's noted. That is a fund controlled by the city as an emergency fund. If the plans don't come together for operating or if there's some unforeseen cost so that's that has been our creative idea on how to put another buffer in there between this project and the general fund for the city of fargo and and i would just also highlight that if you felt like there was a need to have more you could do that if you had a need to you know have i mean we have expansion plans in our project as well our project is um has fulfilled the RFP proposal for the amount of square feet that this project was asking for. We have expansion plans. If you're interested in that, we could utilize the riverfront TIF that's already existing to fulfill that right now. So there are, I guess, a couple different options to consider. But overall, we're very excited about the project. We continue to do a lot of diligence on the project, and we'll look forward to any questions you have.

Thank you, Mike.

I did have one question on venue works. You said 35% on the money to help out. I'm just curious what 35% is worth. So it says something like a refund obligation would be capped at 35% of venue works management fee for applicable year.

Thank you. The idea is after the contingency fund is exhausted. So our management fees are set up so that almost half of it is based on commissions. And we believe in doing that because we want to partner with our municipal partners. So by making half of our fees commission-based, it says to everyone that if we don't perform, we don't get paid. And as an added layer, we've said that if we miss budget on any given year, we will refund up to 35% of those commissions we collected to help balance that budget.

And how much right now with your contract would that be worth theoretically?

35% of $140,000 would be, I can't do the math. $40,000? Yeah, about that. Okay.

And then, Mark, when we talk about TIFs, the confusion for commissioners have, at one time we had three different proposals for a TIF. I'm just wondering where the boundaries are. So can you roughly kind of give me an idea when you're talking TIF, where would that TIF be?

For the TIF district? Yes. Yeah, I think that's really up to the city's discretion on that. We've currently kind of drawn it in the zone that we would envision being redeveloped and where the city would want to recapture that infrastructure redevelopment there. So we look at the district being from University to 25th and then covering both sides of First Avenue.

So a block outside of that First Avenue? Yeah. So that would be a narrow block? going to university and going to 25th? Yep. Because at one time we were going to go a little bit bigger, but you feel that that would work?

I think some of those original discussions were, like with Jim Gilmore and we've kind of, I think some of the other commissioners, we've had discussions about where that zone could be. You know, there was some talks about if you wanted to try and use the tiff district in the convention center to spark activity on main avenue you you could extend it over there and there's there's ways to connect that activity um but we can draw the district wherever it meets this the city's idea of wanting to recapture that development but right now in our proposal it's university of the 25th covering both sides of first avenue yeah that helps because i need to know that

I think, Ian, one of the concerns the commissioners had is kind of apples to apples financial, and Baker Tilly's going to give some type of report to us. I think for our commissioners, we probably, normally Baker Tilly gives us kind of a, this is good for these reasons, and here's the handicaps that you might consider, and here's our thoughts on either proposal. Are we going to get that by next Tuesday, or is that something that's still in development?

It would not be by next Tuesday. We do have a call with Baker Tilly tomorrow to ask what the scope would be, the cost, and the timeline.

So I'd ask all the commissioners, please, to tell Ian what you expect in the financial report because I hate to have him prevent you something and you guys say, hey, that's not what I wanted. I want something different. So please, all of you, tell Ian what you want so we get the right stuff. Commissioner Pepkart. Well, Mr.

Chair, the one thing I would like to have is an outside expertise other than Baker Tilly. Look at this. Whatever, if there's a specialty group that looks at these agreements, because I believe we need somebody, because this is very complicated, and there's lots of agreements that are within the agreements, and you need to have somebody review all that. And go ahead. Are you considering legal or are you just talking financial? Everything, but mostly financial. Because, I mean, this is not just building the building. It's the long-term commitment with it that the city is making. So that's the first thing. We need to have an outside. The other thing that's happened in economic development, to review the horsepower of both groups to make sure they have the financial wherewithal, because we've run into that experience in the past where we've had groups And if something bad happens, we want to make sure they have the horsepower to back it up. Do you get what I'm saying? Yep. And just a couple other corrections, if you don't mind. So in number six, when it talks about the land cost for the downtown civic, it says no land acquisition cost. There is a land. We own that land where the civic is, the city does. And so we're not going to give that for free. Or if we are going to give it for free, that needs to be recorded. So that is a land acquisition cost because that's our land, correct? So I just want to correct that. Then the other one for the downtown civic proposal, they offered to buy the former police department for a million dollars. We're not selling that for a million dollars. We're going to RFP it. It's worth a lot more than that. I own property on the block next door. It's worth a lot more than a million dollars. And so I want us to, that might seem like an offer, but we reject that offer. If we do anything, we're going to RFP that along with the health building across the street. This is all down the road. But I'm just saying these are things that are in here that caught my eye, if that's okay. Thank you, Mr. Chair.

Anybody else?

Mr. Stratton.

Thank you. Thanks to all of you for being such amazing partners in the vision of Fargo's future. And I know you're all affecting each other's views and values and approaches. And I wish there was a way we could just merge you all into one and capitalize on everything you're each offering. Two basic questions about land. Brujala's land would be donated to the city, I understand, and Commissioner Pep Gordon alluded to this, and the downtown civic proposal would somehow or other gain ownership of the city land that it would be going to. Help me understand, both of you, understand what the value of the land is and how that would unfold.

So I think it's roughly five acres of land. It's probably valued somewhere around three to four million, and that would be donated to the city at no cost. That would become the city's property along with the city's building. I mean, no cost to that, but it's a straight donation.

Yeah, for our proposal, this land that the Civic Center sits on right now is owned by the city, and this property will be owned by the city as well. That is, I guess, why we have not put in a land cost is a part of our project because the convention center is owned by the city of Argo. I guess for us, we feel like that makes a lot of sense because it's already a current asset.

So, Mike, so I'm hearing you clearly. You won't need to purchase the land because in the end, the city will own it all? Correct. And you will be operating and managing and leasing and so on?

Yes. So the convention center... is owned by the city, the long-term ownership is the city, and it will be on your land. Great. The police station would be Zander Capital, will own the hotel and own the land, and has made an offer to purchase the land.

Great. My other question is, and I'll go on what you've provided as information, not my biases, but the Ruhala proposal, you directly allude to future developments in that area. And you suggest a performing arts center at some point. And you suggest a science museum. Could you help me understand that vision and how it could ever unfold to reality?

Sure. So that area is already developing as an arts and entertainment district. It sees an incredible amount of activity. going out there. So day one when the convention center would open, that area would already be fulfilling the amenities that guests would expect. But what's really exciting is the opportunities to expand on that district with both possible public and certainly private development that would happen out there. We're responding to the interest that the city has shown over the last probably 10 years about looking for a performing arts center. and finding a way to make that make sense. We see a lot of opportunity in the synergistic connection between a performing arts center and a convention center. There's activities in both of those buildings that could be reduced. For a performing arts center specifically, they would need to be programming in some meeting space, pre-function, some larger event space in there. that expands the cost of a building that already has a pretty expensive detail to it. If you pair that with a convention center, that aspect of the Performing Arts Center can be reduced to more economical, core functional building, and you pair that with a convention center that then can offer those services. Conversely, convention centers have a real demand for 2,000 seat, you could say like a keynote speaker area. That's very difficult to build that into convention center program alone. But if you have a performing arts center connected to that building, now that functions as something that's very attractive for national groups that are wanting to bring in large speaking events paired with the expo and banquet spaces that a convention center would have. So there's some synergy there that if that isn't a long-term goal of the city to do a performing arts center, it makes perfect sense to connect that to a convention center and then continue to develop the area around that. And we would be looking at another hotel for sure and along with other amenities, private development that would go along with that.

And Mark, you alluded also to a science museum. Is that something you'd like to explore?

We've been approached by the science museum and had conversations with them about their interest in multiple locations around town. And I think from their discussion, they see a lot of value in putting this into a district or in proximity to a convention center, as well as they're looking at sites in Moorhead and all over. They have a lot of opportunities. But the possibility of a science museum or similar type of facility just feeds to another type of amenity where we have the land available to add that that would just continue to add to the amenities that would already be present out there.

And if I might continue, Mayor, the same questions to the Allmendinger, Mike Allmendinger and the Civic Center downtown group. Is there a potential vision or possibility for performing arts centers? I don't think it's written in your proposals. And do you have any sense of a synergy with any science museum potentially in or near your location proposals? Yes.

For us, we're very excited about the catalytic activity that this convention center would create for downtown Fargo. We look around and see a lot of opportunities. or future development sites, I believe that there's six surface parking lots within two blocks of this location. That all would be great infill opportunities. We have met with the science museum. I know that the Mid-America Steel site is one of their locations that they're very interested in. I know that there has already been discussions about cleanup activity happening on that site. We'd be very excited, and I think that would be very complimentary to be within a block and a half from that location. For the Performing Arts Center, I think when we think about a project like that, the Civic Quad is probably the part of this project that we are very excited about because the southeast quadrant is still available for some sort of activity. I mean, it's needed for parking right now, but there's parking directly adjacent that's available as well, specifically to the south of First Avenue. That parking lot owned by the Bortnum family is, we've been in contact with them. They support this project. They want to be a partner in whatever capacity. But I just see a lot of opportunities on, how this will just be catalytic for the overall area.

Mr. Turnbull, any questions?

No, I've met with both parties and had great discussions, so I'm pretty well-versed. Thank you.

Mr. Kolpak.

Yep, thank you. First of all, thank you for your continued work on this. I know it's been a journey over 18 months and thank you again. We have several committee members here who gave their time as well. So appreciate everyone's input and expertise. And full disclosure, I have also met with both developers and got some initial questions answered. I have not yet read the full submissions that we just received. So just full disclosure, I will be doing that and fully understanding the information. Thank you again for responding to the call. One question I have is, is it fair to say to both developers that as presented, both proposals would require the TIF approval?

I can go first. So our project does not require the TIF.

But the $2 million would. I mean, using it would. I'm sorry, let me clarify that. The utilization of an existing TIF. Thank you.

Okay, so there's an existing riverfront TIF right now. Our project budget to provide the construction of the full program in the RFP, we are on budget without the use of any TIF.

Okay.

Our proposal, though, is to provide is to provide a reserve fund for whatever may go wrong during the stabilization period of the convention center. So it's really just a protection fund. I mean, it's a reserve fund that the city controls to provide as an emergency if something does go wrong during that period.

Thank you. Mark. Oh, you're done. Mark. Oh, sorry. Yes, Rich.

Can I add one other thought to that? Sure. I'll go back to one of the committee meetings, and Mayor, I don't want to put you on the spot, but I do think, if I remember correctly, you had mentioned that the Riverfront TIF, the dollars, and how they would be utilized had been discussed amongst the group for various functions, whether that was upgrading the Civic Center, HVAC, the plaza, et cetera. So I want to be clear that there's been discussions of using that. This is not just our idea.

Yep, that's fair. Okay, thank you. Thank you.

Our proposal is not dependent on a TIF district. We're just trying to identify a way for the city to manage the building moving forward through the capital reserve, creating a better capital reserve. The $250,000 a year that's coming out of the lodging tax right now or is being proposed to come out of the lodging tax, that in the course of 25 years is a little over $6 million. 25 years from now, $6 million doesn't do anything for the city to expand or remodel or maintain the convention center. So we floated the idea of the TIF district, proposed the idea of the TIF district as a way to generate greater funds for the city. But it also eliminates the need for the $250,000 to be removed or to be deducted from that lodging tax every year, which means the city can bond a bigger, more complete convention center. If for some reason the city decided not to do the TIF district, say it's not approved five months from now and we're still involved in the conversation, it just means we have to build a slightly smaller building because there's a little less bonding money available for the project. So our project is not at all dependent on the TIF district. In fact, our hotel is paying taxes right from day one in our proposal. If the TIF district was approved, those taxes would go into that TIF district and would automatically start funding the TIF district. But if not, they just go to normal city, county, school district, whatever.

I think it's also important to... We kind of put out a couple different scenarios of if the TIF district wasn't approved, how would we handle that? I think there's even an intermediate scenario that I want to bring up in there that... We would still be comfortable discussing covering the losses for the convention center with the bonding still holding the capital reserves in it. That would get you roughly $50 million?

Probably $53 or $54. We think $52 to $54 million.

So if the TIF district isn't approved, it doesn't drop our $58 million possible budget in that bonding to 45. It probably drops it to 52 to 54. And then if the other scenario is that if you don't want any TIF and you don't want us to cover the losses, then you're back at the original 45 that everyone else is working on.

Okay, thank you. And just another clarifying thing, because I've had this question publicly, just a reminder, we did commission, and I'm just speaking for myself, sat on the committee and heard all of the same information, all of the same things. I did not participate in any round of ranking because we were going to make the final decision, and I think as commission, I felt like There are other factors for the whole of the city that are part of that consideration. And so just full disclosure, I was not part of the final ranking. Several commissioners were not. I just want the public to understand that. And so I just want to clarify that. Can I, then maybe one, and I don't mean to put Susan on this spot here, but just looking at where we are, with, and again, I have not read the proposal, or Michael, or maybe Ian and Jim. Looking at the finances today as proposed, any feedback on sustainability from what we know now, or maybe that's a question when we do do the analysis, however that's gonna look.

Hello, everybody.

And again, maybe it's not a fair question. I truly am not. I just want to know where we are so far, knowing that the work's been done behind the scenes by staff.

Well, I do think there needs to be additional work done, and that's what Ian and I have talked about, meeting with a consultant. I would like to suggest Baker Tilly. They're an international company. They have many branches. We do use them for municipal advisory services. you know, for our bond preparation, but they have a whole other division that works on TIFs and P3s. That's who Ian and I have the call with tomorrow on some specific questions. But, you know, my biggest concern is, you know, future impacts to the general fund. That's my job as the finance director, is to look out into the future and say, what could be a potential draw that affects taxpayers. And I've got a front row seat to a very large facility and all the ongoing operational and capital costs. So my concerns are the bond proceeds. We've heard that from all four proposals that the 3% does not generate enough tax revenue to support a facility the size that the committee established that was pretty well addressed. So I guess, and the interest rate is volatile. It could be 5.5, it could be eight when you go to bond, or it could be three. So what are the alternatives? What are plan A and B and C? The other two items are, operating deficits so that that does not become a burden, and the ongoing repair and maintenance. That is why those two were built into the reductions from the bond proceeds so that we would have that available, you know, built in so that we're being conservative and under-building to make sure that we have those proceeds. I know they both say they don't rely heavily on TIFs, but to cover those issues that I have concerns with, That's where the TIF revenue would have to come in.

Can I ask you a question, Susan? You talked about Baker Tilly helping us, and obviously we're familiar with them. But are there other experts, like with the Fargo Dome, that are specialists in that area with all that goes into it? Or is Baker Tilly the primary one? I guess that's my question.

I'm not familiar with others. I'm sure there are. But that's the one that I'm familiar with.

But you understand my question, don't you? I believe we need to have somebody that's an expert in this area to assist us with this, because this is very complicated work. And it's a long-term obligation, and there's lots of facets to it. I guess that's my opinion. So I would encourage us to at least look into, obviously, Baker Tilly is a good option, but are there other specialists? Because there's many facets to it. I mean, we are not the... and include no offense to our staff but this isn't what they work on every day and although susan you did thank you but but you get what i'm saying that this is this is a very special and it isn't just building the building It's the long-term commitment that this is, because it's going to be an asset that is going to be for a long time. So that's what concerns me. And I'm sorry for making a question into a speech, but you get what I'm saying.

Yes. So I guess my question, maybe on behalf of Ian and I, is we are planning to talk to Baker Tilly. We can come back with responses, but what is the next step that you would like? And that was a question.

Just to be clear, we can't make a decision today on one proposal. If we were going forward, that would have to wait until at least Tuesday.

Mayor, while Susan's at the table, do you mind? A couple questions. In specific to the Brujala proposal to have a $2 million reserve fund, where would that sit? I'm sorry. I misspoke. The $2 million reserve fund, where would that sit? And would that go into our reserve? What kind of terms would be attached to something like that? You know, it wouldn't hurt our reserve fund overall for our Moody's rating, but I'm not sure this is a long-term anything.

Well, actually, while I was sitting there, I was emailing our bond counsel to make sure that we could use bond proceeds for that because it's very specific. But because it's a taxable bond, not a tax-exempt bond. There's a little more flexibility, so I think we could. So basically, we'll just set $2 million aside when we get the bond proceeds, and it would sit in a fund. Depending on how tight and restricted, we could count it towards our fund balance, but likely not, because it's only going to be able to be used for those particular things.

And sorry I misspoke about which of those. Another question I have, overall in the balcony, is as we keep going down this path of coming to a decision, is there any way possible? I believe I understand that the funds cannot start accumulating and being gathered and collected until we have an action in place. Is there any way we could visit that aspect of this decision and expedite the collection of funds so that we can fit our .

That's a legal question. That would be difficult because it's in our home rule charter of when we can start it. Say that again, please. That would be difficult to speed up because it's in our home rule charter.

So we can't, is what you're...

I think we'd have to make a decision on who to go forward with before we can start.

No, you just need to know when it starts. Once we've chosen either one, when can we start the tax?

It would start as soon as we're in agreement with either one. Either one.

So my point is the sooner that starts, the better to create the collection of the funds to work with so that there's less likelihood of a deficit or a struggle. But that's my, so we can't start it prior to a commitment.

We couldn't just snap our fingers and start it today, Commissioner.

Another question I have for administration, and maybe Susan, and I'm not certain who, but what would the city's value comparison considerations be between, in this proposal, the ownership ends and stays with the city, and in that proposal, the ownership ends and stays with the Brujala entity?

No, it stays with the city.

Your lands given to the city? The land and the convention centers given to the city? Yep.

So that's apples and apples then? Yep. At the end of the day, in both proposals, the convention center and the land under it is owned by the city.

Because there's people out there who think this is just a private enterprise trying to create their own future. So that's comparative. They would both go to the city.

One of the differences, though, is who's managing it. So the downtown one, they're hiring a private management company. The Buhala management structure is such that The Brujala Hotel and Convention Center ownership all manages the compound.

If I could just jump in there. With the downtown proposal, they're hiring a manager. With our proposal, the city is hiring a manager also. It just happens to be us that owns the hotel. And the advantage of that is our proposal is taking responsibility for any losses in the Convention Center. The way we can do that is by owning and operating the hotel right next to it. So I just want it to be stated clearly. One way or another, you're still hiring a manager to manage the convention center.

Mayor, I wouldn't mind hearing from Jim Gilmore his insights on TIFs. There's a lot of conversations about incentives and TIFs and comparatives. You know, and I'm not so certain that's the end of the world to be exploring TIFs or not. Help us understand how they look, work, and where they're existing now and what would be needed with either proposal, if you would please.

The North Dakota state law allows cities, it's really the urban renewal section of the law, and so what you're trying to do with the urban renewal law is try to redevelop areas that are blighted and need extra help. And so activities that you could use on a TIF on either side, if there's some public infrastructure that's needed, in this case we're talking about building a convention center, because wherever you put this convention center, there's likely to be other development around it, The downtown will be more around here. Property values may go out. If it's out at Longborough Hall, you have a stretch of First Avenue that has very low values amid generally the land. And so the TIF money generally, there's probably not many infrastructure needs. But in the case of the downtown, when we adopted that renewal plan five years ago, within that plan was to use several million dollars to somehow redevelop the Civic Center building. And so, I mean, we know that's needed. The plaza out here is really left undone, and so we need that. We may want to do more parking downtown. So those options are in there. Right now there's, I think, $585,000 in the fund. There's another half million in pending taxes that will be paid from these current tax years. and the assessor's projection is there'd be about a million dollars a year that would go into that fund just based on current development. If there's a hotel developed as part of this, and that's worth $10 million, that's probably another $140,000 a year you know, bump that TIF up. So, you know, there's a lot of things in the TIF plan that you can do. The City Commission really has not sat down and said, here's the most important things. That's something I think as the fund builds will be important to do. You know, the more money you would take out of that TIF fund and put it into the Convention Center, you know, for data that's clearly allowable under the TIF law, that means that there's more money left from the lodging tax Because lodging tax, as Susan was explaining, you're going to have to divide it up. How much do we put in the building and how much do we save for any kind of operational costs or future capital improvements? So TIF money going into either one really boosts your capacity to have a better, bigger building. In Brujala, you know, what the size of the TIF district. I mean, if you kept it really small and just did the hotel, you're looking at $280,000 a year, probably brings you another $3 million into that. If you just look at the development that they have options for or control, you could maybe triple that number, get another hotel, more restaurants in that area that could then be used to pay for the convention center. And you don't necessarily bond for more, but you probably would bond under the renewal bonds for more. I'll leave that to the finance people. So as far as going all the way out to University at 25th Street, there's a limit on these to 25 years. Well, once you start that clock, you may not have any development out there for 15 years, and you're just kind of in an area, it may be better to leave stuff out that's further away and use future incentives to deal with that because they may be needed for that. But my recommendation would be to have the TIF district include First Avenue as far as the Bollinger property and what was in their proposal. least start there um you know there's another you know option here and is the brujala tiff we uh brujala building is a tip we set that up to go a maximum of 10 years the building's been worth more than we estimated so that will probably end at maybe eight and a half years So that Brujala TIF could be extended, extend the time period, and use money there to also add to this to kind of boost the area. So in both cases, if you're trying to use urban renewal, capture money that you would not otherwise have. In the case of Brujala, if we don't have a convention center out there, there might be some commercial development, but it will not be at the scale that they've proposed. In downtown, we're going to get certainly more development too. and it may boost property values in the riverfront. Instead of getting $1 million a year, eventually that will likely go to $2 million a year towards the end of the 20 years.

Jim, if you might continue. I'm wondering, as we look into the future, it seems to be an ongoing conversation with other government subdivisions about the future of incentives and if they continue or change and what they will look like. Do you have any guidance or advice for us relative to the schools or county or state if there's a consideration of TIFs or Renaissance Zone implementation with either of these?

I mean, I'd probably defer to legal on this, but my view of, for instance, the downtown one is we have to consult with the county and the schools if we're going to do something that uses TIF money that's collected over a five-year period. Well, if it's $2 million and collected over a two-year period, are we in a position where we could not even bother to talk to the schools Some of that law was adopted after this TIF was already created. I talked to Mark about they've had some discussions with Fargo schools. They seem open to participating. Maybe that's the best way to put it.

We've had conversations with members of the county commission and with the school board and the superintendent. County's pretty clear about that their new policy is 50% for five years, and that's where they're gonna approach things, but with the county only being 16% of the overall property tax, that's not really detrimental. It doesn't really have much of an impact at all on the TIF fund generation. From what the discussions we've had with the school district is that their new policy, the way they look at this, and I would expect they would have a lot of discussion about it, but they're looking for community impact and making sure that TIFs are appropriate. They appropriately identified that this is not a developer incentive. This is not a handout or a tax abatement right off of any kind, that this is truly a community impact. And that would receive, I think, favorable consideration from them. them with the school district being the majority of the property tax base, that would be incredibly impactful. So it seems like we've had good conversations on all that, and it seems that we would expect a good conversation around that.

And my conclusion is no matter which one you pick up, a TIF district really doesn't help the developer much, but puts the convention center and the city's finances on a much firmer ground.

Are you done, John? Maybe. All these inquiries. Jim's available 24-7, so if you need to, you're a patient.

I believe this is why we're meeting today, Mayor.

Absolutely. You've had a lot of good questions. Any other discussions or discussions?

Ian, any other things? No, we would just thank both teams for their proposals and their lengthy due diligence answers in a week time. It's very much appreciated. It's very well done.

So I can't ask for a motion. We do no action. This is just a brown bag. So again, you guys had a little suspense here, but we'll continue this discussion. So thank you.

So just to clarify, this will not be on Tuesday's agenda. It will be, it will be in. And what will be the agenda item specifically on Tuesday?

Well, we'll have to save some of that discussion for Tuesday, but I think the agenda item would be, we would probably put on their direction from the city commission, whether they want to go forward with one or two for the next stage of the due diligence.

Will we have any Baker Tilly reports back by then, potentially? Probably not.

There would not be a report. Commissioner, there would not be a report, but we can give a briefing on our phone call on Friday. We found out in terms of timeline and cost, and I think the decision will be whether the City Commission wants to go forward with one proposal at that time or to continue down the road with two of them for the next stage.

So, John, that's a great question, because if we don't have an analysis, we may have to delay our decision for two weeks.