DRAFT – These minutes are not official until approved at the next regular City Council meeting.

City of Bigfork

Special Meeting January 25, 2005

Members Present: Mayor Amy Tendrup, Jean Lexvold, Bob Zimmer, Amy Pifher and Richard Salmi Absent: none Also Present: Mark & Connie Maki, Julie Kennedy, Andy Shaw, Marilyn & Gus David, Jef Fisher, Jon Babcock, Joyce Holsman, Chet Cook, Lonnie Kacon, Marilyn Salmi, Robin Custer, Mike Bakke, and John McCann.

Liquor Store Petition: City Attorney Andy Shaw stated that he and City Clerk Angie Storlie had reviewed the accounts for the past three years. This review confirmed that there were losses in the liquor fund two out of the last three years and that the public hearing that was held in December was necessary. At the regular Council meeting held on January 11th, the Council received a petition calling for a special election on the question of whether or not the City should continue to operate the municipal liquor store. Shaw stated that the petition was valid and must be acted upon. He did not feel it was reasonable to wait until the next general election to present this question to the voters, therefore, a special election must be held. Shaw stated that he and Storlie had begun looking into the process for holding a special election because the City of Bigfork does not normally run elections. They are done by mail through Itasca County. Shaw informed the Council that elections are a complex and expensive undertaking. He advised that the Council authorize him to contact the County Auditor and ask for assistance in running the election. If the Auditor’s office is not willing to help, Shaw recommended hiring a consultant to come in and run the election to make sure that all statutory requirements are met.

Gus David asked if the question could wait to be voted on until the general election if it was agreed by the people that the cost of holding a special election was too high. Lonnie Kacon asked Dick Salmi if he was aware of these high costs when he started the petition circulating. Salmi stated that he was more aware of the situation where the City lost so much money on the liquor store. Shaw inserted that regardless of who was aware of what, the petition had been filed and must be complied with.

Gus David asked Shaw if the petition could be considered invalid if those who signed it were given inaccurate information and believed it was a petition to not have the liquor store. Shaw stated that people could have signed the petition for whatever reason they wanted. It is still a valid petition.

The Council authorized Shaw to contact the County Auditor and bring an answer back at the February 8, 2005 regular council meeting.

John McCann asked how it was determined to have a special election and if the people were able to say if they wanted one or not. Shaw answered that the statue calls for an election if a petition is received.

Zimmer asked about rules and regulations for getting rid of the building and inventory if it is voted closed. Shaw answered that if the vote is affirmative to close the business, the Council will need to set a date that the store will close by. They would then go through the process of closing a business, including terminating employees, and selling off fixtures and inventory. They would then be left with the empty building which could be sold, leased, or used for some other city purpose.

Lonnie Kacon asked Salmi where he got the figure of $400,000 that he referred to at the last council meeting. Salmi answered that it was a ballpark figure of what could be made by selling the business and from the taxes on the property. Kacon asked how he estimated that the City could get that much when the building next door had just sold for only a quarter of that amount. Salmi stated that $400,000 was only his personal estimate and that the building next door did not have a liquor license. Shaw interjected that the liquor license would not be part of the sale. The party buying the building would need to apply for the license after the fact. Zimmer didn’t think that the City could charge a large amount for a liquor license. Storlie stated that the City’s current charge for a liquor license is only $25.00. Shaw stated that these questions would certainly be discussed at length after the election if it was in fact voted closed. He advised everyone present that it was to their advantage to become familiar with the situation and fully informed of the facts involved.

Gus David asked if Salmi was aware that there are a number of buildings in town for sale that have been for sale for many years. Salmi said he was aware but that it was the only liquor store in town and that if you could get a business and get it back into a gross of $600,000, you could really make money. David said he didn’t know where Salmi got the figure of $600,000. He asked Salmi if he was aware that the pull tabs generated $18,000 that goes back into the community. Salmi stated that all he was aware of was the losses that we’ve had and that we seem to continue having losses off and on. David stated it was only the last couple of years that there were losses. Salmi said it was more than that and Kacon said there has only been losses in two years as far back as the records show. Shaw stated that it was a poor time to discuss these issues. Mayor Tendrup stated that Shaw will proceed as directed by the Council and then moved on to the next agenda item.

Short-Term Loan: Julie Kennedy of Short-Elliot-Hendrickson was present with quotes on the short-term need projects. The City has been discussing taking out a short-term loan in order to complete these projects. These projects include repair of the Powell lift station at a cost of $6,095, Inflow & Infiltration repair at a cost of $36,685, safety equipment for the public works department at a cost of $5,333.11, the city house sanitary sewer system at a cost of $61,710.50, Third Street utility extension at a cost of $54,525.93, and project financing at a cost of $9,500, for a total cost of $173,849.54. The Powell lift station is a very immediate need and a new pump has already been ordered for this repair. The I&I repair is also extremely important because the Minnesota Pollution Control Agency (MPCA) will not allow the City any new connections to the sanitary sewer system until progress has been made in this area. The public works equipment is necessary in order to allow the PW Dept. to do more in-house, as opposed to calling in other agencies to do it. Another portion of this is a meter that MPCA has suggested we obtain. The City house sanitary sewer is a very rough estimate on cost. The reason is that there are four different alternatives to how this system could work. The current line that runs to the Lutheran Church parsonage runs on private property and Kennedy’s first suggestion was that the City obtain easements for this line. The next item would be to get a survey of exactly where the line is so that we can plan for the extension of it. Kennedy pointed out that this is not an immediate need. The Council had expressed the desire to sell the City house with a complaint system, however it could be sold “as-is” as well. The Council will need to decide if this item will be included in the short-term projects. The Third Street extension is necessary in order to provide water and sewer to certain parcels along Third Street that have already been assessed for it, but do not yet have service. As with the City house sewer, this item is not an immediate need, however the City will have to bear the cost of this project. The project financing costs include the costs of surveys and applications that must be completed. These things are required in order to apply for the grants for the long-term projects.

Shaw asked how the City would pay for the short-term projects. Kennedy explained that the extension of sewer service to the City house would be an assessable project. The rest of the projects will be paid for with proceeds from a short-term loan which will be rolled into long-term financing when permanent financing for the long-term projects is secured. Kennedy reviewed that we had budged $6,000 of annual debt service for these types of projects. Amortized over 30 years at a four percent interest rate, this amounts to a loan amount of $107,902. Some of the options are to wait on either the Third Street project or the city house sewer project. It was Kennedy’s recommendation to put the Third Street project on hold for now. The city house project is a higher priority because it serves a purpose other than upgrading that home’s system. It also will upgrade the current non-compliant sewer system at the Rajala house, which is necessary in order for the City to begin using Well #4 which is located nearby.

Kennedy clarified that the action she is seeking at this time is by no means an approval of a loan or project. It is approval of the easement and survey work and cost estimates so that she can come back and give the Council their options.

Salmi asked if the City’s current debt could be rolled into the new long-term funding. Kennedy stated that it would depend on what it was for. Salmi stated that many people are concerned with the amount of debt that the City already has and about their water rates. He stated that we are paying much more than other communities for water and sewer. Kennedy has compared our rates to Grand Rapids, Deer River, Cohasset, LaPrairie, and Coleraine and we are in line with or under the rates of those cities. Also, Rural Development requires that your water and sewer rates be 1.7% of your income in order to qualify for any of their grants and we are not yet charging at that level.

Salmi stated that the philosophy in the past was that any short-term needs were taken care of with loans from the bank and any long term projects were paid for with grants. Kennedy and Shaw stated that it is no longer possible to get 100% of your needs met with grant money, as it was in the past. Kennedy declared that she would follow any lead on grant monies available.

David asked Kennedy what the likelihood of getting a grant would be if the City had $400,000 sitting in the bank from the sale of the liquor store. Salmi stated that the hospital had over a million dollars in the bank and they still got grants from IRR and from Blandin Foundation. He felt if the City had that money in the bank, they could borrow against it. Tendrup stated that she understood that having that money would make us ineligible for grant money and Kennedy clarified that it is a percentage ratio.

Salmi stated he would like to let the people take a look at this before any decisions are made. He further stated that these projects should be covered with grant money. Kennedy stated that these items are immediate, and even emergency, needs. Salmi asked where the money would come from to pay for this and stated that the people are already taxed to the hilt. Kennedy restated that the money for the short-term loan payments has already been budgeted for in the most recent water and sewer increase.

Salmi reiterated that he would like to let the people take a look at this to make sure this is what they wanted to do. Shaw asked him to clarify that statement and Salmi said he wanted to let the taxpayers decide. Shaw stated that the taxpayers elected the Council to make these decisions. Salmi said he understood that but that the Council had to listen to the taxpayers. Shaw stated that he is certain they do listen and solicit responses from the community. Salmi wanted to table it until the next meeting. Kennedy clarified that the action she was asking for tonight was simply to start the process of applying for the short-term loans. This process takes two months so it should be started soon. Salmi asked if the $9,500 quoted as project financing was for this process. Kennedy explained that that amount referred to the data acquisition that is required for the grant writing. To begin the process of applying for the short-term loans will cost less than $300.

Shaw asked Kennedy if these six projects are necessary for the reasonable maintenance of the system. Kennedy stated that they are, with the exception of the Third Street extension. Shaw asked if that was an assessable project. Kennedy stated that it was not since the property owners had already been assessed for the service, but did not yet have it. Shaw stated that the question is not whether or not we need to do these projects, because we do have to do it, it’s how we are going to pay for them. Shaw stated that Salmi wants to wait until someone gives us grant money to do these. Salmi said, yes, for the major projects. He also said it was important to keep the business local and go with our local bank for loans. Kennedy stated that we did do a loan through the local bank this year and we will do it again if the interest rate from there is more favorable than from our other sources. Salmi felt that even if the interest rate was a percent higher, we should go through them and support the local community. David stated that Salmi was contradicting himself by being willing to pay more for a short-term loan just to keep it local and by not wanting to get rid of the liquor store even though it made money. Shaw stopped the conversation at this point and suggested that we not go down that road. He asked what happens if the City does short-term financing and then does not qualify for any long-term. Kennedy stated that the short-term would then roll into the original amortized amount.

Shaw summarized that the real question here is if the City is willing to go into debt to do these projects, knowing that if long-term grant funds are not secured, they will have to bond for it. Salmi asked if the long-term funding was not secured, then does the short term funding become no longer a grant. Kennedy explained that the short-term is never a grant and that even on the long-term projects, there will be some local contribution required through bonding. She stated that a 60-40 split is the best you can hope for on grants these days. Shaw stated it was not a responsible thing for the Council to condition the provision of necessary government services on the hope that they will get a grant. You have to tax and bond for it and if you can get some grant money to defray it, that’s great. Salmi stated that is why it is so important that people have a chance to take a look at this and give input before the Council acts. Storlie and Tendrup stated that there has been ample opportunity for people to become informed and offer input. These items have been discussed for the last two years, and religiously for the last year. Tendrup stated that none of this is being gone into without a lot of thought and research. Shaw added that it is all discussed at public meetings and the minutes are published in the paper for people to read.

A motion was made by Zimmer and seconded by Lexvold to allow Julie to start the process of applying for the short-term loan and to have Salmi research grants, Motion Carried Unanimously (MCU).

2005 Lifeguard/Swim Instructor: Storlie reported that she had talked with Shannon Gilbert to see if she is interested in life guarding again this summer. She is interested but wanted to let the Council know up front that there would be two weeks during the summer during which she would be unavailable. Also, she would rather not teach lessons as she feels there should be a lifeguard on duty during the lessons. It was determined that the City should offer Gilbert one part-time life guarding position and advertise for another part-time lifeguard and swim instructor. Zimmer commented that some changes would be made to the work hour schedule this year and asked that Storlie make Gilbert aware of this fact. If Gilbert is not agreeable to schedule changes, then the City will advertise for both positions.

The Council received an application for connection to the water/sewer system from Erin Johnson for the existing connection at 202 Ash Street. Motion by Zimmer, seconded by Salmi to approve the connection, MCU.

Liquor Store Manager Joyce Holsman requested that the repainting of the Picaroon Saloon sign be put on hold until after the special election. The Council was in agreement of this.

There being no further business, Mayor Tendrup adjourned the meeting at 7:52 p.m.

Angie Storlie City Clerk

These minutes are available on the City website at www.cityofbigfork.com. To sign up to receive the minutes by email, send your email address to ctyclerk@bigfork.net.