One hour, they talk about 7 items. $1M for a water utility pumping station that wasn’t budgeted, no problem, passes no discussion. $200,000 set aside in a fund to address issues of poverty and needs in our community, not so much, half hour of hand ringing, worry over process and ultimately delay. What are the council’s priorities? WTF? I gotta stop watching these meetings, its just too painful.
Pontoon Rentals at Law Park
Mike Verveer has a question about an alternative location that Sue Ellingson is interested in and if the parks commissioners think that is viable. Is this still the direction the park commission wants to go. Kevin Briski, the Parks Superintendent says that they had a lot of discussion and as they narrowed down the options, the option became Law Park. He hasn’t had a chance to look into the new idea, he wanted to accelerate the process at John Stausser’s request. Verveer asks if he thinks they should proceed, Briski says yes. Joe Clausius says that Ellingson’s proposal is not in order and shouldn’t be discussing it and he doesn’t support it.
EMERGING OPPORTUNITIES FUND FOR NON-PROFITS
Lisa Subeck makes an amendment, strikes 2013 and says there would be no allocation of funds and the city attorney would draft an emerging funds process with no year attached. Verveer seconds it. Subeck says that she thinks they need this fund, but they are taking one-time money and create something that will go into the future. This is an on-going fund and we should be creating a fund and a process that will function into the future. We should plan for it in future budgets. She thinks there is broad support for this fund but rushing decisions is a problem and she is worried about the long term viability of the fund.
Clausius supports Subeck’s amendment, they want to do this in 2014. Just because we have the money we don’t need to spend it at this time. We’re already half way through the year and don’t need to rush this.
Shiva Bidar-Sielaff is disappointed that a co-sponsor has added an amendment on the floor of the Board of Estimates without talking to the rest of the co-sponsors or gave them a heads up. She says that there was a lot of thought, 3 months of thought and delay, they had a thoughtful meeting with city staff and they arrived at a place where they were comfortable. It is a travesty to wait, we have many, many issues they are facing today, we have seen how we allocate funding throughout the year, we have 17 items on tonight’s agenda and to say we have to wait to allocate funding is not being truthful or realistic. We have one-time funding, we didn’t set up an annual process because it needs further discussion and we need to find an on-going source of funds. If we don’t get all the money out, but she is pretty sure that there will be some really good proposals to do some real, good work on issues that we constantly talk about but when it comes to allocating funds we shy away from it. There are 13 other alders and the mayor and he hopes that he will continue to support the version before us not the amendment.
Chris Schmidt says he is not concerned about using one-time money, we will set the process for the future and the dollar amount in the future. We discussed this at the council and decided that we needed an emerging issues fund and some alders set about to create it. He says the pool of money is all in one big ocean and the money we have in 2013 and we will have to look at 2014 separately, this and every other new initiative, he is not concerned about using one-time money in the middle of the year but obviously they will have to look at all of their priorities in 2014 when developing the budget and then look at if they can afford to continue this.
Larry Palm asks if the money is not spent this year, how does it roll over. Dave Schmiedicke, the Finance Director for the City, says it would go back into the General Fund. Palm asks if they can’t come up with a proposal that meets the need, $0 is spent and goes back in the pot, right? Schmiedicke says that yes they could do that, or they could take what they didn’t spend and add some and fund that next year. Palm asks about the word “fund”, a fund is usually a source of revenue that spins off money, the Affordable Housing Trust Fund is a fund that spins off money, is more of a program or project, does the finance department use that kind of language. Schmiedicke says that they are governed by standards, GAP accounting principles and there have been some changes recently where they can’t set up separate accounts, it all has to be in the general account unless we set up a separate fund. They used to have a number of separate accounts but for audit requirements they had to collapse all those into the general fund and they still keep track of it, but it isn’t a separate fund per se. Palm says for accounting purposes this is not really a fund? No. Do you have a better name? Program might be better.
Denise DeMarb says this puts a thoughtful process in place for the folks that recommend the spending and it is represented by a variety of people. She was told the committee was in place before and ran amuk and now we have the opportunity to put something in place that is better than it was and she thinks it is important that they are thoughtful in that approach. She says some people have not dealt with this before, she is just coming up to speed and she would like to fully vet and understand what they committee should look like and what they should see and hear, maybe it is more language than what is in here and maybe it isn’t. She is concerned the $200,000, its a pot of gold just sitting there and she just spent 4 days reviewing contracts because she sits on Early Childhood Care and Education Committee and Community Services Committee and she understands what they are being asked to do and what is not happening and as she was reviewing this and looking at how they spend money on kids and community gardens and the one thing that is missing is job creation, which is near and dear to her heart, she thinks that they can’t attack poverty without creating jobs. She thinks there is lots of opportunity to spend the money but she doesn’t think that it needs to be earmarked to begin the committee, she doesn’t think that the money in the future will have to come from somewhere, they already know that there is a deficit and she thinks there is no harm in going through the regular budget cycle.
Bidar-Sielaff says the committee didn’t run amuk, she was on there, the issue is that the committee was never set in ordinance and that has been pointed out that we need to create that. She says that in the two years she sat on the CDBG Committee, the feedback was that it was an excellent process, there was good communication and no overlap in how things were funded. The conference committee has worked well, it just needs to be officially created. It has not run amuk. She says that she cannot agree more that job creation is a top priority and nothing prevents this money from being spent on that. We spent another $83K a few months ago from the same one-time funding for this purpose. If we can do more of it great, but lets not just push this off til next year for political reasons. The Emerging Opportunities Fund is a take off on Emerging Issues Fund and its something that goes back from before she was an alder. She takes responsibility for taking money from it and doing something different with it but she thinks that we want to move rapidly to fund projects throughout the year and she thinks the last 6 or 7 years is her recollection of the timing on this. She will continue to be a strong supporter of continuing to spend money this year and now more alders will have a heads up on where this is going.
Demarb says this is not political for her, she is new to this. She doesn’t have all the answers and history and it is important for her to understand it. She wants it set up correctly and thoughtfully. She says it is not necessary to rush it and fund it at this point and time. The money is not going anywhere, if the money is not spent we can allocate it there right? Schmiedicke says yes. Some people might have an idea where this money should be spent, she has already said it should be for adult job creation, she is voting for the amendment because she wants more thoughtful creation.
Mayor Paul Soglin says that where this is a program and not a fund we should call it a program, not a fund. Second, when he signed on to this, and now he is getting a little confused, when he signed on to this he made it clear that his support was based on annual funding not a one-time source and he is committed to finding that funding in next year’s budget so that it will have a source of funding. He questions, from a practical standpoint how fast the funds could be allocated anyways, but if all this is set up and by the time the process is completed it will be Sept or Oct and if a competitive process it will be longer. He wants to go back to the central point that it is not good practice to take a one-time source to fund an on-going cost, there has been too much of that in the past and it has caused too many problems and we will encounter them in the 2014 budget. He would be more comfortable taking it out of the reserves than this one time source.
Palm asks about the timeline question. If we enter into a contract with a group in September and they don’t bill us until January, how do you do that. Schmiedicke says if there is a contract in place and the money is encumbered and a bill is presented in a few weeks then we probably would . . . Palm says “lets say longer” . . .we would keep it in place, reappropriate the money, we have to do that with the Community Services contracts sometimes, we had to appropriate money from the contingent reserve because the money was not spent and the Board of Estimates acted on that. Palm says this is complex and hard for him, he agrees there should be a pool of money to be allocated as issues or solutions arise, the mayor and Alder Subeck are right one-time money is not a good idea, but it all goes in the same pool. At the end of the day, it comes from the general dollar amounts we have in reserve, we can say it comes from this thing and that makes us happy spending it because it didn’t come from tax dollars but it comes from our pool. Its really a catch-22, he thinks we can’t put together a process that will happen in 2013, however if we start putting together a process then January 2014 we can get it started. The positive side is that things can start happening in January, job creation is a good one, weather is an impact and there may be some weather related issues we can’t to spend funds on.
Schmidt asks what the funds in the contingent reserve are? About $927,000 Schmiedicke says. Schmidt asks if there are potential uses for this? Schmiedicke says that they were looking at it for the Stagehands settlement but they appealed it so the timeline shifted beyond this year and the amount is indeterminate at the moment, it might be half a million but with the appeal it is hard to say. Schmidt asks about the snow removal budget, Schmiedicke says that at the moment and will historic level removal, they would be $250K over budget. Schmidt asks if the general fund, its all the same ocean but different screen boxes in the ocean, but how is our balance there overall? Schmeidicke says that he made a presentation a few weeks ago and when they closed the books in 2012 for unreserved funds is about $42.8M, which is about 16.9 of 2013 expenditures and the target is for 15%.
Verveer asks if Department of Revenue sales tax audit exposure this year and would that come from the contingent reserve. Schmiedicke says that it covers several years but that it will be paid for this year and they are awaiting a notice of assessment to find out how much we have to pay and that would come from the contingent reserve or the general fund balance. That would likely be a reduction in revenue. The total exposure is about $300 – 350K, most of it is related to the Overture Center and its treatment under the sales tax.
Schmidt says this is very frustrating to get one-time money, he says that sometimes we save it and sometimes we use it for a good idea, if we spend the money this year it will go to something we vet and say it is ok to go to, if we don’t spend it that’s ok. Either put it in the reserve because it might be stressed, we don’t know what snow will be like, 2 or 3 storms and we’re in trouble, he just doesn’t want a specific project before them, like youth employment, and now we are talking about adult employment, that is another thing we have to fund in the long term so this money wouldn’t go for that anyways.
Amendment passes, main motion as amended passes.
Booster Pumping Station 106 Reconstruction, amending the Capital Budget by $1,007,000.00.
Verveer asks why they were so far off and why it is critical we move forward with the project. A project engineer from Water Utility named Adam is thrown under the bus and asked to explain, perhaps in hopes of gaining a little mercy from the group. He says it is the oldest facility, it is undersized and it is non-redundant and it is a critical component in the system, it is one of the highest priority infrastructure projects. The estimate was 1.8 – 2M, upon bidding the project they got three bids within 90K of each other so they were around $2.3 and 2.4M and they are confident that the contractors grasped the scope of the bid and it is a fair price. The estimate was not representative of the prices we received, some prices like electrical and masonry were significantly higher due to shortages of labor in those trades. Some of the specialized equipment costs have risen 50 – 100% in the last few years for the mechanical HVR(?)C equipment. The site has unique challenges, power lines are overhead and the project is against a reservoir that will remain in place so the excavating costs were higher. We are looking at value engineering options, they are looking at undergrounding the power lines, eliminate masonry on the sides of the building and using textured or dyed concrete that would be on the back but masonry on the street face. Those challenges resulted in bids that were over. Verveer asks if Rob Phillips, the City Engineer says that the bids we received were close and that gives him comfort that they got competitive bids, but in terms of the value of the project he is comfortable with, where the money comes from is another issue. Verveer asks about the shortage in trades, next year won’t be better will it, is the project so critical we have to move forward. Adam says their fear with rebidding the project is that it will increase. Verveer asks about the fiscal note and taking the money from the east side well projects, are they being delayed or not ready for construction? Adam says that $800,000 is coming from 2013 projects, 100K is from unit well 15 filtration project, it is nearly complete and has excess funds. 500K is from unit well 8 improvement project that is no longer going forward due to ground water contamination in the Madison Kipp area and $200K will be transfered from unit well 7, the consulting fees came in lower on that project. The rest comes borrowing. Verveer asks if Board of Public Works approved this, Phillips says yes.132,000 for Sustainability Center
Verveer says the Rummel wants referral, Rummel says yes, that they need to talk among staff some more. They refer to the next BOE meeting.Gorman Project on Union Corners Site – No Personal Guarantee
Verveer asks Aaron Olver to answer questions, he says the memo was great, but it wasn’t in legistar and he asked that it be entered into legistar. Verveer asks why there is no personal guarantee. He says it was covered in the memo, but it will also be discussed much as the TIF committee goes forward, can you give us the argument on behalf of staff, even though staff might not be speaking with one voice, but why is it important to accept this with a corporate guarantee as opposed to a personal guarantee which has been an issue with this developer in the past. Olver says to frame it, there are three big picture issues with this development. The role of the UW health clinic, the staff felt that having that as an anchor was important for the site and they made it clear that Gorman was their choice of developer. There were some concerns that if Gorman goes away that UW Health goes away, and that level of concern varies among staff. The second issue is that there are multiple phases and the clinic is most visible and certain, the initial phase of housing is second most visible and the 3rd and 4th are conceptual and not anchor tenants and financing. The other issue is that the city has already sunk money into the deal, $3.3M on holding costs and land, spent money on infrastructure on the roads and this deal caps our exposure and risk at its current levels. There is no doubt that staff prefer personal guarantees because they are stronger. We were not successful in securing one – the reason they were not wanting to do that is that Gorman and Company is organized differently than other companies, they are a corporation that has assets instead of a strict pass through entity and more importantly, because of the phasing, they intend to create different entities and they might not have the same investors or even owners over time. So, the developer was reluctant to be personally on the hook for the entire guarantee in a situation where he might need to negotiate other arrangements for future phases. They would like one, feel more comfortable with it and giving up the personal guarantee is one of the weaknesses of the agreement. The reason we are comfortable in advancing this to you is that there is some complexity in the deal, there is a provision that requires the entities to have a net worth sufficient to back the guarantee, that was negotiated to make the corporate guarantee stronger. And, it caps the risk, we are locking in the anchor instead of letting the deal fall apart over the guarantee. The clinic alone will throw of $5.3M in increment, so that covers more than 85% of the guaranteed amount, so locking in the clinic is important and that makes the guarantee on the other 15% is not as troubling to him. Verveer asks if it is fair to say that this deal is not precedent setting in the area of personal guarantee. Olver says this is a unique situation. In this case we are not borrowing money, we purchased land and spent money, we have debt and no generator and that puts us in a weak position and locking in the generator means we get the generator without additional exposure.DeMarb asks about the adequate net worth, can we assume there was a review of financial statements and notes and the financial statements are audited. Olver says the deal is structured to require them to submit financial statement each year to verify they have not removed assets from the entities. DeMarb says that we all hear of companies that have many guarantees and when you add it all up, it is not what we intended it to be and she wants to make sure that there was due diligence since the guarantee was not as strong. Olver says page 5, section e number 4 is where some of the language is. He says it is important to point out some of the due diligence is yet to come, if approved they will be required to submit documents to show the $6M gap, assuming that is satisfied then the city would draft a purchase and sale agreement based on the letter of intent. DeMarb says that they should ask for the notes as well.
Clausius asks about the phases. UW has the first phase, in the 3rd adn 4th, what type of gap or timeline before the rest of this happens. Phase one is mid next year. Olver says that the clinic is being planned now, they are working actively on the housing and talking to tenants for 3rd and 4th phase. It could be all fairly rapid. The development agreement assumes it will happen in 5 years and if the developer is unable to do that, there is a reversionary clause to allow the city to buy the undeveloped property back. Also by conveying it all in one chunk we are creating incentive to develop by passing on the holding costs in terms of property taxes. Clausius says we are looking at at least 2 years.
Subeck asks about annual financial statements, what happens if they fail to meet the net worth requirement. What if the value of the assets drops, what happens? Olver tosses the ball to Anne Zellhofer from the City Attorney’s Office, she says that we would seek remedies in the agreement. The first would be to send out a default agreement and allow them to cure it, they could satisfy that with a cash backstop otherwise we could foreclose.
Adopted on voice vote unanimously.
James Doyle Square
No discussion, there was a speaker, Adam Plotkin chair of the committee, he explains background, says 2 of the 4 groups responding to the RFQ were invited to respond to an RFP. They have consensus on the goals of the development, the biggest issue is use of the Municipal Building. He says that the council was clear that they keep this for city offices unless there is an exceptional project. Some committee members question this, but they are leaving this issue up to the common council.No questions. Mayor thanks him an the committee.
Verveer thanks Adam and George Austin for their work.
Motion passes on a voice vote.
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