Commission Approves Promissory Note with Josephson's

IRONWOOD, MI - Monday, February 8, 2010 - The Ironwood City Commission held it's regularly scheduled meeting on Monday, February 8, 2010, at 5:30 PM in the Commission Chambers on the second floor of the Ironwood Memorial Building.

Items on the Agenda for Monday night's meeting were as follows:

ROUTINE BUSINESS

A. Regular Meeting Called to Order - The meeting was called to order at 5:30 by Mayor Bob Burchell. Burchell then recited the City's Official Opening Prayer, followed by the Pledge of Allegiance.

B. Recording of the Roll - City Clerk Karen Gullan recorded the roll. All Commissioners - Kim Corcoran; Gemma Lamb; Bob Burchell; William Lucius; and Rick Semo -- were present. Also attending the meeting were City Manager Scott Erickson; City Attorney A. Dennis Cossi; City Clerk Karen Gullan, IPSD Director Bob Erspamer; City Assessor/Building Inspector Dennis Hewitt; Utilities Director Bob Tervonen; Financial Director Julie Frederickson; DPW Working Foreman Joe Madgziak; and City Employee Chuck Thomas. Representing the press were: Ralph Ansami, Daily Globe; Arvo Toolanen and Lou Bonagura, IronwoodInfo.com; and yours truly.

C. Approval of the Consent Agenda.* - The Consent Agenda was unanimously approved as presented after City Commissioner asked a few questions regarding the Parks and Recreation Committee discussion of a possible new pavilion at Norrie Park.

Items on the Consent Agenda included: *1) Approval of Minutes – January 25th Regular City Commission Meeting. *2) Review and Place on File: a) Park and Recreation Committee Meeting Minutes of January 4th.

Corcoran asked for an explanation as to the need of a new pavilion at the park. Parks and Recreation Committee (IPRC) Chairman Sam Davey was in the audience and he told Ms. Corcoran that the Kiwanis Club has simply expressed an interest in developing a new facility at the park. He explained that the idea is in its very early stages and no discussion or studies on the feasibility or need for the pavilion have taken place. Davey said the pavilion is a project that might not happen for five or ten years, if at all.

Corcoran said if there isn't a need for the Park, efforts of the IPRC should be concentrated on things that need to be done or things that people express a need for.

D. Approval of the Agenda - The Agenda was unanimously approved as presented to the City Commission, without any additions, changes or subtractions.

E. Citizens wishing to address the Commission on Items on the Agenda. (Three Minute Limit) - Mayor Bob Burchell gave those in attendance an opportunity to address the Commission on Items on the Agenda.

This reporter asked to speak on Item "F." Lou Bonagura also expressed an interest in speaking on that issue.

OLD BUSINESS

F. Consider approval of promissory note with Josephson’s Nursing Home for the repayment of the Revolving Loan Fund - This reporter asked the Commission and City Staff how it was possible to "lend out" $100,000 to a borrower without getting a signed loan agreement or promissory note. I told the Commission that something like this should never happen considering the funds used are public funds.

Lou Bonagura reminded the Commission that the money that went to Josephson's was lent to them with the understanding that 40 new jobs would be created in the Ironwood Area. He went on to ask why the City should even consider accepting a promissory note if Josephson's will not be expanding. Without the expansion, he reasoned, there will be no new jobs created.

"If I loaned you twenty-thousand dollars to buy a car," Bonagura went on to say,"Two years from now if you still haven't bought the car, well you damned well ought to have the twenty-thousand dollars to return that or the car!"

City Attorney Dennis Cossi told the Commission that he didn't have an answer to my question. He explained that the former Community Development Director was not only on the Ironwood Economic Development Authority (IEDC), the originators of the loan, but he was also seated on the Brownfield Development Authority, the organization that ultimately handed over the check to Josephson's for their project. Cossi said that it was his understanding that the $100,000 was spent on architect fees, site plans, and the like.

Cossi told the Commission that he didn't investigate why or how the money was given to the developers without some instrument showing their debt to the City. He said he was more concerned with getting the money back for the City. He said the promissory note would essentially give the City the same leverage and repayment plan that the EDC loan agreement would have provided. He said that the Brownfield Authority technically owes the money to the City, but they have no funds and it would be nearly impossible to collect the money from them.

Cossi informed the Commission that he has a signed note from the Josephson's investors and that the note is active upon their approval. He said if they opt not to accept the note, then the City could go to court to try to recoup the money. He explained that the City is the second mortgage holder of the Josephson's property, and that the bank holding the first mortgage would be given any financial gain achieved. He also stated that the net effect of pushing for the money in the courts could result in putting the nursing home out of business so that -- instead of them creating new jobs -- the City might cause the opposite to happen -- loss of existing jobs at the facility.

"It's not a good situation," Cossi said, "But I really thing a promissory note is the best solution in a bad situation."

The terms of the note are $100,000 for ten years at 5% interest with payments of $1,060.66/month, beginning this month. A second mortgage on the Josephson's property secures the note.

The Commission voted unanimously to approve the promissory note, and the second mortgage for security of the note, for the repayment of the Revolving Loan Funds by Josephson's to the City of Ironwood.

NEW BUSINESS

G. Discuss and Consider approving donation of property located at 302 Norfolk Street (Old Gertz warehouse) to be demolished with NPP funds - According to City Manager Scott Erickson, City Assessor/Building Inspector Dennis Hewitt has been working with the property owner in question. The building is located behind the former Paulson Tire Company building. It's a green storage building and the roof has recently collapsed.

Dennis Hewitt told the Commission that he has been in contact with the owner of the property for some time. He said she initially wanted to donate the property to the City and have them raze the building, but there was a party interested in purchasing it a while back. Fortunately for the City, Hewitt said, the sale fell through, and the owner once again has offered to donate the property to Ironwood.

According to Hewitt, the City can use Neighborhood Stabilization Program (NSP) grant money to fund the razing of the building. He explained that the funds were originally designated for residential properties, but when he explained that the property was in such close proximity to a residential area, the granters approved the funds to be used for razing the structure.

The City Commission unanimously approved the donation of the land and building at 302 Norfolk Street.

H. Discuss and Consider awarding lowest bid to Jack Doheny Supplies for an “XPress” portable camera system in the amount of $8,950 for the sewer department - City Utilities Director Bob Tervonen explained to the Commission how the sewer "XPress" camera system worked. He explained that the device is fed through a sewer line that is similar to a sewer snake. He said the unit is self-leveling so it aways displays the images of the pipe in the same relative up and down position as the pipe is actually sitting. He explained that the first camera system the City bought paid for itself after its second use due to the savings in demolition and repair of City streets trying to locate pipe problems. Tervonen said he believes the City has already budgeted between $8,000 and $10,000 for the purchase of a new camera system.

After a very brief discussion, the City Commission unanimously voted a approve awarding the lowest bid to Jack Doheny Supplies for the purchase of the "XPress portable camera system.

I. Manager’s Report - City Manager Scott Erickson presented his Manager's Report to the Commission. The follow items were included in that report:

Goal Prioritization Workshop - Last week the City Commission goal setting workshop took place. He said there will be a follow-up workshop in the very near future (one or two weeks) to prioritize the goals and further tweak them based on how difficult they are to achieve. He said "action" items could be given more priority because they could be easily and quickly be implemented.
Neighborhood Stabilization Program (NSP) - Seven properties have been reviewed and approved by the Michigan State Housing Development Authority (MSHDA) for demolition. Four more properties were sent out today for bids on demolition. Erickson said that properties held by local citizens that are in poor "condemnable" condition can be brought to safe condition using the funds, however, public hearings and the like would need to take place.
Search for Community Development Director - There have been 43 applicants for the position of Community Development Director. The applications will be reviewed this week and next week interviews will be scheduled. The goal is to have a new Director within a month or two.
Special DIDA Meeting - A special DIDA Meeting has been scheduled for Wednesday, February 17, 2010, at 9:00 AM. Cathy Cole is Ironwood's contact with the Michigan Economic Development Corporation (MEDC), and she will be at the meeting to discuss the Downtown Blueprint and the pre-application of the Community Development Block Grant for Downtown Projects. The MEDC is now in charge of funding for the Blueprint Plan. According to Erickson, many of the projects initially believed to be fund-able will not be and Ms. Cole will go over the pre-application at the meeting. The meeting is open to the public so all interested parties are welcome to attend.
Water and Sewer Project Update - The three-phase Jessieville/Norrie Water and Sewer Project is moving forward. Phase I information has been submitted to the local Rural Development coordinator. City Attorney Dennis Cossi has worked hard on developing the Right-of-Way map that is required. All of the needed paperwork was submitted and it will be forwarded to the Chicago regional office for further review. If the Chicago office approves the paperwork then they will give the "go ahead" to begin the project. According to Erickson, Phase II will follow shortly because the paperwork for Phase I has been submitted. The design for Phase II is nearly completed. Bob Tervonen has been working closely with Coleman Engineering on the project. The Michigan Department of Environmental Quality (MDEQ) and other agencies will have to inspect the plans and give them their approval. Phase III is in the pipeline for funding approval, Erickson said. That project will more than likely begin in 2011, provided the funding is approved. Phase III covers an area north of US-2 and west of the K-Mart Plaza, and south of US-2 and west of Luxmore Street.
Lake Street Project - A grant was applied for and received, in the amount of $100,000, through Stimulus Funding, for a 2011 project on Lake Street. The initial project was scheduled to be done in 2010, however, in order to achieve the City's goal to replace the 6" water transmission main between US-2 (Cloverland Drive) and Margaret Street, it was pushed to 2011. Part of the Phase III application included funding to replace that line. Fixing the line and redoing the street will be possible by delaying the project.
ICE Grant - The City is looking at applying for a CDBG grant that will help to pay for the replacement of transmission line north of Jackson Road in the near future. More information will be released in a month or so as the application is ready to be submitted.
Hemlock Street Project - Hemlock Street from Norrie Street to US-2 is another project in the works. The Michigan Department of Transportation (MDOT) has given the City funding approval for Phase I of the project. Erickson explained that the project will be done in two phases because it is such a long road. Phase I will include an area from Norrie Street to Arch Street. Phase II will be from Arch Street to US-2. The project is slated for 2011. The grant totals $375,000, with a City match of just over $100,000.
Practice Burns on Abandoned Houses - A practice burn at 459 East Pine Street was delayed due to asbestos issues. The burn will be rescheduled in the spring, according to IPSD Director Bob Erspamer. Practice burns help firefighters train for real fire emergencies. They are also a way to rid the City of unwanted structures at a reduced cost. Erickson told the Commission if the practice burn goes well, the City will schedule more in the future.

J. Other Matters (Five Minute Limit) - City Commission members were given an opportunity to address those in attendance on any matter of their choosing. Commissioner Lucius said he would like to add an item to the next meeting's agenda. He asked to add an item to discuss having a youth liaison report to the Commission once per month on the needs, wants, interests, etc. of young people in Ironwood and how the City can be more of a service to them.

K. Citizens wishing to address the Commission on Items not on the Agenda (Five Minute Limit) - Mayor Bob Burchell gave citizens the opportunity to address the Commission on "non-Agenda" items.

Don Maki addressed the Commission stating that he had three issues and that his only motive for presenting them was to either reduce City spending or to reduce his property taxes.

(1) He explained that more City equipment was used for the SISU race than originally promised. He said, even though City Manager Scott Erickson promised the only piece of equipment to be used for the SISU SkiFest, five pieces of equipment were used -- along with public safety equipment. He explained that, in his job, he does estimating for use of similar equipment. He said if four hours of equipment use were needed for the SISU, the cost would be over $2,000.

He said the City Manager promised the event would not cost the City anything. At the last meeting of the City Commission, Maki said, the total cost was claimed to be $400 to $600. He said that Scott Erickson lied at the last City Commission meeting and he believed that a letter of reprimand should be placed in his file and if the City Commission finds out that he went over the amount he is authorized to spend, then further disciplinary action needs to be taken.

(2) Maki explained that the City Manager was hired to be the City Manager and the City Engineer. Maki indicated that Erickson hasn't done the engineering he was hired to do. He asked the Commission to do a job performance review and adjust Erickson's salary accordingly with the savings to be used to offset some of the outsourced engineering services the City has paid for.

(3) Maki explained that he couldn't make the goal-setting workshop because he didn't read about it until after it happened due to the fact that he gets his paper in the mail (a day late). He said he would like to see the City explore the feasibility of relocating the Carnegie Library into the Memorial Building and either selling or razing the existing Library building.

Mayor Burchell responded to Maki's comments on the SISU. The City Commission authorized the City Manager to participate in the event. He said the snowblower sheared a pin during the clean-up and additional City equipment needed to be used in order to clean up the snow in a timely manner. He explained that the snowblower had to be thawed out in order to replace the pin, and removing the snow from the street was a priority in order not to further disrupt business for the Downtown businesses. He said a decision was made to bring in more equipment and volunteers worked hard to clear the street as well. He told the Commission that next year things will probably change and that even more volunteers will be put in place to assist in the race. Burchell said he was involved in the process, and instead of four hours of use, City equipment was used for more like two and a half hours.

Burchell went on to say that the Commission will seriously discuss Maki's other concerns regarding the City Manager and the Library.

This reporter explained to the Commission that the IEDC has a very good track record on repayment of their loans and that it will be a sad day for the City of Ironwood when the State regionalizes the Economic Development Revolving Loan Program.

I asked Scott Erickson if he feels there may be problems in the future obtaining funding trough the State and through MSHDA due to the fact that both are experiencing financial difficulties. Erickson said he sees problems in the future regarding funding.

Finally, I asked the City Manager if any of the applications for the Community Development Director were from local applicants. Erickson explained that he has not yet reviewed the applications.

L. Adjournment - Following the Citizens' addresses, the Commission unanimously voted to adjourn the meeting.