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HomeMy WebLinkAbout2001-10-16 Business and Economic Development Committee Minutes Business and Economic Development Committee • October 16, 2001 Minutes � Councilor Attendance: Baldacci, Palmer, Vardamis, Tremble Staff Attendance: Barrett, Heitmann, Martzial, Farrar, Hupp, Olson, Bates Others: Bob Kelly, Clendenning 1 Subordination Agreement— Hammond Street Courtyard Proiect Bangor Savings Bank will lend an additional $200,000 to complete the remaining two floors for residential purposes. The project has tenants for this space. The new appraisal will be $1.8 million once completed. Bangor Savings has a first mortgage securing $1 million. The additional loan of $200,000 would be secured by a 2na mortgaqe, and the City's Community Development loan of $150,000, now secured by a 2" mortgage, will be secured by a 3rd mortgage. A motion was made and seconded to approve stafF's recommendation. Baldacci did not vote on the item due to a conflict of interest. � 2 Ground Round Parking Lot Lease — Agreement and Assent of Landlord Heitmann indicated that Dorks`R Us is doing a refinancing through a new lender and would like to have the City's consent. The agreement is simply a transfer and, if there is a mortgage default, the lender would assume the lease. Committee unanimously approved staff's recommendation. 3 Community Develo�pment Rehabilitation Loan — 91 Fourth Street — 2 Unit Martzial updated the committee on this item. The City purchased and rehabed this property under the New Neighbors Program. It is a owner occupied, two unit building. The owner has recently contacted the City regarding a floor rot problem in one of the bathrooms and asked to borrow funds to repair. Martzial said that when the City makes the loan the amount will be approximately $2,500 over the appraised value of the property, which is not a routine occurrence but has infrequently taken place in the past. Since the City has previously invested $19,000 in the property and most likely would have initially fixed the floor problem, if known at the time, Martzial recommended approval of the additional loan. The additional loan will be $4,100 for the repair. Martzial is concerned that when the galvanized plumbing is replaced there may be some additional work required in the street main. The total maximum loan amount will be $6,350 to allow for such a contingency. The � Committee unanimously recommended staff's recommendation. � 4. Airport Update a. Passenger Statistics for September Hupp reviewed the passenger statistics for September 2001. Traffic is down by 16.5%. She cautioned that the initial cushion with the first ten days of September will reflect in the October statistics. All passenger service numbers are down with the exception of Delta, which is up 28% over the last year; year- to-date is down 3%. Delta is very pleased with its service at BIA. The service to Cincinnati is completely full. American Eagle will be doing a significant reduction to their number of flights in the northeast. It could present opportunities for Delta Connection. PanAm is continuing to do fairly well and may be looking at ways to expand their presence in Bangor. They are approving runs for the Boston Maine Airways, and the routes have not yet been determined. PanAm's intent is to do an intrastate contract with the State of Maryland to serve various different regions in that state. Another plan for their jet stream operation is to link it with their Orlando service. Six of Bangor's top ten destinations are in Florida. Barrett said he is pleased that the reduction in passenger statistics is as small as it is given September 11t". It does seem that every time BIA turns the corner, something happens; i.e. ComAir strike, September 11th. Hupp said she • has heard rumors that American might be upgrading their service to compete with Delta on the Boston run. b. Review of Financial Performance for Fiscal Year Ending June 30, 2001 Olson reviewed the financial packet provided with the Committee agenda. The numbers are in the black for the year and she has added an extra $50,000 into the bad debt reserve after September 11t" in anticipation that some receivables might not be collectable. The Airport has been able to offset the upswing in electrical and fuel costs and payroll costs. Hupp said the budget is being reviewed very closely as a loss was anticipated even prior to September 11tn Staff overtime has been eliminated unless absolutely essential. Capital projects are being reexamined. Additional funding for bad debt prepares the Airport for circumstances beyond its control. The FAA is continually issuing mandates regarding September 11t"� and it is not clear as to whether assistance from the Federal Government will be available. Additional expenses and additional lost revenue are evident. Olson always budgets very conservatively and there will be additional revenue not budgeted for but anticipated. Barrett indicated that Airport staff would come to the committee with revised budget projections for the remainder of the fiscal year. Based upon the current analysis, there will be a million-dollar loss between revenues and expenditures. Hupp indicated that last year's revenue figure for Finnair was $400,000 and this year is estimated at � $200,000. � Baldacci asked about Finnair, and Hupp indicated she is still optimistic to have the customs issue will be resolved. Finnair is shipping to the Airport's caterer the equipment needed, and the deicing contract has been finalized. Tremble asked about the depreciation line of $1.89M. Olson said it is a non-cash outlay. Barrett indicated that in a financial presentation, it is added in and then backed out on a cash flow basis. On capital expenditures, he said they are backed out and then added in as depreciation. Only interest expense is shown and not principal payment. Olson said her statement is in a true enterprise format, not cash. Barrett said there will be a cash flow statement in the audit when it is completed in the near future. Tremble asked about operating revenues and asked why the interest income was backed out and asked if the bottom line is $1.2M or $2.2M on a cash basis. Olson said that her financial statement does not reflect a cash basis. At the end of June 2001, the trust account was at $13.5M with a fair market value of $13.8M. At the end of September, it was at $14.5M. At the Committee's request, Olson said she would put the cash flow information together for the Committee prior to receiving the auditor's report. Barrett discussed the runway and indicated that Umphrey, Intergovernmental Affairs Coordinator, is working with the Congressional Delegation to get DOD . funding for the project. If that doesn't come through, decisions may have to be made to scale back the size of the runway in terms of its width. Standard FAA runway width is 150'. BIA wants 250', at a cost of $10M, which includes specific items related to military needs, Hupp indicated. c. Reimbursement Agreement with FAA— Radar System Relocation Hupp explained that the FAA provides navigation aids for the City, and this agreement indicates the City will pay the FAA Airways Facility section for the work being done. The FAA will then reimburse the Airport. Committee unanimously approved staff's recommendation. This item will go to the full Council on its upcoming agenda. d. Status Update Hupp said the Airport is still receiving updates daily from the FAA as to changes that need to be implemented. There will be some increases in costs due to the additional security measures. BIA is currently negotiating a contract with World Airways to do 20 flights through Bangor. The National Guard is in full force at BIA. The airline tenants are pleased with the arrangement. There are still legislative bills pending in the Congress regarding sky marshals and other • security related issues. • Regarding insurance, Hupp said the Airport previously had a policy for war risk insurance but it was canceled effective 10-1-01. The letter of cancellation was received a week after September iit". Two companies are going to ofFer war risk insurance to airports but they are not going to offer it to airports that directly provide security screening. Basically, security screening is an airline function in most locations. BIA provides the service for the airlines. Vardamis asked how Telford will be affected. Hupp felt Telford will have some challenges. During the time there were no flights to/from BIA, Telford lost some business. Telford does a lot of contract work with defense contractors, however. They are seriously pursuing additional opportunities for Bangor. Barrett indicated he spoke recently to Ziegelaar and there may be some short-term effects for Telford. They may want to wait until spring on some of the capital improvements they have discussed for this fall. Renovations within hangar one are proceeding, which will bring their account current. The Committee expressed their appreciation to Hupp for her handling the events surrounding September 11tn Hupp mentioned that Jerry's Catering is struggling and may be approaching the Council for some consideration. Hupp is working with the owner. � 5. Discussion of Cit r�Sponsorship of Forum on Electric/Energy Costs Councilor Baldacci has expressed an interest in the City sponsoring a half-day forum on electricity/energy costs, the effect of deregulation, and the future of the energy market in Maine. He is particularly concerned regarding the impact of high energy cost on economic development efForts in Maine and our region. The price and supply of energy is major economic issue. He felt the City could sponsor a conference and perhaps focus some recommendations on what should be done. � Barrett recommended focusing on electricity only. Baldacci would like to focus on electric rates, the options to be looked at, if deregulation is working, and if it is the right way to go. Barrett indicated Laurie LaChance, State Economist, would be a good representative; a PUC representative; a public advocate office representative; Bangor Hydro representative; a representative of Maine Power Options, an aggregation group to which the city belongs. Farrar indicated he had received a letter from the group indicating the City would be receiving a detailed proposal that should ofFer substantial savings. Baldacci mentioned inviting Gordon While, an energy consultant from Harpswell. He also suggested inviting outside consultants. Vardamis asked if surrounding communities would be included. Barrett suggested looking for a regional group to co-sponsor the event; i.e. EMDC, Bangor Region Chamber of Commerce. Farrar mentioned that the Maine Real Estate and Development Association is holding a forum on energy and Maine's economy on � October 25th at the Holiday Inn on the Odlin Road. Baldacci asked that copies be � distributed to the Council. Barrett said there is a service that weights the cost of doing business in various states and Maine is above the national average but comparable to most of New England. Labor costs are heavily weighted. Energy costs do have an efFect. Barrett said he would provide that information to the Council as well. Barrett said the main reason Maine's energy costs are high is the cost of transmission and delivery which is largely tied to the stranded cost issue. Bates discussed information she gathered which offers a comparison of Maine utility costs by sector to every region of the country. The residential area is high in Maine. Electricity that is imported and generated by petroleum tends to have the highest costs. The report indicates Maine as a primary user of petroleum, the 44t" state in 1998. She also discussed PUC information relating to most frequently asked questions about electricity rates. Baldacci asked Bates to check on the importer/ exporter figures since 1998. Bates suggested a representative from the Maine Power Pool be invited to the forum. Bates will provide copies of the information to all Councilors. It was agreed that December/]anuary would be a good timeframe to work on for the forum. It was also suggested that Jim Tyler be invited to participate. � �