1a. Council Minutes - Special Meeting December 22, 2003A SPECIAL MEETING OF THE KALISPELL CITY COUNCIL WAS HELD AT 7:00 P.M.
MONDAY, DECEMBER 22, 2003, IN THE COUNCIL CHAMBERS AT CITY HALL IN
KALISPELL, MONTANA. MAYOR PAMELA B. KENNEDY PRESIDED. COUNCIL
MEMBERS JIM ATKINSON, BOB HAFFERMAN, RANDY KENYON, DUANE LARSON,
FRED LEISTIKO, HANK OLSON AND JAYSON PETERS WERE PRESENT. COUNCIL
MEMBER TED POLER WAS ABSENT.
Also present: City Manager Chris Kukulski, City Attorney Charles Harball, Finance Director Amy
Robertson, City Clerk Theresa White and Community Development Manager Sandy Wheeler,
Mayor Kennedy called the meeting to order and led the Pledge of Allegiance.
A. AGENDA APPROVAL
Leistiko mowed approval of the Agenda. The motion was seconded.
There was no discussion.
The motion carried unanimously upon vote.
B. HEAR THE PUBLIC
Genie Parsons, 221 Commons Way, stated she's the chairman of Jobs Now and a member of the Port
Authority and encouraged the Council to approve the agreement with TeleTech.
C. REPORTS/RECOMMENDATIONS AND SUBSEQUENT COUNCIL ACTION
TeleTech Holdings, Inc. is interested in operating a Call -In Center in the recently vacated Stream
International space in Gateway West Mall. The City of Kalispell, in partnership with the Flathead
County Economic Development Authority, have been working with TeleTech and Stream to
negotiate the transfer.
Kukulski gave a staff report reminding everyone that the agreement with Stream was a 60-40
partnership between the City of Kalispell and the Port Authority and the partnership will remain
intact if the agreement with TeleTech is approved. He said even though Stream has since pulled out
of Gateway West Mall, it remains legally obligated for: 1) Base rent of $275,000 per year for the
remainder of the lease term which is 6.5 years; 2) Guaranteed minimum tax payment of $140,000 per
year for the remainder of the lease term; and 3) Repayment on the loan made by the City to Stream at
11.5% interest with a current principal balance of$767,394.28. Kukulski said even though the debt
is secured, the City is sitting with an empty building and a lot fewer jobs. He said TeleTech
Holdings, Inc., is interested in locating a call center at the former Stream site, but instead of having a
sub -lease situation, Stream wants to assign its interests in the lease agreement to its parent
corporation, Selectron, and buy out its obligations which would then allow TeleTech to step into the
primary position. Stream is offering to pay a lump sum of $1,360,711.84 for the base rent owed for
the balance of the rental term, offering to immediately pay off the balance of its loan, and further
offering to pay the City's closing costs up to $50,000 in the legal preparation of the Buyout
Agreement. He added that Stream is also offering to pay the City's brokerage fees for bringing
TeleTech to the site. TeleTech, Kukulski explained. is offering to enter into a lease structure similar
to Stream's with rent abatement tied to the pay ($8.00 per hour plus 20% for benefits) and number of
jobs created and maintained. TeleTech will pay the guaranteed minimum tax payment of $140,000
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December 22, 2003
Page 1
per year, and the City will offer up to $1,179,317.94 in loan funds at 4% interest to TeleTech for the
purpose of upgrading the capital and communication infrastructure of the leasehold over the term of
the ten year lease. He said the City will further agree that adequate parking is provided, either on or
off the premises, and negotiations are underway to provide an additional 250 parking spaces by
leasing or buying additional land. Kukulski stated the goal of the City and the Port Authority in
negotiating these terms with Stream and TeleTech has been to preserve the benefits of the existing
Stream agreement while at the same time creating jobs at this site as was originally anticipated. He
stated a total of425 jobs will be created of which 80% will be "full tune" employees with 125 jobs
the first year, 250 jobs the second year, and 425 the third year.
Mayor Kennedy asked Paul Wachholz to comment.
Paul Wachholz, a member of Jobs Now, commented nothing drives our economy more than a job
and what's more important than the pay and the benefits is whether the person will receive training.
He said when Stream left, our economy "sucked up" at least two thirds of those laid off because they
were trained and ready to work. Wachholz encouraged the Council to approve the agreements.
Kukulski and Harball answered questions.
Haffen- an stated TeleTech wants an additional 250 parking spaces to be paid for by the taxpayer
through the Port Authority and the City's Westside Tax Increment Fund. He said since this would
require about two acres at approximately $4.50 per square foot, that's nearly $400,000 for the
property along with $100,000 in improvements. Hafferman commented this adds up to about a half
a million dollars for the taxpayers.
Kukulski responded that two possible revenue sources for these costs could be tax increment funds
and the $275,000 already paid by Stream for failure to perform in 2003. He said the fort Authority
is tackling half ofthe cost and the Cost is tackling the other half
Mayor Kennedy commented the additional parking spaces are not only necessary for TeleTech, but
also for the long-term availability of that space.
Kukulski agreed stating the Port Authority and the City are buying property to assure that there will
always be 500 parking spaces to accompany the 63,000 square foot building.
Peters said he sees the expenditure as trying to get a building over the next six and a half years that is
fully paid for with tenant improvements and adequate parking spaces. He said he doesn't see why the
City would approve the agreements.
Kenyon said he agrees that this is something the City needs to do but added he's disappointed in the
$8.00 an hour wage. He said for a couple with only one spouse working they are eligible for
government assistance making $8.74 an hour. Kenyon said he was also disappointed to find out the
20% benefits includes vacation and sick pay with very little for insurance. He concluded that even
though he's going to vote in favor, it's disappointing that a loan of over a million dollars is only
generating $8.00 an hour jabs.
Olson commented that until the government changes the system the $8.00 an hour is controlled by
how many of these jobs go overseas. He said with TeleTech the City is going to put a bunch of
people to work with the same obligations that Stream had.
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December 22, 2003
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Larson said having sat in on most of the meetings and conference calls; the goal was to "come out of
the deal" with basically the same income coming into the City and fill the space by providing jobs to
the community. He said he feels they accomplished those goals with some give and take. Larson
added that TeleTech could have gone elsewhere and even though the pay wage isn't the best, it's a
lot better than a lot of the jobs here.
Hafferman said it looks like the taxpayer is going to be short about 1.3 million dollars with the buy
out by Stream. He said TeleTech wants 250 more parking spaces than Stream had, yet Stream was
reported to have approximately 800 employees whereas TeleTech only plans on 425. In addition, by
adding 250 more parking spaces, you are taking more property off the tax rolls. Hafferrnan
commented the designation of FTE does not guarantee an employee works full time because the E
stands for equivalent. He stated FTE should be changed to FT, full time, so that 80% is really full
time. Haffennan said the taxpayer gets no benefit from the 1.18 million dollars for improvements
and the increase in parking spaces and if TeleTech goes bankrupt or moves elsewhere, the taxpayer
gets stuck. He said let those who do business in Kalispell go to the bank to get money just like the
residents have to do, and at the very least, TeleTech should have to post a performance bond at the
same rate as all contractors with the City. Hafferman said the City had a bad experience with Stream
and he doesn't want to obligate the taxpayer any further.
Mayor Kennedy responded that when Stream was in residence the employees were allowed to park
anywhere near Gateway West Mall. She said now, American Capital is involved in lease
negotiations for the remaining space and they are not willing to give TeleTech the same parking
consideration. She said with regards to FTE, the memorandums state that 80% of the work force
will be full time employees, not full time equivalents. Mayor Kennedy said she doesn't believe the
taxpayers are getting stuck with anything and she hopes the Council will approve the documents
before them.
Olson stated the City is just trading one company for another company and whether we make money
on the land or not, the end result is "we're creating jobs".
C/I. CONSENT TO ASSIGNMENT OF LEASE — STREAM INTERNATIONAL
Staff is recommending the Council authorize the Mayor to execute the Consent to Assignment of the
Stream International lease at the Gateway West Mall property to its parent corporation, Selectron.
Leistiko moved the Council authorize the Mayor to execute the Assignment of and Consent to
Assignment of Lease between Stream International and its parent corporation, Selectron. The
motion was seconded.
There was no further discussion.
The motion carried upon roll call vote with Atkinson, Kenyon, Larson, Leistiko, Olson, Peters
and Mayor Kennedy voting in favor, and Rafferman voting against.
C/2. MEMORANDUM OF UNDERSTANDING — STREAM INTERNATIONAL
Staff is recommending the Council authorize the Mayor to execute the Memorandum of
Understanding for Stream to buyout the remainder of its lease on the Gateway West Mall property.
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December 22, 2003
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Peters moved the Council authorize the Mayor to execute the Memorandum of Understanding
with Stream International. The motion was seconded.
There was no discussion.
The motion carried upon roll call vote with Atkinson, Kenyon, Larson, Leistiko, Olson, Peters
and Mayor Kennedy voting in favor, and Hafferan voting against.
C13. MEMORANDUM OF UNDERSTANDING --- TELETECH HOLDINGS
Staff is recommending Council authorize the Mayor to execute the Memorandum of understanding
for a lease agreement with TeleTech Holdings, Inc. for the Gateway West Mall property.
Larson moved the Council authorize the Mayor to execute the Memorandum of Understanding
with TeleTech Holdings, Inc. The motion was seconded.
Harball pointed out some minor changes that were made just prior to the meeting.
Kenyon asked if somewhere there's a formal definition of full time employee. He said he knew
several people that worked less than 40 hours a week at Stream and when he worked in the
vocational business it was his understanding that full time employment is 30 or 32 hours a week.
Kenyon asked if there's any clarification.
Harball said that issue was discussed with TeleTech and they acknowledged a full time employee
would be someone working 40 hours a week.
The motion carried upon roll call vote with Atkinson, Kenyon, Larson, Leistiko, Olson, Peters
and Mayor Kennedy voting in favor, and Hafferan voting against.
ADJOURN
The meeting was adjourned at 8:31 p.m.
ATTEST:
Theresa White
City Clerk
Pamela B. Kennedy
Mayor
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December 22, 2003
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