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12/22/03 SP City Council MinutesA 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 moved 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 Mali, 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, Sclectron, 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 Kalispell City Council Special Meeting Minutes December 22, 2003 Page [ per year, and the City will offer up to S 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 of 425 jobs will be created of which 80% will be "full time" 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. Haffennan 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 perfonn in 2003. He said the Port Authority is tackling half of the 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 worming 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 jobs. Olson commented that until the government changes the system the 58.00 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. Kalispell City Council Special Meeting Minutes oecerriber 22, 2003 Page 2 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. Hafferman 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. Haffernan said the taxpayer gets no benefit from the 1.1 S 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 snake money on the land or not, the end result is "we're creating jobs". CIl. 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 Hafferman 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. Kalispell City Council Special Meeting Minutes December 22, 2003 Page 3 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 Hafferman voting against. C/3. 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 painted out some minor changes that were :made just prior to the meeting. Kenyon asked if somewhere there's a formal definition of fall 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 Hafferman voting against. ADJOURN The meeting was adjourned at 8:31 p.m. ATTEST: Theresa White City Clerk. Approved January 20, 2004 Kalispell City Council Special Meeting Minutes December 22, 2003 Page 4