歪歪漫画

BEMIDJI 鈥� Financial issues at the Sanford Center took the forefront at the Bemidji City Council's work session Monday evening, specifically the center's projected budget shortfall for 2024 and the need to address a cash flow problem stemming from poor financial performance in 2023.

The council was presented with an update on the Sanford Center鈥檚 financial situation by representatives from management company ASM Global, including Dave Jolette and Justin Jokovich, who explained that the center had significantly depleted its working capital due to underperformance last year. This led to a capital deficit that ASM predicted would continue through 2024.

Jokovich noted that event scheduling uncertainties contributed to the shortfall. However, he assured the council that the cash deficit was temporary and proposed that ASM inject $350,000 into the center鈥檚 operating budget, to be repaid by the end of 2024.

This proposal also came with a controversial condition, which is the elimination of the termination clause in ASM's contract with the city that allows the city to sever its management contract with ASM under specific conditions, including poor financial performance.

Council members were visibly dissatisfied with ASM鈥檚 handling of the situation, as the discussion became notably tense.

鈥淵our numbers were right at the end of last year if you had hit those cash injections this summer that might have come naturally for weddings or whatever it was that was going to take place," Mayor Jorge Prince interjected. "Those didn't happen, so that's what's causing the cash shortage.

"Why wouldn't you just say, OK city, if you terminate the contract, however, at year's end, give us back the money that we in essence loaned you to get through this cash flow deficit, why wouldn't that be an acceptable solution as opposed to we're not going to terminate it?鈥�

Jolette replied, saying "The answer that I continue to get is if we're going to put the money in, we just needed to find ways that the money was coming back. And without that, I received no approval actually to just put the cash in without defined terms of it coming back."

Mayor Prince chimed in again adding that cash flow shortage is not the same as the operating loss.

"There are times where cash flow is abundant, times where cash flow is low, and ultimately that's separate and distinct from whatever your net operating loss is going to be," he explained. "So, by my estimation as a finance person, the only reason you're sitting in a shortage here is because you used too much of the cash that's currently stuck in the business to fund receivables, payables, inventory, all of those things to cover some of (last year's) loss, which is why we're in this current situation.鈥�

Jokovich agreed with Prince's analysis of the situation.

The concerns revolved around repeated financial shortcomings despite earlier assurances. Ward 3 Councilor Ron Johnson openly criticized the management's approach.

"You're doing worse and you sold us on doing better," Johnson said. "I don't support any of this elimination of the termination clause because I think it's something we've got to have a talk amongst ourselves on how we want to go forward."

Past promises of improved management and reduced operational losses were brought up as points of contention.

"Last year was devastating," Johnson continued. "You're talking this year of being $100,000 over with $350,000 ... we terminated our last (management) company because they couldn't get below $450,000. I mean, you're doing worse."

This criticism was echoed by other councilors, noting that previous management companies had also struggled, but none had presented the same level of risk to the city.

鈥淚f we wanted to we could return $200,000 of that $350,000 back before year's out. So that's really not a huge amount of risk or money on our part," Prince said. "So for you to ask for that contract termination to be removed for such a short term loan, I hope you can understand why that doesn't sound like a very smart business decision.鈥�

The council was presented with two primary options to address the cash flow problem: either the city could provide the $350,000 from its reserves or allow ASM Global to front the money, with repayment terms set to ensure ASM would recover its investment if the contract were terminated.

City Manager Rich Spiczka offered a potential compromise, suggesting that the city fund the Sanford Center's operations temporarily but maintain the termination clause. This would give the council the flexibility to revisit the contract with ASM at a later date.

鈥淚f I were able to work out an agreement with ASM that they put in the money, the termination clause stays in place but if we were to go separate ways, they're going to get their money back and they were agreeable to that would council be agreeable to that," Spiczka said.

The council was generally in favor of this idea, hoping for more accountability in this process.

No final decision was made during the meeting and the council is expected to revisit the matter in a future session with possible proposals to fund the shortfall and set more stringent requirements for ASM's management moving forward.

Also during the lengthy meeting, the council discussed zoning regulations for cannabis businesses following the recent state legalization of cannabis. The discussion focused on where cannabis businesses could operate within the city and the potential need for buffer zones to protect schools and daycare centers.

"There are a couple things that we control in regard to cannabis regulation. One of those things is registration, the other one is zoning鈥� Spiczka said, emphasizing the pressing timeline, with the city鈥檚 moratorium on cannabis businesses expiring soon. "We need to have an ordinance in place by the time our moratorium expires."

City Attorney Katie Nolting highlighted the administrative aspects of registration, presenting options for whether the city should handle it directly or delegate the responsibility to county authorities.

"If the city registers, the city controls what those funds are, established by statute," Nolting said. "We don't get to say what the fees are. ... We would have to do at least one enforcement a year whether that be through law enforcement, through planning, zoning, some other portion.鈥�

The councilors were unanimously in favor of the city doing the registration as opposed to the county.

The conversation moved on to whether or not the city would limit the number of registrations of low-potency cannabis businesses.

鈥淚 think if we started by limiting it, we could always change it," Johnson said. "We could always add to it. But I think a limit to start with would be wise.鈥�

However, At-Large Councilor Audrey Thayer and Ward 5 Councilor Lynn Eaton were not in favor of limiting the registrations from the start.

鈥淭he state's already limiting how many of these can occur by a health license," Prince added. "So they themselves see something in all of this, too.鈥�

Thayer expressed concerns over places like gas stations selling THC drinks and how that would be regulated in terms of registration.

鈥淢ost likely there is going to be a grandfather clause that we're going to just have to do," Nolting said. "That if you're already selling low-potency hemp, you're going to be able to get tickets for you to do that 鈥� that doesn't mean you're going to be able to up it to start selling cannabis when that's available.鈥�

The council also discussed potential zoning districts for cannabis businesses, with general support for confining them to commercial and industrial areas. These zones are traditionally used for retail outlets and manufacturing, making them logical choices for cannabis operations.

Concerning the inclusion of the community's voice in the zoning process, Eaton highlighted the importance of transparency and public input.

"I think planning work process gives the public a great amount of transparency, so I think that's the way to go,鈥� he said.
 
City Planner Melissa Fahrenbruch explained the rationale behind their zoning recommendations was mirrored off of the city's medical cannabis zones.

The suggested buffer zones were designated around sensitive places like schools or daycares where certain activities, such as cannabis sales, are restricted to minimize impact on children and minors.

The council then debated what buffers to institute due to the significant number of daycares and schools in specific areas of the city.

鈥淚 am not in favor of a buffer around daycare facilities, just because I've had some conversation and I can see where somebody could strategically try to open a daycare to prevent opening to the cannabis business,鈥� Ward 4 Councilor Emelie Rivera said. 鈥淚 would maybe look to reducing that restriction to 250 or 300 feet from the 500 feet.鈥�

There was a general consensus among council members that a buffer around schools was necessary, although the specific distance was debated.

"What are we ultimately kind of worried about when it comes to the buffer piece?" Ward 1 Councilor Fiskevold Gould asked.

鈥淭he city doesn't have anything that says that you can't use it on the sidewalk. So you can walk right out of a cannabis shop and start smoking," Nolting explained.

The council also briefly discussed buffers around mental health facilities and parks, with Nolting clarifying that parks are defined as a places regularly used by minors, specifically including playgrounds and athletic fields.

Council members were unanimously in favor of the buffer zones around park attractions and athletic fields, with future discussion to focus on determining the exact distance of the buffers and the types of schools included.