Grand Forks council OKs standstill agreement with Fufeng, receives update on de-annexation petition

GRAND FORKS – City Council members on Monday unanimously approved entering into a standstill related to the termination of a development agreement with Fufeng Group.

The decision came during a Committee of the Whole meeting Monday evening at the Hive, the former Grand Forks Herald building across from City Hall. The meeting was held there as the council chambers at City Hall are in the midst of a renovation.

In February, council members voted 5-0 to disallow certain permitting for Fufeng’s proposed wet corn mill in Grand Forks. The decision was based on the fact that certain conditions specified under Section 8 of the project’s development agreement can’t be satisfied. Notably, the decision came after the Department of the U.S. Air Force said the corn mill would be a threat to national security due to its ownership ties to China.

Following the vote, the process – according to the development agreement – requires the city to issue a notice of termination to prompt further proceedings for recovery of certain costs, expenses and fees incurred by the city for Fufeng-specific items. City Attorney Dan Gaustad informed council members at prior meetings that he has had some discussions with Fufeng’s attorney on the $5 million letter of credit and what Fufeng plans to do with the land it purchased to build the plant.

Through his conversations with Fufeng’s attorney, Gaustad said the standstill agreement was discussed. It will provide that both parties put on hold any actions taken under the development agreement – including the city’s notice of termination – without affecting any rights that exist for the termination. The standstill will allow for the parties to determine if an agreement and termination can be reached.

“If at the end of the day there isn’t an agreement reached with respect to the implementation, then the standstill agreement goes away and we move forward with the termination and send out a notice,” Gaustad said. “It’s essentially allowing us to have these discussions.”

Gaustad said there is an issued letter of credit to the city by MUFG Bank, Ltd., which automatically renews on June 24 unless the bank issues a notice of non-renewal at least 60 days before that date. In order to avoid potential non-renewal of the letter of credit while discussions occur, Gaustad said MUFG Bank has agreed to maintain the letter of credit, which will be a required term of the standstill agreement with Fufeng.

Council member Rebecca Osowski questioned the need for a standstill agreement, since the development agreement with Fufeng is already in place.

“I really thought that the development agreement was clear and to the point and that if something went wrong, we could terminate that,” Osowski said. “And now we are being asked to approve this standstill agreement. How long do you think that we’re going to stand still for? I guess I just don’t understand what we’re trying to come to an agreement (on). Fufeng was deemed a national security threat so we terminate the agreement, we get our money back.”

Gaustad said discussions with Fufeng’s attorney could involve more than the termination of the development agreement and the letter of credit.

“They still own property,” he said. “Those discussions could occur with respect to what are we going to do with the development? Is there somebody else that might want to come in and acquire the property for the development? There are all kinds of things that could be placed on the table.

City Council President Dana Sande said there are benefits to the standstill agreement, including allowing Gaustad to have negotiations with Fufeng’s attorney.

“I think the benefit of the standstill agreement gives our city attorney the opportunity to negotiate without having to be in court,” Sande said. “And I think the opportunity to negotiate without going to court has the likelihood of saving our community a considerable amount of money because we’re talking about going to court with a multibillion-dollar company that probably isn’t super happy with our community right now. So I would prefer that our city attorney have the opportunity to go and have some friendly discussions with them rather than go into an unfriendly situation."

Sande said that if the lawyers aren’t able to come to an agreement, “then we terminate.”

Osowski also asked about how long the standstill period could last. Gaustad said there really isn’t a specific timeframe.

“If the discussions just aren’t bearing any fruit and the parties are this far apart (and) there’s no way to reconcile it, then we recognize that and we walk away,” he said.

Gaustad said that anything that would develop from discussions with Fufeng’s attorney would come back to the City Council.

Also Monday, council members received an update on a de-annexation petition for the Highway 81 area, which was annexed into the city in June in conjunction with the Fufeng project. The petition is being reviewed, with a final action expected on April 3.

City Planner Ryan Brooks said six property owners – Brooks called them “parcels” – did not sign the de-annexation petition.

Certain projects in the annexation area aren’t moving forward at this time, including raw water intake and pump station improvements, along with the construction of a raw water booster station from the Grand Forks Water Treatment Plant. Those items were specific to the Fufeng project.

Other projects, however, were discussed Monday, including a watermain, sanitary sewer and sanitary lift station (lift station 49) and forcemain.

The watermain will provide water service and fire protection to properties in the area, including the greenfield site. Of the three bids received, Taggart Contracting was the lowest at $1,864,612. The intent of the sanitary sewer project is to install a sanitary sewer system for the annexation area. Council members were asked to reject the one bid received from RJ Zavoral & Sons, which was 82% over the engineer’s estimated project cost.

Though council members gave preliminary approval to move forward with awarding the bids for those projects, they will come back to the April 3 City Council meeting.

“If we do continue with the annexation, obviously we’re going to put in infrastructure. But if we don’t intend to move forward with the annexation, there would be no sense to put some of this infrastructure in,” City Administrator Todd Feland said.

In other news Monday, council members:

• Received a briefing from Keith Lund, president and CEO of the Grand Forks Region Economic Development Corporation, on the role of the EDC, and a briefing from Brooks on an overview of planning and zoning in the city.
• Considered approving an application from Kaizen Sushi & Ramen for a Class 3 On/Off-Sale Beer & Wine Alcoholic Beverage License. The restaurant will be located at 108 N. Third St.
• Considered approving bids for phase two of the city’s bus maintenance facility rehabilitation project. The total cost of the project to include construction, professional fees, fixtures, equipment and other soft costs is $7,850,741.