Tax-Exempt Review Committee

Boards, Commissions & Committees

Tax-Exempt Review Committee - August 22, 2017 Minutes

Regular Meeting Tuesday, August 22, 2017

The Regular Meeting of the Tax Exempt Review Committee of the City of Fargo, North Dakota, was held in the City Commission Room at City Hall at 1:00 p.m., Tuesday, August 22, 2017.

The committee members present or absent are:
Present: Dave Piepkorn, Jim Buus, Jessica Ebeling, Mark Lemer, Mayor Tim Mahoney, Erik Johnson, Chuck Hoge, Bruce Grubb, Broc Leitz, Jim Gilmour, James Gartin & Ben Hushka.
Absent: Kent Costin

Committee Chairman Dave Piepkorn called the meeting to order at 1:00 p.m.

Jim Buus made a motion to approve the minutes of the June 27, 2017 meeting. Jessica Ebeling seconded the motion. Motion carried.

Application for New/Expanding Industry Exemption submitted by The Edge Artist Flats
There was no one present representing the applicant at the start of the meeting.

Commissioner Dave Piepkorn asked Ben Hushka, City Assessor, to introduce the item. Mr. Hushka stated this application is for a low income housing project that will be applying for Low Income Housing Tax Credits through the ND Housing Finance Agency. Hushka said that the current policy does include two provisions for PILOT incentives for low income housing projects. One is for projects which have a non-profit entity as a partner in the project. The other is for for-profit projects. This project that we have the application for is for-profit.

Mr. Hushka stated that the policy for for-profit low income housing projects is to arrive at a PILOT that, along with the land tax, results in taxing the project based on an income approach to value using the actual income under the rent-restricted tax credit program. In this case, the assessment value equivalent of the project by which the PILOT payment schedule will be determined is about $1,600,000.

Jim Buus asked if this is currently a vacant land site and, if so, is the land tax currently the roughly $3,900 that is listed with the projected PILOT payment. Mr. Hushka said that the site is currently valued as vacant land and that the site will be sub-divided. The $3,900 is the estimated land tax once the site is developed. It is generating less than that at this point.

Mr. Buus asked if the 2% escalator in the PILOT schedule also applies to the land tax. Mr. Hushka said that only applies to the PILOT payments. He said that the land will be subject to any land reappraisals over time. He said that currently the land is valued at about $2.50 per square foot and is projected go to $6.00 once developed. He said it could also be subject to a proposed reappraisal of downtown land in the near future.

Erin Anderson, representing the applicant, Commonwealth Development Corporation, joined the meeting at this point.

Commissioner Piepkorn asked, of the 42 units, how many would be devoted to low income housing. Ms. Anderson stated that all 42 units would be rent restricted with 30% at 30% of the area median income and 70% at 50% of the area median income. She also said that, of the 30% units, seven would be permanent supportive housing for those who have experienced homelessness.

Commissioner Piepkorn asked about the number of units that will be devoted to artist related tenants. Ms. Anderson said that there will be no requirement of any percentage of units for artists. She stated that was in response to input they received from local artists relating to some displacement that has been happening to artists in the community. She said that they are still in discussions about the artist component of the project.

Mark Lemer asked about the projected 7% vacancy in the application and if there is a standard that is used for projects like this. Mr. Hushka stated that the best projected information in that regard, at this point, is provided by the applicant. Ms. Anderson stated that 7% is an industry standard for affordable housing and is the percentage used by the State agency for underwriting their developments. She said investors in the tax credits also underwrite at a minimum of 7% and the projected vacancy could go higher.

Mr. Hushka stated that the applicant is applying to ND Housing and Finance for the Low Income Housing Tax Credits and that is dependent upon this incentive being granted by the City. He also said that our policy for this incentive is dependent upon their participation in the Low Income Housing Tax Credit program.

Jim Gilmour stated that this project is on the bus route that will take riders to the ground transportation terminal, which will get you to anywhere in town. He also stated that the needed zoning change for this project is currently working its way through the system.

Commissioner Piepkorn stated that we have been looking for more affordable housing and this is a good project. He said that he understands suggesting or encouraging the artist component but, is glad that it is not a requirement. Ms. Anderson said that they need some further vetting of that component. Mayor Mahoney stated that there are of a lot of people displaced in the community, including artists, due to the cost of housing, especially in the downtown.

Mark Lemer said that due to this being the first project that will require the County and School District to weigh in on their participation in the incentive, we should talk through how that will work.

Mr. Hushka explained that the County and Fargo School District have been notified of this incentive application. He said they have thirty days to respond, in writing, to the City whether or not they intend to participate. If they do not respond within thirty days, the City is to proceed by treating them as participating in the incentive. He said that, as of the date of this meeting, neither have responded. Hushka stated that publication of notice to competitors has begun in the Fargo Forum. They must publish two consecutive weeks and the hearing can be no less than two weeks after that. Mr. Hushka said that the hearing before the City Commission will be September 25th. He said that will be after the thirty-day period for a required response from the School District and County. Hushka stated that the process change will not delay the normal timing between receipt of the application and the hearing before the City Commission.

Broc Leitz, of the Fargo School District, stated that they will not protest this incentive and he will be sending a letter stating that they will participate in the incentive. He said that when they get the notices for these, they will be forwarded to him and Superintendent Schatz for review and he will issue the letter to the City. He said that the School District doesn’t intend to get involved in tax policy for the City. They support that there needs to be incentives to encourage growth in the City. He said there could possibly be applications in the future where his board may want to discuss some of the terms due to length or scope of the incentive. But, he stated, that they are generally supportive of the City in these incentive policies.

Commissioner Piepkorn asked Mr. Hushka about the general timing of this process. Hushka stated that, for this application, he notified the County & School District immediately upon receipt of the application. He also said that he began the publication process which takes a minimum of one month. Hushka said that he believes the County intends on taking action on these at regular Commission meetings which occur every two weeks.

Mayor Mahoney stated that in the future he would like Mr. Hushka to include the current status of where things are in the process in all communication to this committee and the City Commission.
There was continued discussion among the committee about the timing of the process. It was concluded that the publishing of notices, setting the date for the City Commission hearing, and scheduling of the Tax Exempt Review Committee meeting should be done immediately upon receipt of an application as it has been in the past.

Chuck Hoge made a motion to a recommend approval of the requested PILOT for The Edge Artist Flats, LLC. Jim Buus seconded the motion. Motion carried unanimously.

The meeting adjourned at 1:29 p.m., Tuesday, August 22, 2017.