Tax-Exempt Review Committee

Boards, Commissions & Committees

Tax-Exempt Review Committee - October 24, 2017 Minutes

Regular Meeting, Tuesday October 24, 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, October 24, 2017.

The committee members present or absent are:
Present: Kent Costin, Jim Buus, Mark Lemer, Mayor Tim Mahoney, Erik Johnson, Chuck Hoge, Bruce Grubb, Broc Leitz, Jim Gilmour & Ben Hushka.
Absent: Dave Piepkorn, Jessica Ebeling
Guests present representing Cass County: Commissioners Rick Steen and Vern Bennet, County Administrator Robert Wilson.

Mayor Mahoney called the meeting to order at 1:00 p.m.

Jim Buus made a motion to approve the minutes of the August 22, 2017 meeting. Bruce Grubb seconded the motion. Motion carried.

Application for New/Expanding Industry Exemption submitted by Cathedral Lofts, LLC
Mayor Mahoney asked Ben Hushka, City Assessor, to introduce the item. Mr. Hushka stated that the current policy calls for an incentive for new apartment projects in the Downtown Area Plan in the form of a 10 year PILOT equivalent to 5 years at 100% improvement exemption and 5 years at 75%.

Jesse Craig, representing Cathedral Lofts addressed the committee. He stated that this is a double lot containing a five-plex that he purchased. He said that the individual he purchased from did not want the property sold to Sanford and become a parking lot. He said the project now is projected to be all one-bedroom units with enough main-level, indoor parking for all units.

In answer to a question from Mayor Mahoney regarding the evaluation point system, Mr. Hushka stated that the downtown apartment policy does not fall under the point system but is based on creating housing units in downtown. He stated that other policies exist for apartment projects creating low income units. Jim Gilmour explained the development of the policy around 1999 when very few apartments were created downtown. He stated that a number of apartments have been created downtown since and the policy has been used the most in the past five to six years.

Cass County Commissioner Rick Steen asked if this is available to any developer. Mr. Gilmour said that we have never denied an application under this policy. Mr. Steen also asked how the land is valued since it is taxable under this program. Mr. Hushka stated that land is valued at market value.

Mr. Gilmour stated that with the current taxable value of the property and the projected value of the proposed project, in year six when there is a PILOT payment, the taxes collected will be higher than what the property is currently paying. And, he said, after year 10 it will be considerably more.
Jim Buus said that, as stated by the applicant, with the small site it is most likely going to just be tore down and be an asphalt parking lot. Mr. Craig stated that there is less and less land to develop in downtown Fargo. He said that unless the City widens the definition of downtown, it will be difficult to transition these older neighborhoods. He said that he thinks we will see fewer of these PILOTs come up in the future.

In answer to a question from Mayor Mahoney about what he will do if he doesn’t get the incentive, Mr. Craig said that he would sell the property to Sanford. He said that the costs and difficulties with staging construction on sites like this are very high.

Mayor Mahoney asked about the projected rent levels. Mr. Craig said that, with washer and dryer hookups and rooftop balcony, these will rent for $975 per month. He said that some say that is high rent but that construction costs are also higher in the Downtown Mixed Use zoned areas. There needs to be a certain percentage of brick and glass. He said with the amount of glass required, you need galvanized or powder-coated steel headers, glass garage doors, and other things that make construction and ongoing maintenance costs are higher.

Mark Lemer asked if the City would consider to adopt a “no harm” policy by setting the PILOT for projects like this at the current level of the tax on the property so that nothing is lost from what is being collected. Mr. Hushka stated that this committee has previously had a lot of discussion over policy and following it. He said this issue would probably need to be brought up in future discussion about probably changing policy but, that evaluating this application should be in the context of current policy. Hushka also added that Commissioner John Strand has asked the committee to consider incorporating an element of (rent) affordability to this policy. So, Mr. Hushka said that it is probably due for having additional discussions and review of current policy. Jesse Craig stated that some of these projects take up to two years to put together and they should be able to know, before and during that timeframe, what the rules are and that they are not going to change.

Jim Buus made a motion to approve the application for a 10 year PILOT with 5 years at the 100% equivalent improvement exemption and 5 years at 75%. Chuck Hoge seconded the motion. Motion carried unanimously.

Discussion on City/School District/County Cooperation on Incentive Evaluation
Mr. Hushka explained the new statute requiring notification to the School District and County on participation in this incentive. He said that, once the notification from the City is received, the School and County must respond within 30 days as to whether they intend to participate. If they fail to, the City must regard them as fully participating.

He said at the last Tax Exempt Review meeting, the committee agreed that publication of notice to competitors in the Forum should begin upon receipt of an application as it always has been done in the past. That process takes about one month according to Mr. Hushka. Hushka said, on the last application received, that he sent the notification letters to the School and County at the same time as notice to competitors was published in the Forum. Mr. Hushka said that timing can be problematic if an application is received at the beginning of a month because this committee meets the 4th Tuesday of the month. With that, he said that the School & County may not have time to get the issue before their boards prior to knowing the Tax

Review Committee’s recommendation. Hushka said that, maybe a better option would be to delay sending the notification to the School and County until the Tax Exempt Review Committee meeting notice is sent; one week prior to the Tax Exempt Review meeting. He said that would give the School and County time to bring the issue to their boards after the Tax Exempt Review Committee recommendation is known and before the City Commission meets on the incentive. Mr. Gilmour said that should work in most cases. He said that sometimes there is a really time-sensitive project where a developer needs to know immediately to make a choice whether they will develop in Fargo or not but, that is rare.

Cass County Commissioner Vern Bennet said that we have a new law and we all need to learn the rules of the process and work together. He said that they want to be cooperative but knowledgeable. He said that he would also like to understand the profit and non-profit aspect of projects like this application. Mr. Bennet said that the County may put more emphasis on jobs created and he sees that on this application that item is blank. Mr. Gilmour explained that the housing incentive policies are to create housing units, not jobs. He said with the economic development projects, job creation is very important criteria.

Cass County Administrator Robert Wilson stated that the timing for the 30-day notice can be an issue because the City meets every other week and the County on the 1st and 3rd Monday of the month which can create a gap. He said that he feels the solution offered of sending the notice to the School & County when the Tax Exempt Review Committee meeting agenda goes out should be satisfactory.

The meeting adjourned at 1:36 p.m., Tuesday, October 24, 2017.