Tax-Exempt Review Committee

Boards, Commissions & Committees

Tax-Exempt Review Committee - July 24, 2018 Minutes

Regular Meeting Tuesday, July 24, 2018

The July 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, July 24, 2018.

The committee members present or absent are:
Present: Dave Piepkorn, Mayor Tim Mahoney, Bruce Grubb, Kent Costin, Jim Gilmour, Robert Wilson, Erik Johnson, Chuck Hoge, Jackie Gapp, Mark Lemer, Jim Buus, Jessica Ebeling
Absent: Ben Hushka
Others Present: Kati Wilcox

Commissioner Piepkorn called the meeting to order at 1:00 p.m.

A motion was made by Jim Buus to approve the minutes from the June meeting held on June 26, 2018. Motion was seconded and carried.

PILOT Application by Enclave Development for Downtown Apartment
Jim Gilmour discussed the PILOT Application from Enclave Development for a new apartment complex near their recent 300 Lime project. The application is for 100% exemption for five years with a 75% exemption for an additional five years, per the old policy. A “but-for” test has not been done on this project; however Austin Morris from Enclave Development would be willing to provide this information to be reviewed by the financial consultant.

Austin Morris addressed the committee. He spoke of the success of the 300 Lime project – a mix of efficiency, one-, two-, and three-bedroom apartments – that is currently 98% occupied at the desired rent amounts. The new project will be an esthetically different project with a new architect designing a new concept.

Mr. Morris stated he is willing to share the financials proving this success; however, he is concerned about the requirements of open record laws associated with sharing this information with elected officials. Erik Johnson approached the podium, explaining there are ways to present the information necessary to do the analysis while retaining the information that is sensitive without violating the open record law.

Jim Buus requested a summary of the projected rents for the new units. Austin Morris said a plan has not been calculated as they are still waiting for approval on the application. However, 85-90% of the rent costs at 300 Lime fit into the adjusted median income for the area, and include almost all utilities.

Dave Piepkorn asked for viewpoints on going forward with a “but-for” test and following what the new process will be. Jim Buus stated this has not yet been adopted as formal policy. Even though Enclave has offered to present that information, he does not feel it necessary. Jessica Ebeling agreed, stating a clean break would be preferred to prevent any grey area between the two policies.

Dave Piepkorn then asked Austin Morris which stages of this process are the most difficult. Mr. Morris explained years one and two are the riskiest, however years six and 11 would be considered the most difficult, due in part to the increase in real estate taxes. Commissioner Piepkorn asked if a more gradual increase would be preferable. Mr. Morris agreed this would be easier to manage.

After some discussion, it was decided a “but-for” test would be beneficial, despite not being required. Jim Buus asked which entity would be absorbing the cost of the test since it is not a requirement for the developer. Kent Costin suggested the actual cost. Tim Mahoney made a motion to approve the PILOT, subject to receipt of the “but-for” test, with the actual cost of the test paid by the applicant. Jim Buus approved.

Update on Recommended Revisions to TIF Policy
Jim Gilmour met with Roers Development on the TIF policy, and plans to do the same with Austin Morris and the Kilbourne Group who plan to submit comments. He is planning a joint meeting at the Cass County Courthouse with county and city commissioners and school board members to review the policy, and then return to the city commission for adoption of the new policy. The issue has been advertised for public comment for about a year now. He has heard from a few developers, including those attending the Tax-Exempt Review Committee meeting last month, though there have not been any comments from the general public. Mr. Gilmore stated there will be another opportunity for public comment prior to the city commission meeting to adopt the new policy.

Kent Costin asked Jim Gilmour which methods of media outreach he has been utilizing. Jim Gilmour stated the City of Fargo website, as well as contacts from the mainstream media.

Mayor Tim Mahoney inquired about the $5,000 fee as a policy change. Jim Gilmour stated the finance committee has already approved a $2,500 fee for a project under $3 million, $5,000 for projects between $3 and $10 million, and more for any projects larger. Mr. Gilmour will work with Kent Costin to decide administrative fee and interest rates for the policy.

Dan Madler with Beyond Shelter addressed the committee with comments regarding investors involved in rent restrictive housing projects. Mr. Madler stated these investors do not like the uncertainty involved with these developments and more information/clarification on what the “but-for” test means and the (un)predictability involved. Dan Madler would also like policy clarification on the policy with projects outside downtown.

Dave Piepkorn addressed the audience, asking for any more public comments. There were none.

Mark Lemer asked the committee if there is a need to be more explicit on the purpose of a post-construction “but-for” test assisting future decisions on what these policies should look like, versus being utilized as a potential “claw-back” or reduction in the benefit. Jim Gilmour explained the policy is deliberately vague to allow for differences in varying sized projects, and has the intent of being more educational than as a tool to further change the policies. Tim Mahoney stated many things can change in an economy over the span of 10 years and there are many variables of that which are not included in the policy. If the city “claws-back” because a project is doing well, developers can simply take their money elsewhere. Mark Lemer suggested the policy being explicit that the purpose of the policy change is not to be removing the benefits from successful development projects. Jim Buus suggested clarifying the policy to state post-construction “but-for” tests are only educational.

The meeting adjourned at 1:50p.m., Tuesday, July 24, 2018.