Tax-Exempt Review Committee

Boards, Commissions & Committees

Tax-Exempt Review Committee - September 25, 2018

Regular Meeting Tuesday, September 25, 2018

The August 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, September 25, 2018.
The committee members present or absent are:
Present: Dave Piepkorn, Mayor Tim Mahoney, Bruce Grubb, Kent Costin, Ben Hushka, Jim Gilmour, Robert Wilson, Erik Johnson, Jackie Gapp, Jim Buus, Chuck Hoge
Absent: Jessica Ebeling, Mark Lemer, Joseph Raso
Others Present: Kati Wilcox, Rick Steen, Erin Anderson

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

Mayor Tim Mahoney made a motion to approve the minutes from the August meeting held on August 28, 2018. Jim Buus seconded the motion, which carried.

PILOT Application by The Edge 2, LLC for a for-profit Low Income Housing Tax Credit apartment project
Ben Hushka introduced the PILOT application, explaining the policy on these projects is to tax at restricted rent levels using a gross rent multiplier of 5.5. Mr. Hushka also prepared spreadsheets in agenda packet showing the payments with and without county-level participation.

Jim Gilmour explained the process of achieving the necessary financing is competitive in nature. He asked Erin Anderson from Commonwealth Development Corporation to go into further detail regarding the point system utilized by the state for awarding project financing and the role an approved application would play. Local support points are critical for the success of these projects.

Ms. Anderson provided a brief overview of what the project entails. The first phase, Edge Artist Flats, is currently under construction. It was clear from the beginning that there was enough space on the site for a second structure and enough demand for low-income housing in the area to move forward with a second phase, Edge Artist Flats 2. However, there is a limited number of tax credits available each funding round, requiring the need to break these larger projects into phases.

The new development will contain 48 apartment units and greatly mirror the first phase. However, the new building will also take part in a recently approved Income Averaging program. This allows a wider array of incomes to qualify - up to 80% area median income versus the 50% with the first phase. They expect the average income for residents of the housing complex will be approximately 54% of area median income.

At Commissioner Piepkorn’s request, Erin Anderson explained the proposed rents and income limits for residents. A Supportive Housing Trust Fund has units set aside without a rental fee for those who are disabled, homeless, or otherwise without income. The remaining four tiers are variant on the residents’ percentage of median income, which are individually re-evaluated each year. A supportive housing provider refers those who may be eligible to rent the apartments and property managers review all submitted applications final approval.

Rick Steen stated a concern on the county level is that once approved, renters are able to stay in the complex indefinitely, even if their income increases significantly and surpasses the level required for initial approval. Erin Anderson expounded on this comment, stating the organization does not want renters to be deterred from finding employment, or better employment, out of fear of losing their home.

Chuck Hoge asked if the 48-unit structure was an ideal size for this project, or if more units would be constructed if the credits were available. Erin Anderson explained the size of this project works out well in terms of both the physical lot size and the amount of funding and credits available to complete the project. Jim Gilmour explained the process of taking these projects in phases is typical as it allows the available incentives to be spread around as much as possible. Even projects on larger lots tend to build 40-50 units at a time. Erin Anderson agreed.

Kent Costin asked for clarification on the process of selecting applicants. Ms. Anderson explained that units are available on a first-come, first-served basis. Applicants must then pass a criminal background check, credit check, and income qualification guidelines. She is expecting a large demand for units, however since construction has just started on the first phase, there is no projectable timeline in terms of how long applicants must wait for housing.

Through continued discussion among various members of the committee, Erin Anderson stated rent amounts are based on the tax credits program’s guidelines for affordability. Ben Hushka then explicated the PILOT payments would be approximately $41,000 plus taxes paid yearly without county participation, or $30,308 plus taxes with county participation. The current tax on vacant land would be approximately $3,200.

Jim Gilmour reiterated his stance on approving the PILOT application, illustrating a desperate need for low-income housing in Fargo and local support being vital to achieving necessary funding from the state. An added benefit is collecting the $30,000 in property taxes, versus the $3200 for the vacant lot. Commission Piepkorn added the location is also a positive factor. The cost of land near downtown is increasing so having a low-income housing unit available now will be of great benefit. Jim Buus stated the project meets all the policy requirements and does not see why the application should not be approved.

Mayor Mahoney made a motion to approve the application, which Jim Buus seconded. After Commissioner Piepkorn opened the floor to further discussion, Rick Steen asked more-detailed questions regarding the amount of property tax and/or PILOT payments allocated to the county. Ben Hushka clarified the PILOT payments will be allocated among the taxpayer funded entities the same way property taxes are. Commission Piepkorn urged Mr. Hushka and Jim Gilmour to attend the county commission to offer these explanations and clarifications there as well. After no further questions, the motion carried.

The meeting adjourned at 1:36p.m., Tuesday, September 25, 2018.