Tax-Exempt Review Committee - May 26, 2020 Minutes
TAX EXEMPT REVIEW COMMITTEE
Fargo, North Dakota
Regular Meeting Tuesday, May 26, 2020
The April 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, May 26, 2020.
The committee members present or absent are:
Present: Dave Piepkorn, Bruce Grubb, Jim Buus, Jim Gilmour, Ben Hushka, Mayor Tim Mahoney, Erik Johnson, Jessica Ebeling, Kent Costin, Ryan Aasheim, Robert Wilson, John Cosgriff
Absent: Levi Bachmeier, Joseph Raso, Jackie Gapp
Commissioner Piepkorn called the meeting to order at 1:00 p.m.
Minutes Approved
A motion was made by Jim Buus to approve the minutes from the April meeting held on April 28, 2020. Bruce Grubb seconded. Motion carried.
Application for Transfer of PILOT Granted to DFI BJ, LLC
Jim Gilmour explained this PILOT was approved less than a year ago and would be located on the south half of the property. There are two ownership groups, the north and the south. In the P3 agreement with Roberts the exemption on the north portion was eliminated to justify the renaissance zone based on the fact that the property was being sold at a more reasonable price. The south half asked for a PILOT which was granted. The PILOT was reviewed by the county and school district and approved. The transfer would be a change in ownership, not a change in the project, so it wouldn’t have to go back to the county for review, but they would need to be aware of it. The incentive would not change.
Mike Zimney from Kilbourne Group explained that they are requesting a transfer because of the change in ownership. Kilbourne Group will still be managing and developing the project. The project will stay the same, it will just be a different set of investors that will own the property.
Mayor Tim Mahoney asked if this is the first opportunity zone the city is doing.
Jim Gilmour replied that the Roers Newmann Center is in a different opportunity zone fund. There are two others that the Kilbourne Group is doing, the Mercantile Parking Garage as well as one on the Nestor site.
Mike confirmed that Mercantile is part of an opportunity zone along with 1001 NP which is the old Nestor site and 1017 4th Ave North.
A motion was made by Kent Costin to approve the transfer and seconded by Jessica Eberling. Motion carried.
Two Applications for PILOT for Low Income Housing Projects From Fargo Housing & Redevelopment Authority
Jim Gilmour explained that the Housing & Redevelopment Authority has been working on the low income housing project for a number of years. Fargo has a shortage of elderly low income housing in town and anytime they are built they fill up rapidly. The pending removal of the high rise will leave a shortage in strength and supply of housing. The project will be an 84 housing unit, the financing is quite complicated, there will be 9% low income housing credits along with 4% low income housing credits. There will be two different investment groups that will buy those credits which explains the two separate applications. They have also received home block grant money from the city, along with housing trust fund money and housing incentive fund money, however one of the keys of the funding is the Property Tax Exemption. The specials on this property are approximately $9,000 a year, the land which does not qualify for an exemption is worth about $1,000,000 so they will be paying approximately $14,000 a year in taxes. If they did have to pay taxes on the improvements that would add about $83,000 in property taxes which would mean the project might not be feasible. The PFM is reviewing this project but the report is not back yet due to the final numbers not being obtained until last week. The property is on the corner of 45th Street and 30th Avenue South and is owned by the Housing Authority, who is tax exempt so the city, county and schools are not receiving tax revenue at this time. As the project develops there will be $14,000 a year in property taxes. The improvements would be exempt from taxes for 17 years at the end of that time the private party would leave and it would be exempt from taxes because the Housing Authority would be the sole owner.
Matt Pike (Housing Authority) explained that there would be a net increase of $14,000 on the property due to the partnership, however the Housing Authority would still hold the ground lease on the property. The Housing Authority originally acquired the property in January of 2017 in partnership with the city. The Housing Authority got a commercial loan and $500,000 of CBDG money was used to aid in the market value purchase. It was acquired with the express purpose that affordable housing be built on that property. Senior housing is a critical need in the City.
Jim Gilmour said they are not asking for a recommendation today but wanted to give an overview of the project and that without the property tax exemption the City would lose out on the resources and the project would not be able to be developed.
Matt Pike stated that they have received 155 vouchers to relocate the residents in the high rise. Once the high rise has been demolished the focus will shift into how to redevelop that two acre lot in partnership with the city.
Ben Hushka pointed out that some of the numbers were a little off. On page 14, 16F that would be a little over $57,000 a year instead of the $54,000, the same on page 19, 16F rather than the $33,000 it would be just over $35,000. If the county opted out of the project they would receive an additional $16,000 on top of the $14,000 land tax.
This item will be brought back to the meeting in June along with the PFM report.
701 Brew Remodel/Expansion & Downtown Incentive Area Boundary (Gilmour)
Jim Gilmour stated at the previous meeting the committee had supported an expansion of the boundary. It was asked that the Downtown Neighborhood Association and the Roosevelt Neighborhood Association be contacted about the change, prior to the change. The associations did not feel it was appropriate to change the boundary at this time. According to the comments they assumed the zoning would be changed. The zoning will stay the same. They assumed that exemptions would automatically be granted for high density housing; that is not the case. They discussed the need for the Core Neighborhood Plan to be completed before any changes were made. Because of the concerns there are two options that Jim suggested: 1. Approve the boundary change as considered at the previous meeting. 2. Amend the policy to allow five year remodeling and additional tax exemptions for Commercial properties immediately adjacent to the downtown. Jim recommended to go with option two.
Bruce Grubb commented that he recalls seeing this issue at the City Commission at least once and would like to know what action the City Commission had already taken.
Jim stated that 701 Brew had made an application to rezone their property from a commercial and residential zone to a downtown mixed use zone. That was fully supported by the City Commission.
Jim Buus moved to approve to amend the policy to allow 5-year remodeling and additional tax exemptions for commercial properties immediately adjacent to the downtown. John Cosgriff seconded. Motion carried.
Dave Piepkorn adjourned the meeting at 1:28 pm.