Tax-Exempt Review Committee - March 23, 2021 Minutes
TAX EXEMPT REVIEW COMMITTEE
Fargo, North Dakota
Regular Meeting Tuesday, March 23, 2021
The March 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, March 23, 2021.
The committee members present or absent are:
Present: Dave Piepkorn, Mayor Tim Mahoney, Kent Costin, Bruce Grubb, Jim Gilmour, Mike Splonskowski, Nancy Morris (Representing Erik Johnson), Jim Buus, Joe Raso
Absent: Levi Bachmeier, 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 December 22, 2020 and January 12, 2021. Kent Costin seconded, motion carried.
Application for PILOT for Tecton
Jim Gilmour explained that this is an application for a 10 year tax exemption for expansion for Tecton. It would be a $16 million building, with $6.5 million in equipment. They plan to add 50 jobs in the first three years and another 30 by year five, all jobs would pay over $15 an hour. The exemption would be 100% for years 1-5 and gradually going down over the next five years. The application estimates the property taxes would be $221,000 a year, however they have an existing building that is valued at $5 million, so the actual value of the exemption could be less.
Ryan Aasheim commented that Tecton has been a staple in the community since 1992. They previously had a PILOT in 1997 and exceeded all the numbers that were committed to. They do have facilities in other states and are considering all their options.
Tom Gohdes, Director of Operations at Tecton, stated they were the first of the Marvin companies to come to Fargo in 1991, they built a 30,000 square foot building and have since expanded. They currently have 1.6 million square feet of manufacturing between Fargo and West Fargo. They are looking to grow their business in the spot that makes the most sense. They have land in Fargo. Fargo is currently their biggest location outside of Warroad.
Jim Buus asked why we are looking at a 10 year TIF when the standard has been 5 year.
Jim Gilmour replied that it is due to the size, but they have always started to pay something in year 6. This PILOT scores very well.
Lisa Giese, Director of Finance for Tecton, explained that they do not yet have a design for the building so they are estimating high at $160 a square foot.
Jim Buus moved to approve, Bruce Grubb seconded. Motion carries.
New Industry Application by Packet Digital
Jim Gilmour explained that this is for an Exemption for a building Packet Digital will be acquiring. They will have 13 jobs initially, 18 jobs by year five, all paying over $20 an hour.
Terri Zimmerman, CEO of Packet Digital, stated the company has 150 year engineering experience with fifteen patents, they are evolving into a new era with the move to lithium ion batteries and a need for U.S. made solutions. Currently, ninety percent of the solutions are made in China and lack the quality and standard ratings that are needed. They recently secured new contracts to build battery systems. In the past they outsourced manufacturing and are looking to convert the building into a manufacturing facility. They will be making battery modules for the unmanned aircraft market and the next generation space vehicles. They have developed fleet management for their batteries, they also build smart chargers, battery systems for electric vehicles, electric racecar and will be transitioning the new technology to space vehicles. They will be creating jobs such as electrical engineering, software and smart battery manufacturing positions.
Ryan Aasheim stated that this would be a great fit for our eco system we are trying to build here in Fargo.
Mayor Tim Mahoney moved to approve, Jim Buus seconded. Motion carried.
Riverfront Renewal Plan and TIF District
Jim Gilmour brought this to the board for informational purposes and wanted the board to have an overview of the plan. The plan calls for a lot of commercial and mixed use along the river. There is also potential for housing which is where there could be some development incentives as the plan is implemented. The old health building and the old school district warehouse could be good sites for housing, several other sites could be up for redevelopment. This plan will go to the City Commission two weeks from now.
Dave asked if the hash-mark through the Mid-America steel building could be moved.
Jim stated that he believes it can. He said it sounds like the engineers would bring the flood protection closer to the river, leaving roughly four acres for redevelopment.
Dave asked, is there a way to keep track of the money and use it to redevelop those areas.
Bruce stated that they are in the process of completing the EPA phase one and phase two environmental assessment. Once those have both been completed, they will get a third summary document that tells them what is there and would allow a plan for remediation and redevelopment. They were right at the preface of that before the fire.
Lewis and Clark Opportunity Fund
Jim Gilmour explained that the Opportunity Fund would like letters of support from the city to aide in the decision of determining if an organization would qualify for a loan. There currently isn’t a mechanism set up for that process, so Jim was thinking this committee could help decide if an organization should get a letter of support.
John Machacek from Fargo Moorhead Economic Development, stated that he talked a little bit about this at previous meetings. John prepared a document as a guide. The organization would need a letter of support stating that the city supports the project, the letter would not state whether the project is good or anything about the credit worthiness. The city could have a template letter that is brought to this committee to determine if the organization meets the requirements before the letter is approved.
Jim Gilmour would like to know if this committee could be the one to review the applications.
A motion was made by Jim Buus to recommend that the city commission designate this committee as the review authority for the applications that come in, seconded by Kent Costin. Motion carried.
Discuss Changes to Tax Exempt Policy
Jim Gilmour stated that a few years ago the Tax Exempt Policy was updated with the idea that after every commission election the policy would be reviewed. PILOT is such a broad program and it really confuses a lot of the applicants. Jim thinks it could be better organized into three categories Economic Development (the but-for test would not be done on this), Redevelopment going beyond five years would require the but-for test, and Housing. It was also suggested that the TIF’s start with this committee rather than go to City Commission first.
Mayor Tim Mahoney brought up the idea of testing the PILOTS in the out spaces, The Lights, is a good example. It would be nice for a developer to be able to see the criteria to determine if they qualify or don’t qualify. The present policy does look confusing. Sometimes the committee will be unanimous on something and it goes to the commission and they don’t see the same value this committee sees.
Brewhalla Market Preliminary Evaluation
Mark Bjornstad, President and Co-Owner of Drekker Brewing Company, stated that their company makes beer but they are a community focused, space making, experience focused company. This project builds on that and creates some wonderment and excitement about living in Fargo. It would be a Food Hall, Community Market, Event Space, Conference Center, Experience Focused Lodging and Residential Living. It would be 100,000 square foot building spread between two floors, with a variety of interior spaces. It is a twenty million dollar project that will create 200 jobs and one million dollars in annual sales tax. The brewery, right now is the number four rated tourism aspect in Fargo, this project will draw tourism. The extraordinary costs consist of land acquisition, landfill site excavation, soil condition improvements, demolition and site work during land acquisition, public works improvements for this site and neighboring properties.
Kevin Bartram, President of MBA Architects, explained that they bought the property six to seven years ago for warehouse space. The warehouse idea fell through, so they talked to Drekker about their idea and their ideas gelled. The brick building was built between 1880 and 1883. When they were digging for utilities and foundations, they encountered brick debris and buried foundations. Some bricks were salvaged and integrated into the Drekker building. They know the current site will have some of the same issues. There is no evidence of environmental contamination but they won’t know for sure until they get started.
When Drekker Brewing releases new beers it draws anywhere from 50-500 people, at least half of those come from out of town, mostly the Minnesota and Wisconsin areas. Food Halls are a growing trend. The space can function as an indoor farmer’s market where companies could have a smaller space without the costs and upkeep of their own location. These spaces become popular dining options because of the multiple choices.
Mayor Tim Mahoney moved to approve a TIF Evaluation of this project, Jim Buus seconded. Motion carries.
The meeting was adjourned at 2:27 pm.