New Fargo property tax break policy adds more monitoring, considers higher wages and workplace safety – InForum

FARGO — Fargo City Commissioners approved a new economic development incentives policy on Monday night, Dec. 13, that puts a bigger emphasis on monitoring, reporting, higher wages and workplace safety.

The policy covers property tax breaks to new or expanding businesses and industries, residents who are remodeling their homes and new homes built in the city.

It also changes the makeup to add more city residents to the newly renamed Economic Development Incentives Committee, previously known as the Tax Exempt Review Committee. Instead of two voting city staff members, they will be replaced by two additional city residents on the seven-member panel, joining three other residents and the mayor and deputy mayor. Other non-voting advisory members also participate.

The sometimes controversial tax breaks for new or expanding businesses or downtown projects have been a sore spot for a few city commissioners and residents over the years.

The new plan more clearly lays out policies to follow, said Commissioner John Strand, who sometimes votes against such projects with Commissioner Tony Gehrig, who has always voted against any such tax breaks.

“I feel like I was listened to and heard,” Strand said. “I’m willing to give it a try and see where it goes.”

Besides the changes to urge higher wages above of $15 or above and workplace safety checks, Strand said he also liked the changes to encourage more affordable housing and a “clawback” to pay back tax breaks if companies or developers fail to meet hiring or investment goals.

Commissioner Arlette Preston also noted that she wanted to see two studies underway from consulting companies before giving her full backing to the new policy: one to examine the effectiveness of the tax breaks, and another that looks at what other similar-sized cities are doing regarding tax breaks.

All the commissioners also wanted to see more monitoring and reporting on the property tax incentives given, as well as those clawbacks in the policy, if goals aren’t met.

Thus, the city will summarize all incentives given each year in an annual report.

For new or expanding businesses creating jobs, the policy states that if requirements aren’t met, city commissioners can give a two-year extension to see if goals are met on wages or jobs created or enact the clawback provision.

Joe Raso of the Greater Fargo/Moorhead Economic Development Corporation told commissioners their organization has software to help with the monitoring and reporting to track job creation and building investments and can connect with city staff.

The city assessor is involved in other breaks for remodeling, new homes or lower income rental housing to check on values and make sure projects are completed.

Here’s a look at various property tax break categories:

  • Residential new housing break: This policy allows for a two-year exemption of up to $150,00 in value on newly constructed homes, duplexes, townhomes and condos. Exemptions are available to builders and the initial owners after the builder. The policy wasn’t change, despite an objection from Gehrig to end the break. This year the exemptions provided breaks on $79 million in property.
  • Building remodeling break: This provides for a tax exemption of three years for residential home projects’ increased values by way of renovation, remodeling or additions for those structures 25 years or older. Other buildings also qualify. A change calls for the exemption to be up to five years for buildings 25 to 40 years old. It also allows buildings outside of downtown to qualify. This year the exemptions affected $22 million in value.
  • Job creation exemptions: A five-year property tax exemption is the standard, with 10 years for “extraordinary projects.” It gives the incentive to help create more jobs in the city. Two of the major changes were in this category as it puts more emphasis on paying $15 or more to new or added employees and includes a review of safety records of the company. It also requires monitoring and clawback provisions. The wages and safety are part of a “scoring system” that is done with each new or expanding company to see if they qualify. There have been 22 of these projects approved in the past five years.
  • Lower income rental housing PILOT: Provides property tax exemptions to help make lower income housing projects more feasible. A change will be that the North Dakota Housing Finance Agency that often provides funding to also make the projects possible will review applicants instead of the city. There have been six of these projects granted in the past five years.
  • Core neighborhood housing PILOT: This is to help with improving the older neighborhoods in the city and has been extended to other areas of the city besides the north Fargo “University Mixed Use Zone.” Longer tax breaks will be considered for affordable housing. There’s only been one of these in the past five years.
  • Downtown housing PILOT: This encourages new housing in the downtown neighborhood. Longer exemptions will now be considered for affordable housing. There have been seven of these type of projects in the past five years.
  • Tax Increment Financing districts: This makes redevelopment of difficult-to-develop sites feasible by helping applicants with such things as buying land, environmental cleanup and building removals through tax breaks. This is only available under the new policy for contaminated, slum or blighted sites. There have been four of these projects in the past five years.

In his report on the new policy, which was first discussed about a month ago by the city commissioners in a special meeting, City Strategic Planner Jim Gilmour also listed all of the job creation, apartment building and low-income housing PILOTS approved in recent years, the estimated benefit and when the break expires or starts. It also lists 12 TIF districts closed dating back to the 1980s.

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