Tax-Exempt Review Committee - June 23, 2020 Minutes
TAX EXEMPT REVIEW COMMITTEE
Fargo, North Dakota
Regular Meeting Tuesday, June 23, 2020
The June 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, June 23, 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, Jackie Gapp
Absent: Levi Bachmeier, Joseph Raso
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 May meeting held on May 26, 2020. Jessica Ebeling seconded. Motion carried.
Two Applications for PILOT for Low Income Housing Projects from Fargo Housing & Redevelopment Authority
Elliot Place Housing Project located on South 45th Street and 30th Ave S, there will be a total of 84 units, under two different ownership groups. The project is being financed by a number of means, there are two ownership groups along with three grants that have been received for the project: the Housing Incentive Fund Grant, the Housing Trust Fund Grant and City Home Grant. The key reason the property tax exemption is needed is because a loan of four million dollars will be taken out for this project. Fargo Housing Authority is the lead in this project along with their partner Blue Line Development who is working on selling the low income housing tax credits. In the future Fargo Housing Authority will become the sole owner and the property will continue to be low income housing. The request is a zero dollar payment on the improvements, however, the owners will pay the taxes on the land which amount to approximately $14,000 a year. The land is currently owned by the Fargo Housing Authority and is tax exempt. The project is only feasible if they receive the full tax exemption.
Matthew Pike from the Fargo Housing Authority explained the principle issue for them is to make sure they meet the minimum debt coverage by making sure Fargo Housing begins paying the property taxes on this property and that Fargo Housing is meeting the need for affordable senior housing. Fargo Housing would immediately begin paying the $14,000 taxes on the land.
Dave Piepkorn asked about the two sets of numbers on page 5. It was explained that the numbers in red are the corrected numbers provided by Ben Hushka.
Kent Costin asked if they could comment on the rent structure and who pays the vouchers.
Matthew explained that Fargo Housing is committing to project based vouchers that they can allocate to a specific project that is different because vouchers normally go to a specific individual that they can take out into the private marketplace. By allocating vouchers to this specific project they can cover all 84 units on the project, to make sure all units are covered by the rental assistance to specifically address those that are most in need and at 50% or lower of AMI (Area Median Income).
Jessica Eberling asked how long the vouchers would stay with the project.
Matthew said the vouchers are fully committed for the life of the project.
Dave Piepkorn asked if this project is near public transportation.
Matthew explained that it is near a bus route but they would love to have a conversation about adding a stop closer to the property. Fargo Housing will also be providing a van for the resident’s needs. Because they have been allowed to reduce the overall parking needs due to the nature of the project they want to make sure the resident’s needs are covered. The bus runs right by but does not stop there yet.
Jim Buus motioned to approve the project, John Cosgriff seconded. Motion carried.
Application for PILOT for PRx Performance
Jim Gilmour explained that this company is looking at a major expansion. Over the next five years they anticipate adding 99, jobs all of those jobs will be over $13 an hour, 40% of them would be over $15 an hour. The request is for a 10 year property exemption, the first five years would be at 100%, years 6-10 would gradually increase.
Brian Brasch CEO of PRx Performance explained that in 2013 he and his partner Erik Hopperstad were sitting around a campfire having a discussion and came up with a business idea. The next morning they woke up and did something about it. They bought a domain name and started a business that was based on the growing Cross-fit Industry. Their competitor believed in street parking, they wanted everyone to fill up their garages with gym equipment and park on the street. Because snow plows would not appreciate street parking in this area, they developed space saving equipment that only takes up 4 inches of space on your garage wall when it is stowed away. From there things kept growing. They appeared on Shark Tank in 2016 and got a deal with Kevin O’Leary. They also received an update on the show. Last year they were the 17th best-selling Shark Tank Company and this year they are potentially going to be in the top ten best-selling Shark Tank products. PRx has enjoyed 300% growth year over year for seven years. This year they are anticipated to grow over 400%. They are strong believers in the community and look for ways to help out the community through donations and recently hiring employees from a struggling business, and bringing in lunch to their employees three times a week to help struggling restaurants during Covid.
They are expanding their product to hockey, which will be released next year. International growth, opening a warehouse in the Netherlands this fall, bringing the financing arm in-house later this year and finally launching a fitness app, where the competitor has 30 employees running their online fitness app and they currently only have one person running their app. They have moved seven times in six years and are hoping to build big enough to last at least a couple of years. They are looking to build a 140,000 square feet building of warehouse and offices. They would like to bring the manufacturing in-house one day. Their closest competitor has an 800,000 square foot building and they are out of space. This is an opportunity to grow in the Fargo area. Other cities would love to get this business and have reached out to them per Jim Gilmour.
Jum Buus asked Jim Gilmour to explain years 6-10 a little more. Jim said that projects have been done like this in the past, however this one is a little different, it still averages out to that 50% but gives them a little more help during the times they will need it the most. Normally it would be the 50% for those five years but this will gradually get them up to 100% so year eleven will not be a surprise.
Mayor Tim Mahoney congratulated Brian on their growth and also thanked him for all the help during the Covid times.
Mayor Tim Mahoney made a motion to approve and Kent Costin seconded. Motion carried.
Discuss ND Opportunity Fund
Jim Gilmour explained that this fund was created well over ten years ago and has nothing to do with the new federal opportunity zone, but has the same name. There isn’t currently a committee that looks at the application for these funds.
John Machacek from the Greater Fargo/Moorhead Economic Development Corporation explained that this fund was created out of the SSBCI (State Small Business Credit Initiative), came out of the jobs act in 2010 where federal funds were allocated to states to use for financing programs. $9.7 million was allocated for this fund to North Dakota, it was created through a 38 city consortium and originally it was run through Mandan with the Lewis and Clark Group running the loan program. The program requires support of the project by the city it will be implemented in. Other cities have the City Commission or Council provide the support letters. Mandan, for example, has the applicant provide a letter to the city that has their business description, project description and an explanation of what the benefits are to the community (investments, jobs, is it an expansion, is it a start-up), the city would then provide a letter of support to the group. The EDC at this time does not have standards in place for approving letters and they are still working on standards and the best process to go about approving companies.
Jim Gilmour asked should this be the process. Should the company go to the city and then to the commission or should we ask the commission to delegate the approval to this committee or delegate the approval to the Mayor.
Dave Piepkorn said if it is tax development it should go to our committee. However it should be vetted before it gets to the committee.
John Cosgriff asked about the Federal funds and what part originally did Fargo see participants in.
John Machacek said it was pretty low. Originally the funds were federal and they had to be turned over a number of times, before they were no longer federal and it has been through that turnover, so the federal part is no longer vital. John said more promotion of the program should be done and it would be nice to see more activity here.
John Cosgriff suggested that the Growth Initiative Fund would be the best place to promote this fund with businesses in the area.
John Machacek is one of the 38 members that would be able to shut down the program and disperse the money to the cities.
Jessica Eberling said she looks at it and doesn’t see a direction of strategy on how to implement it or any framework or structure to base it on. She would like to see something along these lines before implementation starts.
John Machacek explained other cities haven’t figured out their rules or strategies yet either. He does agree it would be easier if there was criteria in place.
Dave Piepkorn suggested to keep it on the agenda and keep working on it.
Mayor Tim Mahoney said he feels bad that Chelsey Steinlicht of Bright Future Learning Center has come to us asking for an endorsement for a business she would like to expand, she is the only one who has applied for this money and the loan money is just sitting there. He understands that we should have policy in place but was wondering if we could give Chelsey a letter of recommendation.
Jim Gilmour said that the amount of loan money is limited and if we spend 6 months deciding on strategies the money could all be gone.
John Cosgriff suggested that we could give her the letter and decide the strategy going forward.
John Cosgriff motioned to approve a letter, Jessica Eberling seconded. Motion carried.
Dave Piepkorn adjourned the meeting at 1:52 pm.