Tax-Exempt Review Committee - May 25, 2021 Minutes
TAX EXEMPT REVIEW COMMITTEE
Fargo, North Dakota
Regular Meeting Tuesday, May 25, 2021
The May 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 25, 2021.
The committee members present or absent are:
Present: Dave Piepkorn, Mayor Tim Mahoney, Bruce Grubb, Jim Buus, John Cosgriff, Jackie Gapp, Mike Splonskowski, Erik Johnson, Jim Gilmour, Joe Raso
Absent: Levi Bachmeier, Kent Costin, Jessica Ebeling
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 April 27, 2021. Bruce Grubb seconded, motion carried.
Application for New Industry Expansion for Standard Industries
Jim Gilmour explained that Standard Industries currently has a location at 14th Ave N and 42nd St, they are acquiring a much larger site that would allow them to triple their size. They currently have 38 employees and anticipate increasing to 80 employees, wages are all over $20 an hour, with half of those over $28 an hour. Their current building is 37,000 square feet and the new building would be 120,000 square feet. Typically on an expansion, the only part that would qualify for the exemption would be the expansion which for them would be about 70% of the building, the other 30% would pay property taxes as they are today.
Ryan Aasheim of EDC stated that this is another example of a strong company that is looking at future growth. They currently produce large tanks that they have to store and work on during the winter months outside. They are focused on Ag equipment and machinery.
Mike Lepine – Owner of Standard Industries – explained that the company has been around since 1977 and has added on over the years. Up until 2016 they produced 80% Ag Equipment. Since 2016 they have diversified, Mining Equipment has really taken off. They specialize in Stainless Steel and have been doing a lot of manufacturing for Cargill. They recently completed a flour plant in Tampa, Florida. About three years ago they did a lot of flour bins for the state mill in Grand Forks, North Dakota.
Jim Gilmour stated that the most important score is how many jobs you add over the first three years. That score is above what is required. Jim recommends approving this project at a 70% exemption, recognizing that the 30% is shifting over from one location to another.
Jim Buus asked Jim Gilmour to expand on that because his recollection is that someone who is expanding on the same location would get the percentage, but here is a project that is a mile and a half apart but it is still considered an expansion.
Jim Gilmour stated that this has varied by business. He said someone will likely buy their old place and they are comfortable with the 70% and they will also be paying property taxes on the land which is significantly more.
Jim Buus moved to approve at 100%, Mayor Tim Mahoney seconded. Motion carries.
CASH-WA (Former Food Services of America) PILOT Discussion
Jim Gilmour stated this is an informational item. Within the PILOT law, when there is an ownership change, the new owner needs to apply for the exemption. There hasn’t been a chance to reach out to the new owner yet. It is a ten year PILOT, after five years it moves to 50% exempt. This is not a new project. The application from the new owner will be for the remainder of the current exemption.
Discuss Tax Policy Draft
Dave Piepkorn asked for an update on Fed Ex due to some false acquisitions.
Jim Gilmour explained the Federal Express Site back in 1997 was Airport land and no taxes were paid. In 1999-2003 Airborne Express leased the land and applied for a 5 Year property tax exemption. On average the property taxes were $8,000 a year. The next twelve years Airborne Express paid $15,000 a year in taxes. Federal Express took over operation of that site in 2017 and paid $5,000 a year in property taxes and the buildings were exempt. Beginning in 2022 they will pay approximately $48,000 a year in taxes with 50% exemption. Starting in 2027 they will pay full taxes of approximately $93,000 a year. The airport received $43,000 a year in a lease, the landing fees are $133,000 a year and there is a two cent per gallon “fuel flowage fee” that the airport charges. When Fed Ex agreed to come to Fargo they promised there would be an equivalent of 50 full time jobs with annual wage of $24 an hour. They currently have 70-80 full time jobs at $26 an hour.
Dave Piepkorn stated there were accusations that Fed Ex did not do what they promised to do. It was on the news and talk shows, but clearly they have met their promises.
Jim stated that we have looked at the older tax exempt policies, there is a list of seven things we are trying to accomplish with these policies.
1. New Housing Construction: No changes, First owner is exempt for two years for $150,000, this applies to core neighborhoods and new subdivisions.
2. Remodeling and Additions: All projects qualify for five-year exemption if building is more than 25 years old (Previously, buildings 25-40 years old received three-year exemption), Commercial buildings outside of downtown qualify for exemption on additions.
3. Economic Development: Greater emphasis is placed on primary sector, greater emphasis is placed on pay and benefits in first three years, continue to give consideration to reputation of the company, add a review of experience rating regarding worker safety, clearly define when a company is eligible relative to start of lease or construction, scoring still under review with Greater Fargo Moorhead Economic Development Corporation (GFMEDC), Plan to work with GFMEDC on performance review.
Dave Piepkorn stated he would like to suggest that the city attorney have a document that is fairly brief that summarizes what the city is agreeing to, the number of jobs, the pay, how long the exemption is, how much the exemption is, then it would be signed by the Mayor and whoever is the head of the company, so it is a clear legally binding agreement. Each year on the anniversary date they have to report to the city auditor to make sure they are following through.
4. Core Neighborhood Housing: Replace and expand University Mixed-Use policy, projects must be consistent with land use plan and zoning, Greater incentives may be allowed if affordable housing is included, still requires “but for test” by City financial reviewer.
5. Brownfield (Redevelopment): Developer requests for Tax Increment Financing limited to “Brownfields”, continue to require “but for test” by City financial reviewer, continue to use “TIF Note” or special assessments for financing, limit term to 15 years.
6. Downtown Housing: No changes to base policy, greater incentives if affordable housing is included, still requires “but for test” by City financial reviewer.
7. Lower Income Housing: No changes, Exemptions may last up to 20 years if needed.
Jim included a slide that showed the advantage of doing programs such as Tax-Exempt. It included 12 projects that has a base value of $9,060,260 and increased in value of $388,860,084. Jim also included a slide of the Bison Block. In 2006 there was a property value of $542,200 and property taxes were $7,500, jump to 2020 and the property value is $6,900,000 and the property taxes are $95,000.
The meeting was adjourned at 1:52 pm.