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Published October 08, 2012, 11:30 PM

Moorhead passes tax break aimed at attracting restaurants

MOORHEAD – The restaurant had become somewhat of a staple here, operating at its Highway 10 location for 12 years.

By: Erik Burgess, INFORUM

MOORHEAD – The restaurant had become somewhat of a staple here, operating at its Highway 10 location for 12 years.

But in May, Bennigan’s closed its doors, and the location sits unused to this day, a physical reminder of Moorhead’s noted difficulty in attracting and keeping new restaurants.

In late September, a local Applebee’s franchisee expressed interest in the location but told city staff the higher operating costs and significant renovation costs were impediments to them moving forward.

It seems like a familiar story. The City Council here has recognized Moorhead lags behind Fargo and West Fargo in restaurants and has talked about ways to counteract the trend.

In a council meeting Monday night, they voted to attempt a remedy by doubling time periods for property tax exemptions for new “full- and limited-service” restaurants here.

The move comes just two months after the City Council allocated $10,000 to study the effect of Minnesota’s lack of a tip credit, which allows employers to count a portion of tips as wages for purposes of paying the minimum wage. Minnesota is one of seven states without a tip credit.

“We’ve been striving so much to keep us on a level playing field,” Councilwoman Nancy Otto said.

The council voted 6-0 to extend exemption periods, with councilmen Luther Stueland and Mark Hintermeyer absent.

As defined by the council, a full-service restaurant is one where customers sit down and have their order taken. A limited-service restaurant is one where customers place an order at a cashier, but then have the food brought out to them at their table.

Currently, all new construction – whether industrial, commercial-retail or restaurant – receives a 100 percent property tax exemption on new building value, while the land remains taxable.

Under the new schedule, that exemption will last twice as long, so new building with a taxable value of $150,000 to $249,999 will get four years of tax exemption instead of two. A new building with a taxable value of $250,000 to $499,999 will get six years of exemption and one with a taxable value of $500,000 to $999,999 will get eight years of exemption.

The motion by the council will also provide a sales tax credit up to $25,000 for equipment or construction materials for a new or expanding full service restaurant, which should assist in the costs accrued when a new franchise takes over an existing building.

Funding for the sales tax credit will be taken from the city’s Border Cities legislation, which is provided by the state.

These council actions do not guarantee that Applebee’s will move into the former Bennigan’s location, director of community services Scott Hutchins said, but should spur new restaurant development in general.

Residents here have been clamoring for both kinds of restaurants for some time, council members say.

“One of the five major complaints I get from Moorhead is the lack of restaurants,” Councilman Mark Hintermeyer said in an August meeting.

Readers can reach Forum reporter Erik Burgess at (701) 241-5518