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Minnesota border cities want a better balance with the Dakotas

GRAND FORKS -- Minnesota cities along the North Dakota border are hoping lawmakers will continue providing money to help retain and grow businesses on the east side of the Red River.

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Once the center piece of Moorhead's downtown redevelopment, Juano's moved across the river to Fargo in 2014. The location has since been taken over by Rustica Eatery. Forum file photo.

GRAND FORKS -- Minnesota cities along the North Dakota border are hoping lawmakers will continue providing money to help retain and grow businesses on the east side of the Red River.

Minnesota lawmakers are considering $1 million for tax reductions to border cities, including East Grand Forks. The cities then would disburse the tax credits to local businesses that are approved.

The program has existed since the 1980s, and helped East Grand Forks land a new 67-bed hotel now under construction off U.S. Highway 2, said the city's Economic Development Authority Director Paul Gorte.

"It offsets some of the cost differences between us and North Dakota," Gorte said.

The bill making its way through the Legislature, the House version being authored by state Rep. Deb Kiel, R-Crookston, seeks some more permanency to the credit. East Grand Forks was down to about $14,000 in available funds before the state added more to the program, which was used for the Fairfield Inn and Suites by Marriott.

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"If you don't have the monies, you don't have the tool to offset some of the cost differentials," Gorte said. He said the city has helped more than 200 businesses with the credit over the years, and the hotel specifically is receiving $100,000 in tax credits.

David Murphy, the East Grand Forks city administrator, testified in a legislative committee last month that the city is hoping to attract some "support businesses" that could come with the Grand Sky unmanned aerial systems tech park at Grand Forks Air Force Base.

"We are excited for the opportunities we have in the future," he said.

History

The creation of tax credits to help border communities came in the mid-1980s, after 50 businesses left Moorhead for Fargo in the span of 18 months, according to a 1989 article on the Federal Reserve Bank of Minneapolis' website. A few years later, that flight had slowed considerably.

The incentives today are available for businesses in Moorhead, Breckenridge, Dilworth, East Grand Forks and Ortonville. Recreation and entertainment facilities are ineligible for the credits, as are businesses owned by a fraternal or veterans organization, a public utility or one that's used in the operation of a financial institution.

Scott Hutchins, the deputy city manager in Moorhead, said his city uses the tax credits as a tool for both business attraction and retention. The credits can be used in various ways, but some businesses have used it to offset worker's compensation costs.

Kiel's bill, which has a companion in the Senate authored by Sen. Kent Eken, DFL-Twin Valley, would split the $1 million up annually on a per capita basis between the five border cities. The current budget includes $750,000 a year for the program, Eken said.

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But more important than the amount, Hutchins said the bill seeks more certainty. In some years, the program wasn't funded by the state, he said.

"What this bill seeks is an appropriation, but also a permanency, a sustainability to that appropriation, where cities like East Grand Forks and the other border cities can count on that appropriation being there," he said.

Differences

North Dakota business and state leaders often boast about what they see as a more favorable tax and regulatory climate on their side of the border. A Grand Forks business would pay an 8 percent lower tax rate than one in East Grand Forks, according to a Forum News Service story.

Kiel said there are some additional issues for border cities, such as the increased tobacco tax in Minnesota and a new law to require water sprinklers on certain houses. A potential gas tax increase would be another blow, she added.

Still, Eken said existing law helps shield border gas stations from gas tax increases. He pointed to that law as one way Minnesota has recognized the unique situation of border communities and their businesses.

Still, Eken pushed back on a suggestion that the credits are an acknowledgement that North Dakota has a better business climate than Minnesota.

"I think Minnesota has a very good business climate as well," Eken said, pointing to funding for education, research and infrastructure. He said North Dakota has benefited greatly from the Bakken oil boom, a natural resource Minnesota lacks.

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"That creates a high level of disparity between the two," he said.

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