FARGO -- Doug Burgum is taking his interest in downtown revitalization on the gubernatorial campaign trail with a new pitch he calls his Main Street Initiative.
Burgum, the Republican nominee for governor, rolled out the initiative last week in a campaign ad and touted it in a talk here to a downtown development conference.
The initiative, based on what the Burgum campaign has released about it, is more of a statement of values than specific policy recommendations. The themes are familiar to anyone who has followed Burgum’s efforts to restore Fargo’s once sleepy and going-to-seed downtown. He’s done that through his real estate development firm Kilbourne Group.
Speaking to an audience at the North Dakota Downtown Conference, Burgum made an economic case for investing in downtowns or main streets as a key to a thriving city. The state’s Renaissance Zone tax credits -- among those expected to be reviewed by lawmakers in next year’s legislative session -- are a valuable tool in accomplishing that, he said.
Marvin Nelson, Burgum’s Democratic opponent in the governor’s race, agrees that the tax credits helped transform Fargo’s downtown, but argues that if left in place too long they can drive up rents and mostly benefit the wealthy.
Besides acting as a “pillar of economic success,” Burgum argues that concentrating development in a city’s core can help restrain property taxes by avoiding the need to extend expensive infrastructure.
Burgum has repeatedly said a “unique” downtown is crucial to attract a talented workforce of young professionals who seek out inviting urban environments. By mixing uses -- residential, retail and offices -- downtowns become more attractive and vital.
“If you want to recruit people here, you need attractive cities,” Burgum said, noting Job Service North Dakota lists 14,750 job openings, with 1,000 positions available in Fargo.
Downtowns are critical in making a city unique and inviting, he said. “They’re the differentiators.”
Downtowns are also more efficient in their demands on infrastructure and services, Burgum said, and are therefore friendly to taxpayers.
For decades, cities have focused their growth initiatives on the periphery, he said, in sprawling, low-density suburban neighborhoods that require costly extensions of infrastructure and city services.
Fargo’s 49 square miles occupy more space than some much larger cities, including Boston and San Francisco. By contrast, two cities of comparable size to Fargo, Boulder, Colo., and Ann Arbor, Mich., have footprints roughly half as large.
Fargo has added 162 miles of new streets in the past decade, Burgum said, and now has 2,000 lane miles that must be maintained and plowed -- longer than a drive to Bangor, Maine.
“It’s about how we design things,” Burgum said. “The more linear feet we have, the more it’s going to cost.”
That’s something city leaders and planners should keep in mind, given taxpayers’ frustration with increasing property taxes, Burgum said. Higher-density development, such as in downtown areas, cost less to provide services per person, he said.
Ironically, Fargo once was much more densely populated than it is today. In 1950, with a population of 38,256, Fargo had 6,880 residents per square mile. Today, Burgum said, with a population exceeding 123,000, Fargo’s density has dwindled to 2,525 people per square mile.
With significant mixed-used developments built in recent years, however, Fargo’s downtown is becoming increasingly dense, and is helping to subsidize the rest of the city, Burgum said.
North Dakota’s Renaissance Zone property tax incentives program has been adopted in 56 cities and has supported 1,355 projects as of 2014, Burgum’s figures show.
Fargo’s Renaissance Zone has driven a huge increase in the tax base of the city’s core, he said. The tax base was $197 million in 2001 when the program started and mushroomed to $689 million by 2015, with property values increasing steadily over the period, according to city figures cited by Burgum.
Despite the five-year tax break, Renaissance Zones increase property tax revenues over time, he said. In Fargo, the revenue stream has increased from $4.7 million in 1999, before the incentives were offered, to $8.9 million by 2016. Over the same period, according to Burgum’s figures, the tax rate decreased from 2.4 percent to 1.3 percent.
“This lowers the burden on everybody else because downtown Fargo is a cash cow,” he said.
Roberts Commons, a joint project of the city of Fargo and Kilbourne Group, will combine a 455-stall city parking ramp that will be “wrapped” by apartments and shops, a mixed-use development on Roberts Street.
Even though Nelson, Burgum’s Democratic rival, said Renaissance Zones become a crutch when left in place too long, he agreed they can help spur redevelopment if used as a short-term fix for up to 15 years.
“What you really do is breed dependency on the tax breaks,” Nelson said. “It just cycles and cycles and cycles.”
He said the rise in property values from Renaissance Zone redevelopment eventually drives up rents, forcing some shop and apartment tenants to move. “You’re going to see all these neat little shops are going to have a hard time,” Nelson said.
Also, the income tax breaks that go along with the property tax breaks mainly help the wealthy,
and are of little value to smaller, rural communities, Nelson said.
In response, Burgum called Nelson’s “gentrification” criticism a “false choice,” and said the Renaissance Zones “have a proven track record of attracting capital, creating jobs, revitalizing our communities” and increasing the tax base.
Because of Kilbourne Group’s extensive real estate holdings in downtown Fargo, and the firm’s use of the Renaissance Zone program, Nelson questioned whether Burgum can avoid conflicts of interest if elected governor. Budget austerity could mean the difference, for example, of cutting the Renaissance Zone incentives or helping the elderly, he said.
“If elected,” Burgum said, “I will take all the appropriate steps to assure North Dakotans that I’m fully focused on serving them with integrity and transparency.” He did not elaborate.
Marty Riske, the Libertarian candidate for governor, said economic development incentives like the Renaissance Zone are popular, but he is studying ways to ensure that taxpayers receive some of the economic benefits.
In his downtown talk, Burgum used the Roberts Commons project as a case study in the public-private partnerships he advocates to rejuvenate downtowns, and as an example of the long-term benefits to the local tax base.
The project will include $10 million in private investment that will generate $171,353 in property taxes in its sixth year when Renaissance Zone incentives expire, and thereafter. The ramp, Roberts Garage, will be financed by a $10 million city bond and is expected to generate $300,000 a year in parking revenues.
Later, on the south side of Second Avenue North across the street from the Roberts project, Kilbourne Group will build a mixed-use project called the Kesler building. That project, involving $10 million in private investment, will generate property taxes of more than $150,000 a year after the Renaissance Zone credits expire.
Together, the two project will generate more than $300,000 in tax-increment financing revenues that also will help retire the $10 million city bond, in addition to the parking ramp revenues, according to Kilbourne figures.
Critics of incentives like the Renaissance Zones, including Fargo City Commissioner Tony Gehrig, have argued that residential taxpayers have to pay more because of property tax incentives for developers.
“It’s actually the opposite,” Burgum said, noting the long-term payoff from the expanding tax base and increased property values.
By contrast, he said, “We spend tens and hundreds of millions of dollars on the edge and we never have a hearing on it,” referring to infrastructure and services to cover the city’s expanding footprint.