FARGO — Opportunity zones, created to spur investment in economically distressed areas by offering tax incentives to investors, are just beginning to show signs of altering the development landscape in North Dakota.
So far, state securities officials have received notices from a couple of qualified opportunity funds, including Kilbourne Group’s Great Plains Opportunity Zone Fund, based in Fargo.
Nationally, according to Opportunity DB, which compiles opportunity investment zone funds, there are 117 opportunity funds with an investment capacity of $37.4 billion.
With bipartisan support, the opportunity zone program was enacted as part of President Donald Trump’s tax cuts at the end of 2017. Now, after a New York Times investigation, Democratic lawmakers are criticizing the program, arguing that instead of benefiting low-income communities by spurring investment in housing as well as businesses and the jobs that go with them, they benefit the wealthy.
Kilbourne Group, which is focused on real estate development in downtown Fargo, is using the opportunity zone incentives as one of its financing tools in three projects that together will add 320 to 340 apartment units to the downtown district and require about $59 million of total investment.
They include the Mercantile building, a mixed-use building planned for the location of the former Schumacher Goodyear on Broadway. Pile driving is slated to begin next month.
Next spring, Kilbourne Group, owned by North Dakota Gov. Doug Burgum, plans to start construction on two other mixed-use buildings, combining commercial and residential spaces.
One is the site of the former Nestor bar, 1001 NP Ave., that would involve two four-story buildings with 147 apartment units. The other is at 1017 4th Ave. N.
“Downtown Fargo is the only place that we are working on projects in opportunity zones,” said Mike Allmendinger, Kilbourne Group president. Kilbourne is still seeking investors for the projects.
Under the opportunity zone program, touted as an economic development tool, investors can receive tax breaks, including discounts or deferments to entice investment in areas that otherwise would not likely attract financing.
James Leiman, North Dakota’s director of economic development and finance, said rules and regulations are still being written for the opportunity zone program, which might explain why projects so far appear to be limited.
“There seems to be a lot of excitement around this and the potential to revitalize communities,” he said, adding that projects are largely invisible until they start actively seeking investors and must notify regulators.
“Until someone files, you really don’t know,” Leiman said. “You’re just starting to see movement. We’re at the infancy of this.”
Earlier this year, the Greater Fargo Moorhead Economic Development Corp. hosted two information seminars for prospective opportunity zone investors and developers.
Kilbourne Group was part of the presentations, said Ryan Aasheim, the EDC’s chief business development officer.
“Other than that, it’s not been a lot of outward activity,” he said. “Kilbourne Group with the Great Plains Opportunity Fund is probably the most active player in the state. I’m not aware of any other funds that have formed or have investments. That doesn’t mean they’re not happening.”
Brian Ritter, president of the Bismarck-Mandan Chamber Economic Development Corp., said his office held an informational seminar on opportunity zone investments, but has heard very little since. He is unaware of any funds or projects in development in Bismarck-Mandan under the program.
Karen Tyler, North Dakota securities commissioner, said rules and regulations for the program should be finished by the end of the year. Also, she added, investors seeking the most benefit under the opportunity zone project have an incentive to make their investments by the end of the year.
“I don’t think we have a good sense yet of how much activity is out there,” she said. “We could see activity pick up” by the end of the year, Tyler added.
The opportunity zone incentives “certainly have the potential” to help low-income communities that lack investment to spur economic growth, Leiman said.
“This has serious potential to do great things here,” he said. “I’m hoping North Dakota can be more or less the case study for rural America.”
John Strand, a Fargo city commissioner who often advocates for more affordable housing when projects seeking incentives come before city leaders, said the opportunity zone projects in development in Fargo will help revitalize areas of downtown.
The former Nestor and Goodyear sites, he said, have become rundown parking areas.
“They’ll be dramatically improved from what they are now,” he said. The Kilbourne projects combine residential and commercial uses with parking that serve people who want to live in or near downtown, he said.
“It’s really good stuff.”
The opportunity zone program does not require affordable housing, nor is affordable housing required under city incentive programs, something Strand hopes will evolve in the future.
Here is an online map of opportunity zones in Fargo-Moorhead prepared by the Greater Fargo Moorhead Economic Development Corp.