A rural renaissance: Investment incentives give boost to small ND towns
CASSELTON, N.D. - When First State Bank of North Dakota opened an office here 15 years ago, it wanted to be a major presence in the city’s downtown core.
Bernie Sinner, president of the Casselton branch, said it was difficult to find the right piece of undeveloped land at the right price to build the bank building it wanted – that is, until the city’s renaissance zone became available.
“It supported making the investment at the level that we did knowing those incentives would help soften the cost and provide the encouragement to do it right,” Sinner said, “so much so that we did it again 10 years later.”
Today, First State Bank’s loan-processing office sits across the street from the bank.
Sinner, who helped launch the city’s Renaissance Zone Authority and now serves as its chairman, said many other downtown Casselton businesses have been helped by the five-year property and income tax incentives, including a dental office, a pizzeria, a drug store and an apartment developer.
Statewide, there are 56 cities with renaissance zones, which are generally expected to spur investments and increase the tax base. Though the program had a big-city aura when it was debated in the Legislature in 1999, a majority of the cities with renaissance zones are, like Casselton, cities with populations smaller than 2,500.
Data from the state Commerce Department suggest that, resident for resident, small cities may have gained more from their renaissance zones than big cities.
By the numbers
Among the biggest backers of the program at the Legislature was the city of Fargo, which was fighting downtown decay at the time and saw a solution in the Michigan renaissance zone program that helped Detroit.
That caused rural lawmakers to fret that small cities wouldn’t benefit. They said the state would, instead, give up income tax revenue from big cities that are already growing.
Since the program began, there have been 1,355 projects throughout North Dakota: 810 in cities with populations greater than 2,500 and 545 in cities with smaller populations. The estimated value of the property tax exemptions for the big-city projects total $32.1 million and $5.2 million for the small-city projects.
But the total population of the big cities is nearly eight times larger than the small cities.
In Casselton, population 2,329, there are 3.4 projects and $105,600 in property tax exemptions for every 1,000 residents. In Mayville, population 1,858, there are 9.1 projects and $71,100 in exemptions. The exemptions are provided here as a rough measure of the relative value of the properties affected.
Compare those figures to Fargo, population 105,549. For every 1,000 residents, there are 2.1 projects and $73,000 in exemptions.
The discrepancy is even bigger in some small cities. Extrapolating from Hope’s population of 258, if the city had 1,000 residents, it would have 31 projects and $214,300 in exemptions.
Rikki Roehrich, the state Renaissance Zone program manager, said she thinks small cities and big cities have both benefited.
“Larger towns typically can accomplish larger commercial projects and attract financing for them, which you don’t see in the smaller towns,” she wrote in an email. “Having said this, the smaller communities still have their fair share of commercial projects – just at the appropriate size for the community.”
For Hope, which lies off the beaten path away from major highways, one of the big goals with its renaissance zone is to encourage housing, according to Karen Bergstrom, economic development coordinator for Steele County.
The housing stock is getting older and the county wants to encourage repairs and new construction to keep workers in town and maybe attract new residents, she said.
“There’s nothing better than rural living,” Bergstrom said. “Everybody loves to shop in Fargo and Grand Forks and Bismarck and the bigger towns. That’s great, but there’s something to be said for knowing your neighbors and knowing them well.”
Seven of the city’s eight projects are residential properties. The lone commercial project was Hope Electric, a contractor specializing in electrical and automation projects.
Bergstrom said encouraging commercial developments is also a goal, but the city’s location makes that difficult.
“Every monthly board meeting on the EDC they’re crashing their heads. ‘What can we do to draw somebody in?’ ” she said, referring to the county economic development corporation.
That’s a contrast with Casselton, a suburb of Fargo adjacent to Interstate 94, where seven of eight projects are commercial developments. The lone residential project is an apartment complex.
Sinner said the city’s renaissance zone allowed developers to replace deteriorating buildings and renovate historic buildings that enhance downtown. Hagen Dental, for example, replaced two old homes and allowed the dentist to be closer to his patients, who attend classes at the nearby school. Pizza Ranch and Casselton Drug & Floral rehabbed two historic buildings.
Sinner said Casselton is seeing new developments along the interstate, but it’s important to preserve downtown because the concentration of businesses build on one another. It also helps keep Casselton a rural hub for residents of nearby towns who might not want to drive to Fargo, he said.
In Mayville, a rural hub about halfway between Grand Forks and Fargo, the renaissance zone has resulted in 17 projects, most of them residential properties.
Like in Hope, there are many older homes in Mayville that need renovation, said Gary Winger, a retired city auditor and chairman of the Renaissance Zone Authority. One resident tore down a house and built a new one, he said. Down the road, a Grand Forks man bought a house and renovated it for his daughter, who is attending college in town, he said.
Winger said before he became a member of the authority, he, too, used the renaissance zone program to renovate his house, increasing its value two to three times.
That’s a reminder that local governments can expect to collect more taxes from his and other renaissance zone projects after the five-year tax exemptions.
Though the state gathers data that suggest how renaissance zones benefit each city – these are the estimated property tax and income tax exemptions – there is no comprehensive data showing how much property values have increased.
Roehrich said the state doesn’t require cities to submit that data.
But it’s clear that cities believe they’ve benefited a lot. Casselton and Fargo, among the first cities to get renaissance zones, will see theirs expire next year. Fargo city leaders plan to ask for a five-year extension, the maximum allowed under state law. Casselton city leaders are talking about doing the same, Sinner said.
Two more cities, Hillsboro and Tioga, are considering applying for their own zones, Roehrich said.