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Downtown Fargo high rise would require $14M investment from city

FARGO - The Block 9 high rise proposed for downtown would require the city to invest $14 million in a new parking ramp and renovated plaza, but would also provide at least $50 million in new taxable property, according to city staff.

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This rendering, provided by Kilbourne Group, shows a view of the plaza of the Block 9 tower that the group is aiming to start construction on sometime this fall.

FARGO – The Block 9 high rise proposed for downtown would require the city to invest $14 million in a new parking ramp and renovated plaza, but would also provide at least $50 million in new taxable property, according to city staff.

The figures were part of a proposed tax-increment financing district, which would dedicate higher property taxes generated by the new building to public investments in the area.

The high rise will be at least 16 stories high, based on a model developers at Kilbourne Group have been showing to city officials. Four floors will be occupied by the Fargo-based R.D. Offutt Co. and RDO Equipment Co., which are also developing the building.

In the public-private partnership envisioned by the three firms, the city itself would be a developer.

Scott Neal, RDO's vice president of real estate, said the city's help is needed to make the now-drab plaza a landmark gathering space for the city where there is something happening every other day, from a farmers market to an ice rink.
"We envision much more for that area, something akin to a Rockefeller Square or a Ghirardelli Square in San Francisco."

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Block 9 will probably be under construction for at least two years before R.D. Offutt and RDO Equipment can move its staff from around the Fargo area into the building, Neal said.

The Planning Commission agreed Tuesday to recommend the TIF plan to the City Commission, which is expected to discuss the matter at its March 14 meeting.

Underused land

The TIF district would encompass the entire block now occupied by U.S. Bank, U.S. Bank Plaza and several parking lots. The developers' plan calls for the building to be in the northwest, the plaza on the southwest and a parking ramp in the northeast. Nothing would change with the bank, which is in the southeast.

One of the justifications for a TIF district listed in the plan is it would lead to redevelopment of a "blighted area," defined here more as underused land. This redevelopment also fits with the city's Go 2030 growth plan, which emphasizes infill buildings and quality construction.

The developers' model shows ground-floor retail, similar to what's already present on Broadway; six floors for office space, including four for RDO; four floors for the hotel; and five floors for condos.

City Planner Jim Gilmour said he thinks the actual cost of building the high rise would probably be in excess of $90 million, but the market rent for such a space would probably justify an assessed value in the $50 million range.

The assessed value of the block, including U.S. Bank, is currently $4 million.

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Rewards and risks

Assessed value is used to calculate property taxes. The TIF plan says the city can expect to collect $700,000 a year from Block 9. Over the presumed 25-year life of the TIF district, that revenue would be enough for the city to issue bonds totaling $11 million.

That's still $3 million short of the amount needed for the public investment.

Gilmour said he anticipates the difference would be paid by the development firms and with parking fees, meaning taxpayers wouldn't shoulder the burden.

The idea of a TIF is to stimulate development that might otherwise not have occurred. But the risk is a development wouldn't have as high an assessed value as estimated, leaving the city with less revenue than it expected to pay the debt on its investments.

According to the City Assessor's Office, there are 14 TIF districts in effect citywide. The properties in those districts have seen assessed values increase by $252 million, or 3,063 percent, and the city has seen revenue from them increase by $3 million a year, or 3,046 percent. There are four more TIF districts with projects still under construction or have yet to start, including the new downtown parking-ramp development at Roberts Street and First Avenue North. That project is also being done by Kilbourne Group.

On the Web: To see the Block 9 TIF plan, go to page 14 of the PDF file at bit.ly/21IenrB.

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0B6NQBzkycuE2bzJvT1A2UV83a0U.jpg
A diagram of the Block 9 tower proposed by developer Doug Burgum in downtown Fargo. Source: Special to The Forum.

Related Topics: KILBOURNE GROUP
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