More in Moorhead: Once sleepy city booming for third year

Just east of the Red River and north of farmland stretching beyond sight, a sign queries: "Isn't it time to call south Moorhead home?"

For an increasing number of families and businesses, the answer posed at the entrance to Hampton Place is yes.

After missing out on the explosive 1990s growth in Fargo and West Fargo, Moorhead is heading to a third consecutive year of record development.

Later this month, houses will begin to go up at the massive 1,000-unit development planned around Moorhead's year-old Horizon Middle School. Within a couple of years, two new big-box retail stores are expected to spring up there.

Two major farm implement dealers are setting up new headquarters in the city, expected to be valued at up to $7 million combined.

When developers call City Hall these days, they're not just scouting for future locations, they're looking for land.

The uptick in activity begs the question: Why now?

Developers, city officials and others credit many of the same factors in explaining the city's recent momentum.

- The $64 million bond approved three years ago to pay for two new school buildings and the renovation of three schools.

- A growing recognition that while income taxes are higher in Minnesota, other factors like lower property taxes and utility bills counteract the disparity.

- The inevitable - albeit slow-to-develop - result of growth on the Fargo side of the river.

"There was no doubt as the pie was growing larger, sooner or later Moorhead would get a larger share," said City Manager Bruce Messelt. "There had to be a point at which Moorhead was going to participate, regardless."

Moorhead definitely was not at that point in the 1990s.

Between 1994 and 2000, the total value of residential and commercial construction in the city averaged about $27 million per year, according to city building permits.

Fargo and West Fargo's population grew by 20 percent from the 1990 census to the 2000 census. Moorhead lost 118 people that decade.

Fueled by the perception that the tax burden was far higher in Minnesota, most development ended up on the North Dakota side, said Beth Grosen, the city's business development specialist.

"There was a common understanding that the migration was only one way," she said.

In 2002, Moorhead and Clay County were home to about one-third of the people in the two-county area, but only one-fifth of the jobs, according to the Bureau of Labor Statistics.

"It just seemed nothing was here, and nobody was doing anything about it," said Andrew Skatvold, chief executive officer of Paragon Development.

That changed about three years ago.

From 2002 to 2004, the average annual value of construction was more than $80 million - triple the average for the eight-year stretch starting in 1994.

The trend is continuing this year, with about $72 million in construction in the city this year through August.

As of April 2004, the state demographer estimated the city had grown by about 1,300 people since the 2000 census. And the city expects to add 350 households this year.

In Moorhead's 28 active subdivisions, 2,500 lots should be platted by the end of the year, Messelt said.

Homes should start to go up at Horizon Shores within a couple of weeks, said Scott Neal of R.D. Offutt Co., the firm building the subdivision, which when fully built will be Moorhead's largest commercial development.

RDO expects it will take about seven years to complete construction on the 420-acre plot of land just south of Horizon Middle School.

In the first wave of building this year and next, about 100 houses and 100 apartment units will be built, Neal said.

Being adjacent to the new school makes the houses - which will cost from $129,000 to the mid-$400,000 range - an easy sell to families, he said.

"It's huge. It's a big part of our marketing," he said.

Neal said about 70 percent of buyers are families with children or couples planning to have children.

There's similar growth near the city's other new school, Reinertsen Elementary.

Set along recently paved 40th Avenue South, the school is surrounded by new housing complexes just starting to take shape.

Paragon Development is building about 60 townhomes north and west of the school, said Jeff Schaumann, development president. Most of the 16 already built are sold, he said.

Schaumann, who was Moorhead's city planner about two years before taking a job with Paragon earlier this year, said putting the new schools on the edges of the city was a smart move that sparked housing growth on the farmland surrounding them.

"That helped set the table," he said.

Brenda Martinson, managing broker at Coldwell Banker in Moorhead, said her real estate agents have seen a big increase in the interest in Moorhead homes.

She credits Moorhead's growth to new schools and the city's work in explaining that lower property taxes and utility bills make the cost of living in Moorhead similar to that in Fargo and West Fargo.

When growth began, it naturally snowballed, she said.

"I think once you get over a barrier, it just kind of dominoes," she said.

Then again, the growth in Moorhead may just be a natural reflection of the overall health of the area's economy, said Larry Leistritz, a professor of agricultural business and applied economics at North Dakota State University.

"This may be a good example of the rising tide lifting all the boats," Leistritz said.

With housing and population on the rise, it's not surprising that Moorhead is seeing renewed interest from businesses, Grosen said.

"The old adage that with rooftops comes commercial is true, I believe," she said.

Developers who contact the city now seem readier to move on projects, Grosen said.

"In the past, there have been quite a few lookers who were just exploring things," she said.

The city is attracting more interest from regional developers, Messelt said. For example, a Twin Cities developer plans to build a Walgreen drug store next year where the Arvid Benson Home Furnishings Store stands along Main Avenue.

Messelt said as Moorhead's population and per capita income rise, the city will be able to compete for major retail stores looking to put a second store in the area.

But for those companies, a store in Moorhead is no different than a store in Fargo, he said.

"From a business standpoint, it's one market and one community," he said.

RDO has two big-box retail stores, both more than 100,000 square feet, lined up to move in south of Horizon Shores near the future interchange off I-94 onto 34th Street, Neal said.

He would not name the specific businesses.

Construction is expected to start in 2007 on the interchange, and both stores plan to be open for business before the new ramp is ready, Neal said.

The appeal for the stores is the mass of housing that will surround them, he said. With more shopping options comes more population.

"People attract businesses, and businesses attract people," he said.

But added population isn't the reason Moorhead has been drawing businesses to its industrial and business parks, Grosen said.

While tax incentive programs like the Job Opportunity Zones help, companies like RDO Equipment, Gopher Excavating and Midwest Construction Services moved to Moorhead because there is room to develop around the interstate, she said.

"I think the incentives are part of it, but I think it's the land and the interstate accessibility," Grosen said. "There aren't that many parcels of land near interchanges with great visibility and exposure in the metro."

That's why Titan Machinery is planning to move its headquarters from south Fargo to near the Moorhead airport, just off the interchange of Highway 336 and I-94, said Titan President Peter Christianson.

Titan chose the spot because of the easy freeway access and room to expand, he said.

"It's becoming more of an issue to find undeveloped land that's available," he said.

It could become more of an issue as the city pushes south, where most new housing and businesses have located.

City services like sewer and water do not stretch south of 52nd Avenue South along the Red River and 46th Avenue South farther east.

Of those 2,500 plats expected to be on the books by the end of the year, only 1,200 will have city services, Messelt said.

That boundary might push farther south later this fall when the City Council considers borrowing another $10 million to expand services. It has already issued $50 million in bonds since 2003 to install the infrastructure serving the city's edges.

To pay for those loans, the city needs to add about 50 acres of development a year, Messelt said. In the past three years, it's adding about 500 acres annually.

But will it be able to sustain that growth? At some point, it should level off, Messelt said.

"I don't think it would be realistic that the city of Moorhead is going to grow 20 percent over the next decade," he said.

Whether Moorhead will keep expanding at its current clip is the million-dollar question, Paragon's Schaumann said. But if the houses keep coming up, the businesses will follow, he said.

"People will only drive so far to go get a carton of milk," he said.

Readers can reach Forum reporter Dave Roepke at (701) 241-5535