Once again Cass County Commissioners have questions about the appropriateness of tax breaks for downtown Fargo development projects. Once again a divided commission is asking for more information. Once again the projects’ future is in question and projects were at least briefly put on hold.
County commissioners, in two 3-2 votes, denied tax breaks for three multiuse projects on the west end of downtown Fargo, all being developed by Kilbourne Group. A majority of county commissioners said they want more information, so talks continue.
The discomfort of the three commissioners — Mary Scherling, Rick Steen and Chad Peterson — partly concerns the long period of tax forgiveness, up to 15 years. That’s as much as three times longer than the five-year grace period for the Renaissance Zone incentive program, which has been widely used.
We’ve seen this movie before. Almost two years ago, again by a 3-2 split, the Cass County Commission rejected tax breaks for affordable housing apartments, again on the western edge of downtown Fargo.
That apparently was the first time county commissioners exercised their review authority of tax incentives, a role granted by what then was a new law. County commissioners acknowledged their unfamiliarity with the incentive programs, which city officials are well acquainted with.
We’re happy that county officials take their oversight role of tax incentives seriously. They shouldn’t be given lightly, since they delay the collection of taxes generated by a project — but the payoff is many times greater, so taxpayers gain handsomely over the long term.
One of the Kilbourne projects now in limbo, the Kesler project, located behind the Black Building between First Avenue North and Second Avenue North, will replace dingy surface parking lots that generate essentially no tax revenues. During the first five years, the $17.2 million Kesler project would pay about $130,000 per year. But once the grace period ends, following years six through 15, the building will generate $600,000 per year for local governments.
Without the full tax break, Kilbourne representatives have said, the firm wouldn’t be able to move ahead on another $400,000 in architecture and design work until an agreement with the county is struck. And if the incentives aren’t granted, according to the company, the project would have to be pared back by millions and rents would have to go up 15% or more.
Unfortunately, the county’s questions arise as the vetting for these projects by Fargo city officials is well along, although city commissioners have yet to decide whether to award the tax breaks. These projects go through planning and tax incentive committees before reaching city commissioners.
Businesses won’t go ahead with multi-million investments in the face of so much regulatory uncertainty.
Here’s an idea to streamline the process and engage county officials earlier in the process. School board members could opt to join in, since they also have review authority under the still-new law, though so far haven’t voted to block or delay incentives.
Could the city, county and school board form a joint committee to review these tax incentive applications? That way, county officials would be part of the discussion early on, and could ask questions early in the process.
Short of that, could county officials attend the city’s review meetings? It appears this situation will be recurring, so delays and uncertainty could become routine. That’s not good for downtown redevelopment, which is a resounding success and should continue.
There has to be a better way. We can do better than this. Let’s find something that works.