Let’s go back in time. Think back to 1999 and recall what downtown Fargo was like then. Recall the rundown appearance of many buildings. Conjure the drab vacant lots used for surface parking. The dreary, worn-out look of the city’s core.
1999 was the year that the North Dakota Legislature passed a law creating the Renaissance Zone program, which allows cities to create improvement districts and to permit property tax and state income tax abatements for five years for qualifying projects.
There’s no question that the Renaissance Zone and other incentive programs have transformed downtown Fargo. Downtown is now an inviting, vibrant district that has drawn residents to new apartments and condos along with retail shops, offices, restaurants and bars.
Yet skeptics and naysayers continue to snipe about Fargo’s use of incentives to spur development to give new life to the heart of the city and to expand the tax base.
Fargo leaders have approved a study of the performance of incentive tools including the Tax Increment Financing program, commonly called TIP, and Payments in Lieu of Taxes, or PILOT. Those programs, along with the Renaissance Zone program, have been instrumental in transforming downtown.
The numbers confirm what our eyes tell us. Downtown property values in 2000, when the Renaissance Zone program was just getting started, totaled $245.8 million. By 2017, downtown property values had more than doubled to $541.1 million, an increase of 120%.
Fourteen TIF projects involved blighted or underused properties with a base value totaling a mere $9 million. The value of those projects mushroomed to $392.2 million. True, it takes time for the city to collect the increased property taxes from those significant improvements.
TIF’s come with property tax grace periods that have ranged from five to 39 years and averaged 14.7 years. Projects included the Dakota Bank redevelopment downtown, the Radisson hotel, the Roers Stop ‘N Go development near North Dakota State University and Shotwell Commons. There's no denying that the city gained tremendously by exercising patience in getting a return that helps to finance city services while at the same time giving new life to rundown, eyesore properties.
More recent TIF projects enabled three of downtown Fargo’s most ambitious developments, one of which, the RDO Building, has changed downtown’s skyline.
The RDO Building, along with Roberts Commons and the Mercantile building, all include city parking ramps, and wraparound buildings that include residential and commercial uses. Combined, the value of the three properties was $5.7 million. Today, after the parcels were enhanced through development, they are worth a combined $117.6 million — a total that will increase further with completion of the Mercantile building and Kesler building, part of the Roberts project.
The projects clearly have been successful in expanding the tax base, but the study will show how efficient the incentives have been. The study also will show how Fargo’s use of economic development incentives compares to similar cities in the Midwest.
It's wise to have an independent, expert look at what we're doing and to see how we fare against like-sized cities in the region. If the study finds problems, it should point to solutions.
Once finished in January, the study should help to increase public confidence in incentives and how they're used. The results should confirm what our eyes tell us when we stroll through downtown.