Forum Editorial: Fargo should go further in improving transparency of its tax breaks
Fargo city leaders are pursuing a policy to increase job quality and worker safety in projects that get tax breaks. They should go further in making economic benefits of tax breaks transparent.
The city of Fargo awards millions of dollars of tax breaks to businesses in the expectation that the incentives will generate jobs and expand the tax base.
Especially in downtown Fargo, we’ve seen the tangible results of these incentives. The dramatic transformation of the city’s core, with impressive new buildings alongside extensive renovations of old buildings that were showing their age.
These improvements have undeniably helped to significantly expand the city’s tax base. Downtown, where most of these tax exemptions have been awarded, has a property tax base that has more than doubled since 2000.
But should the city be trying to accomplish more with the millions in tax breaks that it grants?
The Fargo City Commission has adopted a new policy that urges that jobs created by economic development incentives should pay at least $15 per hour. The new policy also encourages affordable housing, a significant need.
Importantly, the city now will have the ability to “claw back” incentives when promised benefits don’t materialize. For that to be meaningful, the city will have to closely monitor development projects to ensure that they’re performing as the businesses said they would in order to get the incentives.
That will require close tracking and reporting of the projects. If it turns out that some of these projects don’t meet their goals, city officials should exercise claw-back provisions when the job numbers or pay lag significantly below the objective.
Although the city’s tax base has grown significantly, there’s been little in the way of accountability to ensure that the tax breaks are performing as intended.
City leaders will get a look at how Fargo compares to peer cities in terms of tax breaks and an evaluation of the incentives’ effectiveness in two reports that will be presented to the City Commission.
This information, once compiled, should be made readily available to the public. The reports should be posted online. So should the monitoring reports to see if projects pan out in terms of the jobs and pay levels that are the justification for the tax breaks.
The city should have an online dashboard that allows interested citizens to check on the performance of economic incentives. Right now, the city publishes an annual report on property tax exemptions and projects using tax increment financing, but the report doesn’t provide information indicating what economic benefits these programs generate.
Leaders at City Hall should welcome this high degree of transparency. It will demonstrate what we’re getting for the tax breaks, information that will increase public support for the incentives.
If performance is below expectations, leaders and their constituents will know and corrective actions can be taken.
Tax breaks have undoubtedly helped to greatly spur growth in the tax base. But as the city seeks to further other goals, including ensuring the quality of jobs that are created, transparency will be crucial to keeping the effort on track.
We’re encouraged by the good government steps City Hall is taking to improve the transparency of its economic incentive programs. It can go a bit further to make this information readily available and easily understandable to citizens.