Grand Forks companies use property tax exemptions to expand
Several Grand Forks companies have announced plans to expand their facilities this year, and they’re getting help from the city to do it.
Those companies, PS Doors, Technology Applications Group and ODRA, all received approval for declining property tax exemptions from the Grand Forks City Council. That means they won’t owe any property taxes on their newly constructed addition during the first year of it being fully occupied then will owe 20 percent of the taxes in the second year, and so on until they owe 100 percent after the fifth year and beyond.
The exemptions only apply to the new expansion, and not the existing building.
Company leaders and economic development officials said the program helps soften the initial financial blow for employers looking to expand and add jobs.
“We’re taking on a tremendous amount of expense and new debt and lets you grow into that gradually over a couple of years,” said PS Doors founder Jim Satrom. “Then it’s there forever for the city.”
Municipalities can grant property tax exemptions under state law only when the Department of Commerce has certified that the company is a primary sector business. The state Tax Commissioner’s office defines primary sector businesses as adding value to a product, process or service that results in the creation of new wealth, or revenues generated by sales to customers outside North Dakota.
For Technology Applications Group, or TAG, that definition is especially relevant.
The Grand Forks company invented the Tagnite coating system to make magnesium components extremely resistant to corrosion. TAG President William Elmquist said the only place companies can get the Tagnite coating is Grand Forks.
Many of its customers are from the defense and aerospace industries, and parts come from places like Connecticut and Arizona, as well as Poland and Italy, Elmquist said.
Its new 1,600-foot, two-story addition will include a masking room where helicopter transmissions and jet engine gearboxes will be masked after the Tagnite has been applied “to ensure a proper paint application,” according to the company’s application for property tax exemptions.
“Having the property tax exemption that’s heavily weighted toward those first few years is a terrific help due to the immediate costs that you go through in design and engineering,” Elmquist said.
ODRA, which manufactures street sweepers, is adding a 4,125-square-foot addition to its current building to help accommodate its final assembly process. The company’s current setup requires some of the final assembly to occur outdoors, “where weather is a factor to the ability for (pre-delivery inspection) to be performed in a timely manner to meet logistic schedules,” according to its tax exemption application.
The City Council approved its request Monday.
Satrom said PS Doors hasn’t finalized how large its expansion could be. Its application indicates it could add up to 48,000 square feet and roughly double its current workforce of 60 over the next few years.
Satrom said they’re seeing growth across their product line, which includes industrial doors and fall and flood protection products.
“We’re seeing our customer base grow in all those areas,” he said.
While most Grand Forks City Council members have supported the use of property tax exemptions, one has consistently voted against them.
Terry Bjerke argued that there shouldn’t be any need for incentives to expanding businesses when Grand Forks is doing well economically.
“I don’t think it’s an incentive, it’s a gift,” he said. He also pushed back against any notion that the business wouldn’t expand if they didn’t receive the tax exemption.
Paul Lucy, director of the economic development and finance division at the North Dakota Department of Commerce said another benefit to tax exemptions is allowing businesses to stay competitive while they expand.
“It allows them to take those resources that maybe they would need to put toward paying their property tax bill to put those resources to other functions or expenditures within the company,” he said.
City Council member Dana Sande, chairman of the city’s Growth Fund Committee, said in a voicemail that the city isn’t actively marketing the program to businesses.
“I think overall it’s good for the city,” he added.