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On 3-2 vote, Fargo leaders approve $15.5 million in tax breaks for downtown tower

FARGO - The Fargo City Commission on Monday approved an estimated $15.5 million in property tax exemptions and a loan to help the developers of a downtown high-rise despite opposition from two city commissioners.

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A rendering of the Block 9 project proposed in downtown Fargo. Courtesy Kilbourne Group.
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FARGO - The Fargo City Commission on Monday approved an estimated $15.5 million in property tax exemptions and a loan to help the developers of a downtown high-rise despite opposition from two city commissioners.

The centerpiece of the $98 million Block 9 project is an 18-story tower to house a hotel, offices and condominiums. The project also includes construction of a parking garage and the renovation of the plaza on the east side of Broadway between Second and Third Avenues north.

The city will borrow $15 million to help Block 9 finance the 340-car garage and redo the plaza. The garage would be owned by Block 9, whose tenants would get to use it from 6 a.m. to 6 p.m. weekdays.

Debt payments will be the responsibility of the developers, and Fargo Planning Director Jim Gilmour said the city has “adequate security” in the event Block 9 stops paying.

Block 9 is backed by Kilbourne Group, RDO and TMI Hospitality. Kilbourne is owned by Doug Burgum, a Republican candidate for North Dakota governor.

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City Commissioner Tony Gehrig voted against offering any tax assistance to Block 9. “I support the project. I think it’s a fantastic idea,” he said. “But we’re asking a lot from the taxpayers in order to make it happen.”

Commissioner Mike Williams voted for some of the tax assistance, but not a $6 million break through a program called payment in lieu of taxes. He said it was highly unusual and wrong for Block 9 to get a tax waiver the developers could use to pay back the city bond for the parking garage.

“I haven’t found a place yet that has allowed a waiver of taxes, which is $620,000 a year in this case, that they can apply to pay back a city bond for something they own and operate at the end of the day,” he said. “I think there’s room here where the developer can own the parking that they need and the city could own a portion of this.” He asked the Commission to consider continuing negotiations with Block 9 to that effect.

Gehrig said the city’s policy was clear that payment in lieu of taxes should not be used for “hotels, office space.”

But Mayor Tim Mahoney and Commissioners Melissa Sobolik and Dave Piepkorn overrode Gehrig and Williams to approve three separate tax exemptions worth, according to Gilmour, $15.5 million over 25 years. Apart from $6 million through payment in lieu of taxes, Block 9 will get a tax break of $2 million through the downtown Renaissance Zone. The City Commission also approved $7.5 million in tax increment financing.

Business leaders appeared before the Commission prior to the vote to endorse the project. Mark Nisbet, chairman of the Downtown Community Partnership, said it was “something we’re extremely excited about. … It just bodes very well for us in the future of this great community.”

Piepkorn added: “This is a great addition not just to the downtown but to our city. I think it’ll be a crown jewel.”

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