The Grand Forks City Council voted 7-0 on Monday night to send potential tax discounts on a large, $30 million downtown project to the next phase of public scrutiny — where those discounts might draw skepticism from other local leaders.
The move opens the door for property tax breaks on the renovation and nearby construction at the office tower at 322 DeMers Ave., where Edgewood Development Group hopes to begin building a new boutique hotel, events center and condominium on adjacent land during the spring of next year. The current building houses extensive commercial space, including Northwestern Mutual and Sky’s restaurant.
As a result of the council’s vote, Edgewood’s bid for tax breaks will now go before a committee of local leaders — from the city, county, Park Board and School Board — who will weigh a third-party financial review of any tax discounts. Each group will later decide whether they wish to participate in the tax breaks, though the local Park District’s participation is bound to the city’s, Grand Forks City Administrator Todd Feland said.
Feland said the details of the discounts have not yet been settled. But developers are expected to pursue local tax breaks in two key ways: through this application process, formalized in 2018, and through a local “renaissance zone” policy, which encourages development in key city areas like downtown.
The renaissance zone policy will allow developers to apply for a 100% local property tax discount on new development that would be granted by the city — which applies to all local taxing entities — and a significant income tax discount that would be granted by the state. Those discounts would last five years, Feland said.
The details of the discounts that Edgewood pursued before the council Monday are still not settled, Feland said, but could last 10 years and relieve the group of 100 percent of local taxes on new development. The result could be 15 years of deeply discounted local taxes.
“They’re still going to pay taxes on what’s there, it’s just the increased value (that’s discounted),” Feland said of the property taxes.
Any discounts against property taxes after roughly $30 million are invested are expected to be significant, which could mean important forfeited revenue to some local groups.
Reached on Monday, local School Board President Bill Palmiscno voiced hesitation.
“I think this will be a hard one to sell for us, because we’re looking at asking the general public for a bond issue shortly, and it may look like we’re giving away some tax dollars and then asking them to up their taxes,” he said, referring to a vote expected next year to help fund the district’s deferred maintenance.
It’s not clear how that would affect the project, though. Feland pointed out that Phil Gisi, chairman and CEO of Edgewood, has insisted that the discounts are necessary for its completion. Feland added that it would prove difficult for other groups to move ahead with tax discounts if all three major taxing groups don’t move in concert.
“If one part of the three-legged stool doesn’t come through, I think that would have an impact on the other two legs of the stool,” Feland said.
Gisi emphasized that he would not have approached the city for the tax breaks if they weren’t necessary to the project’s completion. He said that, because of an economy of scale, he cannot simply reduce the size of the project in the face of lower public assistance. That would drive up the price per square foot, he said.
“There will be a lot of questions in the future, I’m sure. But I’ve done a lot of projects in the upper Midwest, and I’ve never asked for (this kind of tax break) before. I’ve never gone through that process. In this case, the project really needs assistance,” he said.