Grand Forks Public Schools committee pushes smaller tax break for downtown hotel proposal
The school board is set to vote on the smaller tax break later this month.
GRAND FORKS — Grand Forks School Board members will later this month consider a smaller tax break for a proposed hotel in downtown Grand Forks.
The school district’s finance committee voted unanimously on Tuesday to forward to the school board a “payment in lieu of taxes” plan for the Olive Ann boutique hotel that would, in effect, raise the amount of property taxes the hotel’s developers would pay in the middle five years of a 15-year tax break and forward the additional tax revenue to the district.
It’s a difference of about $23,000 for each of those five years, according to School Board member Doug Carpenter, a CPA who has been skeptical of the proposed tax break. The city and county governments are also considering the Olive Ann tax incentive, and Carpenter noted that the city’s sales tax would benefit from the hotel project and the county, which is weighing the pros and cons of a home rule charter, may ultimately levy a sales tax of its own and reap further benefits from the redevelopment that way.
“But we don’t have that option,” Carpenter said. "That’s why I’m pushing pretty darn hard for every little dollar we can get.”
The project's developer, Phil Gisi, told committee members he could make the smaller tax break work by building fewer rooms at the planned hotel, which would also sport a bar and an events center, among other amenities. He told City Administrator Todd Feland in a Jan. 24 email that the project “simply cannot proceed” if the requested tax break is cut back any further. The version Gisi presented to City Council members late last year is itself a scaled-down version of the pre-pandemic plan he first put together for the Edgewood Corporate Center at the intersection of Fourth and DeMers in downtown Grand Forks.
In essence, a “PILOT” plan means that developers like Gisi, for several years, only pay a portion of the additional taxes they’d otherwise have to pay on a reworked, and thus more valuable, property. Often, the plan is set up in a way that means they’d pay property tax as if they hadn’t touched the property at all for a decade or more.
The tax break for the hotel still needs to be formally voted on at a School Board meeting. The board is set to meet next on Feb. 14. Grand Forks County officials are set to consider approving the tax break on their end the next day. The Grand Forks City Council is set to hold a public hearing and a final vote on the project in early March.
If one of those governments doesn’t OK the PILOT plan, the Olive Ann’s owners would pay that government property taxes as normal, according to an opinion put forth by the school district’s lawyers in February 2020.
As originally constituted, the Olive Ann tax break is comprised of three five-year chunks. From 2024 through 2028, the hotel’s developers would take advantage of a North Dakota “Renaissance Zone” plan to pay no additional property taxes on the hotel, treating it for tax purposes as if it hadn’t been renovated at all. From 2029 through 2033, they’d also pay no further property taxes, but via the “PILOT” plan batted around by school officials instead. And from 2034 through 2038, the PILOT scheme would mean that the developers would pay only 20% of the additional property taxes they’d incur from the renovations, according to an analysis by Grand Forks City Hall finance staff.
The counter proposal school leaders floated on Tuesday would keep the first and third chunks of that plan intact, but would increase, from 2029 through 2033, the property taxes the developers would pay from 0% on the additional value the renovations produced to 10%.
Last month, board members approved a fundamentally similar tax break for a massive Chinese corn-milling facility but bounced the Olive Ann plan back to the finance committee .
Board members at that meeting worried about the long-term viability of the hotel and questioned the breadth of its economic benefits. Some also noted the tricky political calculus of justifying a tax break to developers while asking Grand Forks residents at large to pay more in property taxes to pay for the district’s long and expensive list of longterm maintenance projects.