Two major development projects were announced for downtown Grand Forks last week - though local leaders still have a lot of public work before we know how, and if, the projects will have tax incentives.
Those projects include extensive renovation in the St. John's block building, at 2 N. Third St., and its adjoining "annex" building, renovating lower levels for commercial use and upper levels for condos and "micro lofts." Down the street, a separate project is expected include a Hugo's grocery store, Alerus location and dozens of apartments at the corner of Fifth Street and DeMers Avenue. Documents on file with the city estimate the total property value increases between both projects will well exceed $10 million.
Developers plan to seek tax increment financing, or TIF, incentives for both projects. The policy alters tax bills to make it easier for developers to pursue big projects - but to get there, both projects will have to navigate a new city policy that regulates how those incentives work.
The city has long offered TIFs, which generally include development-friendly tax incentives. In some cases, local taxes are discounted for a set period of time, meaning that new development has a lower bill for a set number of years. In other cases, the government issues bonds, lends bond money to the project and treats taxes on the final result as repayment. As a result, taxes are lowered to encourage improvement of properties that will generate more taxes later.
Leaders for the both the St. John's and Hugo's projects submitted "pre-applications" for TIF agreements to the city May 7, both of which were approved by the City Council. That's the first official step in a new local review process, and it gives developers a chance to test City Council's interest before taking on any more paperwork.
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"(The city) had been given indications in both projects that they were working on bringing a project forward," City Administrator Todd Feland said, referring to conversations with both teams before May 7. "I think, generally, we're here to try to explain what the incentive process is. People come to us and discuss their project, and we say 'Here's how we go forward, here's what the process is.'"
In coming months, each proposal will now face a $2,500 application fee, a third-party financial review of their respective plans and further review by a newly created "local advisory board," which includes members of the City Council, Park Board, School Board and County Commission. That group will make a recommendations to local governing bodies about TIFs on the property - and, if the life of the incentive is more than five years, city leaders said, the School Board, County Board and City Council all have the option to participate in the TIF or not. If it's five years or less, the City Council makes a unilateral decision. In all cases, the Park Board's financial relationship to the project is tied to the city's.
"This is a big deal, let's put it that way," said Kevin Ritterman, president of Dakota Commercial - the development firm behind the downtown building that will house Hugo's. "I really think that the city and all the parties will come together and make a good business decision and make this thing happen. But it's got to be financially appropriate for everybody involved."
Ritterman said that means the community, too.
City leaders clarified that tax incentives on a newly developed property only apply to what's been added to the property. For instance, a $100,000 lot with a $1 million addition could only see TIF policy used on the new $1 million in value.
This new review process was finalized by the City Council in February following changes in state law on TIFs, and had not been updated since 2010. Previously, TIF award process was much less formalized.
Previous TIFs
Dakota Commercial has been a recipient of multiple TIF deals in the past. One is still active at University Flats, at 851 University Ave., where a plan enacted in 2017 offers deep discounts on taxes for six years that slowly taper off over the following four years. Similar agreements were in place for Aurora at Griggs Square and Northern Heights, both developments on the corner of Sixth Street and First Avenue North, where taxes were deeply reduced for five years following their construction before returning to the normal rate.
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Meredith Richards, a community development official with the city, said TIF policy - what can and can't benefit from the policy - is tightly controlled by state law. North Dakota Century Code offers about a dozen pages of statute on the matter, and the pre-application materials ask developers to specify how they believe their project merits a TIF plan, either because it improves an "undeveloped or underdeveloped" property or because it fights slum and blight.
She added that Grand Forks has also offered similar tax incentives -though not TIFs, legally speaking - for business like LM Windpower, and Red River Biorefinery in recent years.
The city has also implemented a state-sanctioned Renaissance Zone program to offer incentives for downtown and near Grand Cities Mall. Recent beneficiaries, which include Rhombus Brewery and some single-family homes, with expected beneficiaries like Sonic and the new development at Arbor Park, which is also developed by Dakota Commercial.
The details of the forthcoming TIF agreements, and how they'll work at St. John's Block and the new Hugo's are still unclear - though the St. John's project is expected to pursue a TIF bond, and the Hugo's development a tax exemption. Richards said the timeline for those applications are now in developers' hands, though she expects to see them returned to local officials soon.
"Everybody wants to get these projects started before freeze-up," Richards said. "We've got to have something actionable so these developers can get something in the ground."
