Burgum: Celebrate downtown investors
Doug Burgum didn't come to the Herald Thursday specifically to speak about downtowns, public projects and special assessments, but North Dakota's second-year governor firmly laid out his opinion when the subject arose late in a meeting with the H...
Doug Burgum didn't come to the Herald Thursday specifically to speak about downtowns, public projects and special assessments, but North Dakota's second-year governor firmly laid out his opinion when the subject arose late in a meeting with the Herald's editorial board.
"One thing I'm excited about (in Grand Forks) is the collaboration between - you know, the overused 'town-gown' thing - the city and the university. Grand Forks is very engaged with the Main Street Initiative," the governor said in the closing minutes of a 90-minute discussion. "There is real meat to the Main Street Initiative. And there is real meat because of all of the jobs that are available. The way you recruit people today is you have to convince them that this is the city they want to live in. So when we have companies that are moving downtown and investing in downtown instead of moving to the edge, they ought to be celebrated by everybody. They're helping everybody with their workforce issues."
Burgum discussed myriad topics during the conversation, starting with higher education issues - covered in a news story in Friday's edition of the Herald - and ending with a wide-ranging series of issues, from downtowns (he's for them), to political endorsements (he's backing Republican candidates Kevin Cramer and Kelly Armstrong for Congress) and North Dakota oil (he's optimistic).
But back to downtowns.
"I visited a group of 20 CEOs and asked, 'When you're recruiting people, how do you recruit them?' Everybody said they take them downtown," Burgum said. "They don't take them out and say 'We've got a big-box retailer here.'"
And besides, Burgum says, building on the edge often comes with community risk.
"We have to get all of the city leaders to understand that when they make decisions about subsidizing the edge, that's going to raise property taxes because it may not pay for itself," he said. "When you put new infrastructure, which is public dollars, with a new school, which is public dollars, together - like a Davies in Fargo or Legacy in Bismarck - you're in it for $100 million."
Following are Burgum's answers to various questions posed by the Herald's editorial board.
Q: We've heard you talk before about the potential ill effects of building schools on a city edge. And since you've said that at least twice in Grand Forks, we wonder if you're sending a message about our own potential school projects. Are you?
BURGUM: I haven't looked at that proposal. It's not about ideology, but about financial solvency. You can look at a school that goes out on the edge for $53 million with $50 million in infrastructure. If we fill it in with single-family houses around it ... and we borrowed money to put in the infrastructure and put (special assessments) on those new lots, then gave every homeowner a two-year tax-free home credit to go there and then run the numbers, will all of that new development pay for that public infrastructure? The answer in some cases is no.
It doesn't matter how many good-looking houses are there or how pretty the new school is. It's a money loser for all taxpayers and do you know who is making up the difference? The people in the older sections of town. The old pays for the new, and that's the part we're trying to communicate. If you want to do that thing on the edge, you better not be giving them two years free, but instead need to raise their taxes. A city has to live within its means as opposed to borrowing.
There is a lot of attention put around projects with initials (tax increment financing, or TIFs, for instance). But the things that don't have initials - like capital improvement plans, special assessments, new home buyer tax credits - don't get any attention.
Editor's note: After the meeting concluded, the governor suggested walkability scores - which are becoming more common with building and publicly funded projects - should be determined and studied for potential new public buildings.
Q: Is oil back in North Dakota? Are we getting to a place where we can have more confidence in that commodity?
BURGUM: The answer is yes and the credit for more confidence goes two ways. We had this historic high and then this historic low, over $100 (per barrel) and down to $26 rapidly. That was completely out of our control, but where credit can be given is that the companies that are in North Dakota - the shale operators - have invested so much in new technology and new approaches. Some of these guys report they are making more money at $50 per barrel than they were at $80. ... It's the reason why we have activity in North Dakota and the reason we will probably in the next month or two announce a record amount of oil production in North Dakota ... and twice as much gas. We're going to have a billion and a half dollars of new gas processing plants being built in North Dakota. We weren't chasing them down with tax incentives. This is what happens when the free market starts rolling, and it's a credit to those entrepreneurs and risk-takers who are inventing new approaches.
Another piece that is exciting relates to the number of wells per pad. When this whole thing started in North Dakota, we had one well per pad and the pad was four or five acres. Now, it's 12 to 16 wells in some cases per pad. And one of the economic stories of the year is that (Dakota Access Pipeline) is operating.
Also, another piece is the tax trigger and tax rate. If the trigger had not been removed, $1.1 billion would have been lost by the state of North Dakota and it wouldn't have come on until right now. It would have been off for 25 months (January of 2016 to February of 2018).
So yes, it's nice to see it back. And where it plays into this is that a lot of the revenue by law moves into certain buckets - 30 percent off the top goes into the Legacy Fund, some goes into other funds and a portion of it hits the General Fund. By having it go into those funds, that is how we can start replenishing some of these savings accounts that got depleted.
Q: You've asked for more reductions in the state budget. Meanwhile, UND has some healthy capital requests. Is UND asking for too much?
BURGUM: I haven't seen their request list. I know when we did the tour, there were a lot of needs, this building here and that building there. But some of those, again, if we're empowering campuses and they can - through private partnerships or alumni - we have to empower campuses to do that.
UND has excess square footage. Some of that is being taken care of by demolition right now. But if you're Barnes and Noble and you're in a long-term battle with Amazon, you have to be careful how many new stores you build. How much fixed cost do you want to take on for the future? It's one thing to raise the capital from alumni to build the building, but it's another to heat, maintain and staff it in perpetuity.
What is the fixed cost and the operating cost versus what is the variable revenue that is going to come in, and trying they to balance that? And what does the modern, 21st century, new American university look like in terms of that ratio and that mix? Those are good questions for our campuses to ask themselves.
But there is certainly some need. We saw plenty of things, plenty of needs. We haven't been to a campus yet where there isn't a stack of deferred maintenance. Everybody wants to show us their worst things ... which is good, because then you understand this is what happens when you (haven't been able) to keep things up to date.
Q: The state Board of Higher Education has openings. The application deadline has passed, but is it possible you would reopen the process to seek a higher number of qualified candidates?
BURGUM: That's nothing I could verify right now. I would say in general that we have been very strong in all of the things we're doing, trying to get great pools (for boards). We had 240 people apply for the Governance Task Force and it was an awesomely talented group of people. And we're trying to pick 15 out of that?
And then on the state Board of Higher Education, you get a handful that apply? That's a demand signal. That tells you this is a hard board to be on because they work hard, it's thankless, they don't get paid and it's a tough setup. I am grateful for everybody who has served and all the people serving right now. They are true public servants who get hit from all sides. It's public service.
Q: So at least right now, you don't know if you'll re-open applications?