Developers propose property tax exemption plan to boost city revenue

The Fargo City Economic Development Incentives Committee convened on February 25, 2025, to discuss a proposed property tax exemption for developers, structured similarly to a Tax Increment Financing (TIF) exemption. The developers requested a fixed-term property tax exemption, which would span several years.

The proposal outlined a tiered exemption plan. For the first five years, the developers would pay property taxes based solely on the existing value of the property, approximately $2,700 annually. From years six to ten, the exemption would decrease to 75%, resulting in an estimated tax payment of $63,000 per year. After the tenth year, the exemption would further reduce to 50%, with anticipated tax payments increasing to $126,000 annually by years eleven through fifteen. Ultimately, after the fifteen-year period, the annual property tax would reach approximately $252,000, with the city and county each receiving over $40,000 from this amount.

The financial review presented by PFM indicated that without assistance, the internal rate of return (IRR) for the project would be around 7.55%. However, with the proposed tax exemption, the IRR could increase to approximately 10.7%. The debt service coverage ratio, which initially fell below the required 1.2 times without assistance, would meet the minimum threshold with the proposed incentives.

The committee engaged in discussions regarding the potential increase in property value over time, with expectations that the property could be valued at around $18 million upon completion. The meeting concluded with an invitation for further questions, emphasizing the anticipated substantial increases in property value in the future.