MetroPlains seeks tax break
A low-income housing developer is asking the city for a property tax reduction, and if approved, Dickinson would receive about $507,000 less in tax revenues.
At a special Dickinson City Commission meeting Tuesday morning, real estate developer Gary Stenson, president of St. Paul, Minn.-based MetroPlains Development, LLC, a company behind proposed Section 8 housing, presented his funding intentions in aspiring to replace 30 income-based apartments that were lost in a July 8 tornado.
A payment in lieu of taxes, or PILOT, is being requested by Rippley Richard Real Estate Development Services on behalf of MetroPlains.
"There is still a lot of uncertainties in this project," Stenson said. "We're confident it's a good project. We think it'll work, but it's by no means -- we're not there yet."
If the PILOT were approved as requested, the city would receive about $109,000 over the span of 17 years.
Without the PILOT, the city would receive about $616,000 in property taxes over the span of 17 years, assuming a 3 percent valuation increase applied each year.
Stenson said if MetroPlains were paying taxes at the PILOT rate of $5,000 per year, it would allow the company to increase the first mortgage payment by about $300,000.
However, a few city officials have some reservations about issuing the PILOT as is.
"When we do things like this, there's always unintended consequences as a result and generally those unintended consequences come in the form of once we've done this, then someone else comes in and says, 'Well, you set a precedent, therefore you should grant my request also,'" said Dickinson Mayor Dennis Johnson. "I have some worries and concerns."
City Commissioner Joe Frenzel expressed similar concerns about future developments.
"I believe that it would become more difficult to say no to people in the future if this whole thing's granted. That's not saying it shouldn't be, I'm just saying that that's an issue we're going to have," Frenzel said.
The North Dakota Century Code gives the city the power to designate the yearly payment amounts for a PILOT and also to decide the apportionment and distribution of the taxes collected.
If the PILOT is not granted, Stenson said there is a chance the 44 Section 8 units would not be constructed.
Stenson said though denial of the PILOT would not affect rent costs, it could affect the quality of the structure.
"If we don't get all the financing put together, the project may not get done," Stenson said.
City Administrator Shawn Kessel said the PILOT request cited extra building costs, including construction of access roads, alleviating a site issue and adding an electric heat pump, as reasons for the application.
With a total of 44 units split up mainly into 2-bedroom townhomes and a few 3-bedroom units, the units would be constructed on three sites.
"We've been developing affordable housing in Dickinson for approximately 25 years," Stenson said.
Stenson said the maximum family income for the new townhomes would most likely be less than $35,000 per year.
"The development will be kept affordable for a minimum of 15 years," Stenson said.
While several funding options are available, the PILOT concept has been used more frequently in recent years, Stenson said.
"It's a lot simpler, a lot cleaner and more of the cities in North Dakota have been using that method now instead of the tax increment finance method," Stenson said.
Kessel said because the proposed project is Section 8 housing, doors for additional state and federal funding options open.
Along with the PILOT MetroPlains is requesting, the company has requested other funding incentives, including a $1.6 million mortgage through the U.S. Department of Agriculture Rural Development, $300,000 in HOME funds through Affordable Housing Developers and $4.75 million in Low Income Housing Tax Credits.
The tax credits would equal about 25 to 30 percent of North Dakota's allocation for the year.
"We think this application will score very well," Stenson said. "They give points for part's of the state that are impacted by the energy activity that's going on and creating housing shortages."
Construction could begin as early as this spring.
In recent years, two other PILOT requests were approved in Dickinson, including one for Park Avenue Villa and another for Letvin Equipment Co.