FARGO-This city's use of tax increment financing to promote business development has been targeted by a group called Americans for Prosperity with an online video ad calling the incentives "a free pass" that allows well-connected businesses to avoid paying "their fair share" in property taxes.
It's a message City Commissioner Tony Gehrig, an opponent of tax-incentive programs, supports.
But fellow City Commissioner Dave Piepkorn says the tax breaks spur development and, in the long run, lowers taxes.
The North Dakota chapter of Americans for Prosperity put the video ad online Monday, Oct. 9.
In the video, TIF zones are described as "a carve-out" so "well-connected businesses" don't have to pay as much as others in property taxes.
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The video goes on to say that business owners use government dollars to shoulder some of the financial risks of their ventures.
"TIF zones are corporate welfare and it has to stop," the ad says, urging Fargoans to tell city leaders to end the use of tax increment financing.
Jason Flohrs, executive director of the Minnesota and North Dakota chapters of Americans For Prosperity, said the video gives Fargo residents information to act on as city officials review how TIFs are used.
Flohrs said city commissioners raised property taxes and blamed the state for not maintaining property tax buydowns.
"So, instead of cutting back on the handouts that they're giving to these special interests, they've just decided to continue to raise property taxes for every other business and every other individual in the city that isn't getting a handout right now," Flohrs said.
"Why should taxpayers be (on the hook) for a difficult project to do? We need to let the free market be the basis for the decisions that are made," said the St. Paul man.
In Fargo, a business or developer may be granted a TIF to perhaps help clean up a polluted site, or install utilities, roads, sidewalks or parking, Planning Director Jim Gilmour said Tuesday. The developer pays the full taxes on the improved property to the county, which passes the monies on to the city. The city either uses the difference between the original tax level and the new, higher tax level-the increment-to pay for the costs of improvements it has done, or to the developer for their improvement costs, until the improvements are paid off, usually in five to 16 years, he said. After that, the city collects the full, higher tax receipts from the property.
Gehrig said he likes the video.
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He said incentives like TIFs, payments in lieu of taxes, the downtown Renaissance Zone and new-home exemptions add 7 percent to Fargoans' tax bills.
"They are all kind of egregious in their own right. I think TIFs are bad because we put them on the books longer," Gehrig said.
Gehrig said firms that want to build or expand in Fargo will do so without incentives.
"People come to Fargo because we're the best city for them. ... They don't come here for a short-term exemption. That's just icing on the cake for them," Gehrig said.
Piepkorn disagrees, calling TIF zones "a very important development tool" if used judiciously.
And they are not just for businesses. The latest TIF zone was approved for a low-income housing project, he said.
Piepkorn said Fargo taxpayers would pay more in property taxes without TIF or Renaissance Zone exemptions.
"The economic development that's taken place with these ... has been without a doubt very beneficial," Piepkorn said.
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Piepkorn says it's "hypocritical and ironic" that Flores is criticizing the incentives.
"He lives in Minnesota. And as you know, Minnesota, they give out cash-millions and millions, if not billions-and so I do not appreciate him spending money in Fargo trying to tell us what to do," Piepkorn said.
In fact, Fargo and North Dakota should be more aggressive with incentives, Piepkorn said.
He cited Wisconsin's $3 billion offer to attract Foxconn, and the incentives being offered by cities and states to attract Amazon's second headquarters.
"We have ridden this roller coaster of commodity prices-oil and ag. We have to do something to diversify, and I don't think we're doing a good-enough job," Piepkorn said.
"We're in competition all day, every day. To get big businesses to come to Fargo, and come to North Dakota, you have to have packages. And if you don't, they won't come. They'll just go to the next" city, Piepkorn said.
To see the video, go to Americansforprosperity.com, click on the newsroom link, and scroll down.
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