Bill proposes ending Renaissance Zone program
A bill introduced in the North Dakota House would end the Renaissance Zone program and give individual cities local control of some of the tax incentives previously offered through the program.
Rep. Rick Becker, R-Bismarck, introduced House Bill 1182, which had a hearing in the Finance and Taxation Committee on Jan. 18. No action has been taken on the bill since. If the bill passes, the North Dakota Department of Commerce won't accept any new projects after Dec. 31, 2017.
The Renaissance Zone program was created in 1999 to revitalize communities and encourage development through tax incentives, according to the Department of Commerce website. The program gives property tax incentives, state income tax credits and income exemptions to commercial or residential projects that substantially improve the property.
According to the Department of Commerce, 58 cities in the state have renaissance zones.
Becker said part of the program he doesn't like is the income tax abatement incentive, which decreases the amount of income tax qualifying individuals pay for five taxable years. Becker said the incentive is unfair because state residents have to pick up the slack. Residents of small towns shouldn't have to pay for downtown development in Fargo, Bismarck or Williston, he said.
The fiscal note on the bill from the Office of Tax Commissioner states the income tax incentives of the program have a negative effect on state general fund revenues because individuals qualifying for those incentives are paying less taxes. The note says repealing the program will have a positive effect on the state general fund revenues because those tax incentives will no longer be allowed.
Cities participating in the Renaissance Zone program handle the property tax incentives already, so if the income tax incentive is taken out, there is no reason why the state should handle the program, Becker said. The bill would give local governments control of the program, take away state restrictions and allow cities to choose how they want the program to be for their community, he said.
Becker said there is nothing to back up arguments that if the income tax incentive is taken away, people won't want to be part of the program.
"The data isn't there, it's not what drives people to enter the program," Becker said.
Jamestown's renaissance zone
Jamestown has had about 35 renaissance zone projects, said Jeff Fuchs, city administrator. A majority of the projects have been commercial buildings downtown, he said. About 28 to 30 of the projects completed the final paperwork, with the remaining few doing the renovations but not finishing the paperwork, he said.
Jamestown's renaissance zone is bordered on the south by 6th Street Southwest, in the west by the James River, in the north by 5th Street Northeast and in the east by 3rd Street Southeast, according to the zone map on the city of Jamestown's website. The zone includes some of the BNSF land near the tracks and most of the oldest parts of downtown.
Some of Jamestown's renaissance zone projects include Gun & Reel Sports, Sabir's Buffalo Grill and The Jamestown Sun. Residential projects in the program assisted in bringing people back downtown to live and greatly increase downtown property values, which benefits everyone, Fuchs said.
Without the renaissance zone, a lot of those projects wouldn't have happened, Fuchs said. The program has been good for the health of the community, he said.
"I think eliminating the program would be detrimental to restoring downtowns in the state," Fuchs said. "I think the program is doing what it's intended to do, and I don't see a need for changes."
The opening of shopping centers at the edges of towns has contributed to the loss of property values in downtowns, Fuchs said. Anything that can eliminate vacancies and deterioration of buildings in downtowns is good, he said.
Fuchs said the program has still been effective in recent years. Since 2013, 13 renaissance zone projects have been completed, he said, and about three or four projects have been approved in the last couple months.
Rep. Jim Grueneich, R-Jamestown, said the Renaissance Zone program has successfully brought new businesses to the downtown areas of many of our cities and seen success all over the state.
"There is no doubt that the renaissance legislation has had tremendous impact on community infrastructure, downtown redevelopment and enhanced quality of life for North Dakota citizens," Grueneich said.
Grueneich said city property tax only makes up about 20 percent of the total property tax, so opponents of the bill say it doesn't leave enough of an incentive to bring businesses to downtown areas. The program's original intent was to last 20 years, so it is reaching the lifespan of what it was originally designed to do and that was to revitalize downtowns, he said.
This bill gives the power back to local governments with them being able to decide if they want to give a property tax abatement to the different projects, he said, and continue the program if the local community supports it. Grueneich said he feels like it is a program to sustain and improve rather than discontinue.
"Eliminating the exemption would help the state, as it deals with the revenue shortfall, but it may be detrimental to the development of our towns," Grueneich said.