The city of Grand Forks is under scrutiny following the approval of eight luxury apartment developments under the Payment in Lieu of Taxes (PILOT) program, which grants significant tax breaks of up to 100% for periods ranging from five to twenty years. Critics argue that these incentives disproportionately benefit developers while imposing financial burdens on taxpayers.
The most recent project, Brookstone, claims to provide “low-income” units, but only 20% of its units meet this classification. With 80% classified as medium-income, the development is set to receive a 90% tax exemption. This translates to an annual tax payment of just $170 for the empty lot and a mere 10% of taxes on the projected $30 million in improvements, amounting to approximately $63,170 instead of an estimated $600,000 per year through 2045.
Critics, including local resident Mary Koponen, have raised concerns about the implications of these PILOTs. The mayor has defended the program, stating that the properties already benefit from emergency services. However, Koponen questions the logic of equating the needs of a soybean field with those of hundreds of new tenants. She emphasizes that the residents of these 80-100% PILOT developments are unlikely to cover the additional costs for schools and services, which will ultimately fall on current taxpayers.
The mayor’s assertion that “PILOTs cost current taxpayers ‘Not one penny’” may hold true during the construction phase, but Koponen argues that this does not account for the long-term financial impact on the community. Furthermore, while it is noted that similar programs exist across North Dakota, they were originally intended to support primary sector businesses, which create jobs and stimulate the local economy without competing directly with existing businesses.
Grand Forks has already provided $50 million in tax breaks through the PILOT program, and the city is on track to approve additional luxury apartment developments. Koponen raises the question of legality regarding the use of PILOTs for apartment complexes, suggesting that this may stretch the original intent of the program.
Discussions surrounding vacancy rates also reveal conflicting data. A developer-funded poll indicated a 1-3% vacancy rate, while a more comprehensive survey conducted by the GGGFA found rates ranging from 5-6%. This discrepancy raises questions about the actual demand for luxury apartments versus the need for affordable housing options in the area.
As the mayor continues to support the PILOT program, citing the need to wait for lower interest rates, Koponen and others are left wondering about the long-term financial sustainability of such developments. With projections suggesting that the additional tax breaks could reach between $100 million to $200 million, the burden on local taxpayers could increase significantly.
Grand Forks currently has a median effective property tax rate of 1.6%, the highest in North Dakota, surpassing rates in Fargo (1.3%), Bismarck, and Minot (1.4%). This situation raises important questions about how the city will fund essential services, such as schools and emergency response, in light of the growing number of tax exemptions granted under the PILOT program.
As discussions continue, Koponen urges local leaders to consider alternative funding methods for apartment developments, such as private investment or loans from the Bank of North Dakota, rather than relying on PILOTs that disproportionately affect homeowners. The future of Grand Forks hinges on finding a balanced approach that meets the needs of its residents while ensuring sustainable financial practices.
