The city of Grand Forks has come under scrutiny following the approval of eight luxury apartment projects that benefit from substantial tax breaks known as PILOTs (Payments in Lieu of Taxes). These agreements provide developers with exemptions ranging from 80% to 100% for periods of up to 20 years. Critics argue that this approach unfairly shifts the financial burden onto local taxpayers.
Among the controversial developments is Brookstone Apartments, which claims to offer “low-income” housing despite allocating only 20% of its units for that demographic. The remaining 80% are classified as medium-income. This project has secured a staggering 90% tax exemption, which translates to an annual tax liability of just $170 for the vacant lot, alongside a mere 10% of the taxes on the $30,000,000 improvements—amounting to approximately $63,170 instead of the expected $600,000 per year through to 2045.
Local officials, including the mayor, defend these decisions by asserting that the PILOT properties already contribute to emergency services. Yet, questions arise regarding the actual impact of these residential developments compared to their agricultural predecessors, such as the soybean fields they replace. With hundreds of new tenants anticipated, the question is who will shoulder the costs of education and community services.
The mayor’s statement that “PILOTs cost current taxpayers ‘not one penny’” during construction is contested by critics who point out that the long-term implications can lead to increased taxes as the exemptions phase out. Although it is true that similar PILOTs exist throughout North Dakota, critics emphasize that these incentives were primarily designed to attract businesses that create jobs and stimulate economic growth, rather than to support residential developments that may compete with existing landlords.
While the mayor claims broad support for the apartment PILOTs, it is suggested that many residents lack a clear understanding of how these arrangements function. A recent poll by the GGGFA indicated a vacancy rate of 5-6%, conflicting with a developer-funded survey suggesting only 1-3%. This raises concerns about whether the city truly needs additional luxury apartments, especially when more developments are reportedly on the horizon.
Financially, Grand Forks stands out with a median effective property tax rate of 1.6%, which is higher than Fargo’s 1.3% and Bismarck’s and Minot’s 1.4%. Nationally, the average is approximately 1.0%, according to Ownwell.com. Consequently, the burden of funding schools and emergency services for these PILOT properties often falls on the shoulders of taxpayers for decades.
As Grand Forks contemplates future housing developments, the call for a reevaluation of PILOT agreements grows louder. Advocates for change propose that funding for new apartments should come from private investors or loans from the Bank of North Dakota, rather than relying on tax breaks that disproportionately impact homeowners.
Mary Koponen, a concerned resident of Grand Forks, articulates the sentiment of many who feel that the current trajectory of luxury apartment developments does not align with the needs of the broader community. The debate over PILOTs continues, as city officials weigh the potential economic benefits against the long-term financial implications for taxpayers.
