A developer who pioneered Minot’s use of tax increment financing (TIF) is proposing to use the financing tool again on a downtown project.
EPIC Companies, with offices in West Fargo and Minot, utilized a TIF to help pay for street improvements associated with the Blu on Broadway project completed last fall. On Monday, the company and city staff explained to the Minot City Council how using a TIF can be beneficial in EPIC’s renovation of the former Midwest Federal bank, known as the Big M building.
Public hearings to be held in May must occur before the council can take action. EPIC also presented information to the Ward County Commission Tuesday and will be presenting later to the Minot School Board. Participation of the taxing entities is sought in the TIF.
A TIF would not provide EPIC with a tax break. Rather, $2.7 million in collected property taxes on the improved property over 20 years would be earmarked toward more than $3 million estimated for asbestos abatement and demolition work.
The City of Minot would take on bond debt of $2.7 million to pay for the abatement and demolition. The debt would be repaid using 90% of property-tax collections on the M building. The remaining 10% of property taxes would go to taxing entities as usual.
Currently, total property taxes on the building, assessed at about $500,000, are just over $9,000. Ten percent of the property tax after renovation would provide more than $33,000 to be split among the city, park district, school district and county. Once the bond debt is paid and the TIF ends, the taxing entities would share in the full tax collection, estimated at nearly $250,000 a year.
Before any council action is taken, the city is having a professional financial assessment completed on the TIF proposal to determine its soundness and to ensure its necessity to the project. The project also will be reviewed with the city’s bond counsel. The city intends to seek performance bonds and include language in the developer’s agreement to protect the city by allowing it to collect projected taxes even if the property assessment falls short, Minot City Manager Harold Stewart said.
To be eligible for a TIF district, a project must improve blight and be shown to be in the interest of the public economy, health, safety or welfare.
“It’s in pretty rough shape right now,” Minot native Blake Nybakken, EPIC’s chief operating officer, said of the M building. “What we want to do is turn it from what is a potential liability into a property that is again contributing not only to the city and the vibrancy of downtown but to the tax rolls as well.”
He said EPIC paid up three years of delinquent property taxes when it purchased the property. Including the $2.7 million TIF, EPIC plans to invest $14.7 million into the renovation, set to begin this June and be completed in the fall of 2023.
“We want to bring it back to life, and we’re excited about that,” Nybakken said.
EPIC’s plan calls for commercial space on the first two floors, 31 apartments on floors three through six and eight condominiums on floors seven and eight. There will be 11 underground parking spaces, a community room and an exercise center.
The council indicated preliminary support for the project.
Mayor Shaun Sipma noted concern in the community that a 20-year TIF may be too long.
“I agree 20 years has been way too long for that building to be empty,” he responded. “We’re actually going to capitalize better as taxing entities than we have been.”
The proposed 20-year TIF is short of the 25-year TIF maximum in state law. A TIF that extends beyond five years requires participation approval by all taxing entities. An entity that decides not to participate would keep its full share of the property taxes, although that could impact the feasibility of the project, Stewart said.
The city council had approved a five-year TIF for Blu on Broadway in 2020 that directed tax collections toward improvements on First Street Southwest, converting it from basically an alley to a city street with curb and gutter, streetlights and fire hydrants. Brian Billingsley, community development director for the City of Minot, said that original TIF will cover about $420,000 of street costs, and EPIC will cover the remaining $280,000.
The Ward County Commission voiced interest in the Big M project but postponed making a decision on TIF participation. Commissioners will draft a participation letter to consider at their April 19 meeting.
Commissioner Howard “Bucky” Anderson acknowledged advantages and risks to moving forward.
“We are kind of betting on the future with a building that probably right now doesn’t have a future,” he said.
The City of Minot also plans to mail notices to 32 identified competitors to the project, defined as similar projects with commercial and residential use, to allow them to submit comments.
“I’m bullish on Minot,” said EPIC President and Minot native Todd Berning. Trinity’s construction of a new medical complex and voter approval of a bond issue for a new high school were good signals for EPIC investors, he said.
“A lot of our investors over the years have come from the Minot area,” he said. “Annually, we have anywhere from $3 million to $8 million coming right out of this area that’s now going to stay. A lot of our investors are very excited about putting money back into Minot.”