By Katie Spokely
Since 1996, Renaissance Zone programs have been utilized by cities throughout the Unites States to spark a rebirth, or revival, for neglected urban areas. North Dakota originally passed Renaissance Zone legislation in 1999, and has since designated Renaissance Zones in 57 cities throughout the state.
Despite their widespread use in North Dakota and beyond, many still don’t fully understand why these tax incentive programs exist, how they work, and why they’re important. Granted, understanding the history, details, and consequences of any incentive program can be overwhelming and frustrating. Let’s look at the basics of Renaissance Zone programs in a simple and (hopefully) valuable way.
Renaissance Zones were first created in Michigan in 1996 as a response to depressed, underutilized urban areas. The original idea was to promote economic development by exempting individuals and businesses in certain areas, defined by the governments as Renaissance Zones, from state and local taxes.
Since then, variations of that original idea has been adopted by cities and states throughout the country, including North Dakota. Legislation allowing local governments to establish Renaissance Zones and corresponding funds was passed in North Dakota in 1999.
Why was this program needed in the first place? For many decades, urban sprawl moved people and investments away from urban cores, and outward toward cities’ edges. This made suburbs and shopping malls successful, and left downtowns without the same populations and investments, leading to decreased property values and abandoned buildings – many of which had historic value.
An excerpt from a message included in the City of Fargo Renaissance Zone Plan, written by Renaissance Zone Authority Chairman, Dr. Roger Gilbertson, explains it well:
“Similar to many downtown environments in other municipalities across the country, Fargo’s downtown core suffered for many decades as a result of shifting demographic and cultural norms, as well as a myriad of other factors including failed urban renewal policies that eliminated important downtown urban infrastructure and the rise of suburban communities and suburban sprawl which was a product of interstate system construction and subsequent arterials that improved access to outlying strip malls and regional malls. As a result, property values in the downtown core were unstable and investments in buildings and infrastructure were limited.”
Once cities like Fargo realized what was happening, and recognized the simmering potential of their downtowns, they chose to build Renaissance Zone programs that fit their communities.
The incentives offered through the City of Fargo Renaissance Zone Program are intended to encourage economic development and investment opportunities in the downtown business district.
The program offers two primary potential incentives: property tax exemptions and income tax exemptions. It also provides opportunities for qualified projects to pursue historic preservation and renovation tax credits.
To summarize the incentives:
Those pursuing Renaissance Zone incentives complete an application summarizing the project which is reviewed and scored by city staff and approved by the Renaissance Zone Authority. A variety of guidelines and criteria must be met in order for a project to be approved. The Renaissance Zone Authority is responsible for assuring that all projects promote the goals and objectives of the Renaissance Zone Development Plan.
The vision of the plan includes economic vitality, housing diversity, and a vibrant city center. “Downtown Fargo’s Renaissance Zone is an economically vital, culturally rich mixed-use district where there are well-designed public and private spaces for residents, visitors, employees, and employers and where an appreciation for the district’s historic character and natural amenities is paramount.”
The plan’s goals, which double as part of the criteria for applicants, include activity generators, walkable districts, ground floor uses, neighborhood center, urban design, transportation, safe streets – safe neighborhoods, high-quality housing, infill, housing amenities, downtown entryways, the place to be, a place like no other, 24 hours a day – 7 days per week – 365 days a year, and connections and coordination.
Renaissance Zone incentives can be misunderstood, because a common misconception is that the exemptions harm taxpayers, and generate unnecessary profits for the project.
For most building owners pursuing the benefits of the program, the tax savings allow them to make necessary improvements and updates to the infrastructure of the building that would otherwise be unfeasible. Most buildings in Fargo’s Renaissance Zone are decades old; many are more than a century old. Due to urban sprawl, most still have the infrastructure that they were originally built with. That means plumbing, sewage, and electrical systems that are decades, or even a century, old. Making updates to these systems can be costly. Without the tax exemptions, owners would be forced to make decisions around not making the proper improvements to the building, charging higher rent, or not using the quality of construction techniques that best-benefit the community.
Take 123 Broadway, the former Metro Drug location, as an example. The building was constructed in 1893, and refaced in 1899. The original sewer system was outdated, and its pipes were at risk of failing at any moment.
Savings from the Renaissance Zone program allowed Kilbourne Group to replace the system, and install a new connection to the storm water system. This will not only improve the efficiency of the building, but will prevent future disruptions to the building’s tenants and neighbors that would have been caused by broken pipes. Savings were also put toward a fire sprinkler system, which improved life safety and permitted more of the original wood features to be exposed to showcase the interior of the building.
Making updates and installing features like new roofs and sprinkler systems benefits businesses in the buildings, and those around them. Data show that these improvements also benefit taxpayers. At the end of 2016, the city released a report on the Renaissance Zone program and its return on investment. Their data show that an owner of a $100,000 house has to pay an extra $1.06 in annual property tax due to current projects that have their taxes abated; however, the increased value of the projects that are now paying taxes again after their five-year abatement reduces taxes on that homeowner by $5.86, creating a net decrease of $4.80. This shows that, in the long term, this program creates more value for members of the community.
Savings from the Renaissance Zone program do not go toward adding excessive features to buildings, nor do they go directly into building owners’ pockets. Savings go toward improvements that allow buildings to not only survive, but thrive for another half-century. They allow developers to do high-quality work that will benefit the community for years to come. This program gives our beautiful, unique downtown a chance to shine the way it once did, and grow into something we’re all proud of.