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Kristen Daum, Published January 04 2010

West Fargo tax exemptions not in jeopardy over job losses

Fifteen West Fargo businesses received property tax exemptions in 2009, worth a combined total of $45.8 million.

Of those 15, at least two cut jobs in 2009 rather than adding them, as is often required when the city of West Fargo agrees to grant either a five- or 10-year tax exemption.

That doesn’t mean, however, that West Fargo will strip these businesses of their exemptions anytime soon, according to Dorinda Anderson, West Fargo’s business development director.

If a business doesn’t hold up its end of the bargain, West Fargo officials can scale back the amount of exemption after the first few years, Anderson said.

“They still put the investment in the building, so we try to work with them and determine what it is, why they haven’t created the jobs,” she said.

And just because a business has a bad year doesn’t mean it won’t eventually add jobs back and ultimately reach a level of promised new jobs at the end of the five- or 10-year period, she noted.

For example, even though Bobcat Co. and DMI Industries both cut jobs at their West Fargo locations in 2009, their overall work force has increased since they began receiving exemptions several years ago.

West Fargo Mayor Rich Mattern said the tax exemptions are a way to keep expanding the city’s business sector.

He said the Veterans Boulevard corridor south of the Ninth Street/

Interstate 94 interchange is one area in West Fargo primed for new businesses, specifically retail.

“We need to take a real strong look at the retail sector and try to entice and talk to some of the big-box businesses,” Mattern said. “The more retail you have, the less burden is placed upon homeowners. This is our opportunity to do that.”

Under five- and 10-year agreements with the city of West Fargo, the businesses fulfill an investment in the community by undergoing a project. Receiving the exemption often comes with a requirement to add jobs, which is another way of investing in the city.

West Fargo officials and business leaders said these tax exemptions benefit the community by drawing in new residents who help expand the city’s tax base and spur growth by paying taxes and shopping at local businesses.

“It helps us and it helps them, and it keeps our economy strong,” Anderson said.

In order to receive an exemption, a business must first submit an application, detailing construction plans. The request needs the approval of Anderson, the Economic Development Advisory Committee and the City Commission.

The exemptions only cover taxes on property, not taxes on the land.

“Typically we’ve been very conservative in West Fargo, as far as the amount of exemption that we’ve given,” Anderson said. “But when you put a significant investment in, that’s a good thing for us.”

The amount a business receives depends on the cost of the project, as well as the anticipated number of jobs that need to be added in order to receive a full exemption.

For instance, Anderson said, a business could receive a $75,000 exemption for every job added because of their project.

For businesses seeking to expand, especially in a down economy, the tax exemption could provide them the leverage they need to meet their goals.

“By giving them an incentive, it allows them to have some extra dollars available – cash flow, basically – because they don’t have to pay that once a year,” Anderson said.

But once the five- or 10-year agreement is finished, the business pays the full property tax again, which becomes additional money going back to the city.

Bobcat just entered its final year of receiving a tax exemption, which was valued at $2.5 million in 2009. So, in 2011, the company’s property taxes will be going back to the city, Anderson said.

“We know that after these exemptions are over, we’re going to have a viable company here with a lot of jobs, and that tax base will be there forever,” Anderson said.

Bobcat spokesman Jeff White said the tax incentives have been beneficial to the business.

“We’ve always appreciated the relationship that we’ve had with the city of West Fargo and don’t see that changing,” he said.

Readers can reach Forum reporter Kristen Daum at (701) 241-5541