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Published August 06 2010

Fargo assessments renew tax system debate

The taxing system used by Fargo and other area cities to develop and improve specific neighborhoods has long been debated.

Fargo most recently tried to revamp assessment policies and costs with a task force in 2002. It tried again in 2004 with a committee of representatives from across the metro area. The two efforts produced a handful of results: a streamlined process, more consistent guidelines and lower interest rates.

But after a recent special assessment associated with the yet-to-be-completed Davies High School project left several 25th Street South homeowners flabbergasted by bills of up to $70,000, the same topics of debate that arose eight years ago – high costs, fair distribution and surprise expenses – have resurfaced.

Most stakeholders agree some form of the assessment system is necessary. But views on where, when and how special assessments should be applied vary widely among builders, Realtors and city officials.

Land developers are perhaps the strongest supporters of the assessment system, and with good reason: The city fronts the cost of improvements rather than developers, and the costs of special assessments can be passed on to homebuyers.

Jason Eid, president of Eid-Co. development group, said special assessments pay for much-needed improvements and pave the way for growth.

“In order for the city to progress, we need infrastructure,” he said. Compared to other states, Fargo’s system spreads the costs of improvements in an equitable way, he said.

Eid-Co. owns several plots of land off 25th Street that were affected by the same special assessment that triggered an outcry from nearby homeowners. The company’s properties were assessed hundreds of thousands of dollars for road, sewage and sanitation improvements.

“I’m fine with it,” Eid said of the costs. “I’m not an anti-specials kind of guy.”

He said he’s also fine with a special assessment on his personal home in the area – $3,300 according to city records.

Bryce Johnson, executive vice president of the Home Builders Association of Fargo-Moorhead, was a member of the 2002 task force on special assessments. As long as costs are controlled, she said, special assessments are necessary.

“Those improvements are an investment for the future,” she said. “They increase the value of the land.”

She said it’s important for developers to educate potential buyers on the costs they might incur through special assessments.

But Peggy Isakson, president of the Fargo-Moorhead Area Association of Realtors, said special assessments that apply to existing homes can saddle owners with unexpected costs.

Buyers in new developments can choose whether to accept the cost of special assessments or choose to look elsewhere, she said. But homeowners like those on 25th Street – some of whom have been in the area for decades – have no recourse when a new assessment is levied.

“These poor people had no idea what was coming their way,” she said.

Isakson said a $30,000 special assessment to a home can add as much as $300 a month to a mortgage if the owner opts to pay the assessment over the allotted 25-year timeframe.

And tacking on a big assessment to an existing home can make the property “almost impossible to sell,” she said, because buyers can find a better value in a home without an assessment bill.

City Commissioner Mike Williams organized the 2004 committee on special assessments. He said the assessments can be an effective tool for encouraging development in certain areas, but they need to be used selectively.

A special assessment system that makes sense for improving a street may not work for a semi-rural area like the extreme south end of the 25th Street corridor, for instance.

“One size doesn’t fit all,” he said.

Dan Eberhardt, special assessments coordinator for the city of Fargo, said the suggestions of the 2002 task force made assessment costs more consistent and predictable and that “the process is working.”

He said the homeowners on 25th Street were alerted to the per-foot costs well in advance of receiving their assessment estimates last month.

Property owners can apply for assessment deferrals on unimproved parcels through the city engineer, Mark Bittner.

Bittner said a half-dozen homeowners and two developers have contacted the city about deferrals. Jason Eid identified his company as one of those developers; the Ryland Development Corp. is the other major developer with land in the area.

A handful of the 25th Street homeowners have said they intend to protest the assessment. Land owners granted a deferral agreement are precluded from protesting by the terms of the agreement.

The owners of at least 50 percent of the land in an assessed area must protest to trigger a formal review. That means deferral agreements by a few developers who own large parcels could derail a protest attempt.

Readers can reach Forum reporter Marino Eccher at (701) 241-5502