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Erik Burgess, Published November 16 2013

Some Moorhead restaurant owners say city's new incentives in bad taste

MOORHEAD – A new incentive package approved by city leaders to help lure a big-name restaurant to downtown Moorhead is causing some heartburn for established eateries here.

The City Council on Oct. 28 changed city policy to allow itself to dip into state incentives and start offering new or expanding restaurants an “employee credit” – $1,500 per new or retained employee up to a maximum of $25,000.

For Sarah Nasello, who has owned Sarello’s Restaurant and Wine Lounge in Moorhead for 13 years with her husband, Tony, the council action is more proof it doesn’t care about existing businesses.

She pointed to the “tough times” after the flood of 2009 and the subsequent floods when the city offered “very little if any support,” Nasello said.

“This just feels like another slap,” she said. “And it becomes harder and harder to give a good answer to our Fargo customers when they say, ‘Why aren’t you in Fargo?’ ”

Chuck Chadwick, executive director for the Moorhead Business Association, told The Forum last month that the employee credit helps balance the disparity between Minnesota and North Dakota, where tipped employees can be paid less in hourly wages.

Nasello recognized the disparity between Moorhead and Fargo, but said this new employee credit actually “puts us at even more of a disadvantage” because now there’s a disparity between new and existing Moorhead restaurants.

Chadwick repeated on Friday that in the long run, it’s good for Moorhead to be welcoming to new businesses and homeowners.

“And how do you do that without hindering your existing homeowners and business owners? Very tough,” he said. “There’s just not an easy answer.”

Other incentives exist

This is at least the second time in about the past decade that the city has used incentives to lure a big-name restaurant to the displeasure of established local food joints.

Moorhead council members voted overwhelmingly in 2000 to approve an incentive package for Bennigan’s, which set up on Highway 10 and 34th Street South. At the time, Moorhead mainstays argued the big chain was getting an unfair advantage, according to Forum archives. That sentiment carries through to today.

Ryan Alford, a cook at Altony’s Italian Cafe, which moved from Dilworth to Moorhead last year, called the new employee credit incentive “unfair.”

“It’s nice to have new businesses, but we need to support the ones that are already here,” he said.

Jacob Bruns, who has owned and managed Mick’s Office for about four months, said if the new downtown restaurant is a bar and restaurant, he thinks it’ll help drive traffic through downtown, which is a good thing.

“If it’s just a restaurant,” Bruns said, “that would really suck, as far as motivation towards other small businesses. … It sucks that we don’t that kind of break.”

There are incentives for established restaurants if they make improvements to their structures, said Amy Thorpe, Moorhead’s economic development program administrator.

The city’s property tax exemption program was extended last year after the city failed to lure an Applebee’s into the former Bennigan’s, which closed May 2012.

The business has to make at least $150,000 in improvements to apply for a four-year property tax exemption. Higher investments net longer exemption periods.

Thorpe pointed to JL Beers, which received a property tax exemption after tearing down the old Pizza Hut and building new at 2902 Highway 10 E. Owners of the liquor store 99 Bottles at 924 Main Ave. also received an exemption after fixing their building, Thorpe said.

Thorpe said the new employee credit is specifically targeted at full-service restaurants. Only restaurants in the city’s two tax-increment finance districts – downtown or the Holiday Center mall – can apply. The city wanted to offer an additional incentive to businesses interested in TIF zones because being in a TIF zone precludes an additional property tax break.

Thorpe said if an established limited-service restaurant in one of those TIF zones were to change to a full-service restaurant, it could apply for the employee credit.

“The EDA (Economic Development Authority) and the City Council, and – I’m sure if you talk to citizens – they say we need more full-service restaurants,” Thorpe said.

The employee credit comes out of the city’s Border City Enterprise Zone Fund, which has a balance of about $1 million. That money also funds sales tax credits to businesses and helps offset worker compensation costs.

“There are definitely incentives available,” she said.

Thorpe said the city will be ready to announce the name of the restaurant that is considering downtown Moorhead in about two to three weeks.

Readers can reach Forum reporter Erik Burgess at (701) 241-5518