Archive of Bismarck Tax Battles
The following is an archive of the issues related to Bismarck's tax fights between 2014 and 2018.
November 20th, 2014
The City of Bismarck Is Abusing Tax Exemption Power
For all the talk in North Dakota about reforming and reducing property taxes, one area that is not getting enough attention is the way in which local governments abuse their power to give special tax breaks to a select few under state programs that allow them to do so.
In Bismarck, one such case is sure to raise the level of awareness by the public and legislators if it gets final approval from the city commission.
According to the Bismarck Tribune, Bismarck’s Renaissance Zone Authority has approved tax breaks for buyers of condos in downtown Bismarck which cost upwards of half million dollars each.
“If you’re buying a $500,000 condo, all of a sudden you have $450,000, $425,000 in it because of tax savings,” he said.
Renaissance benefits have been approved for the entire building. Each tenant and resident in the building is also eligible for their own benefits.
Pine has sold four of the 17 condos, including one to Bill Cleary. Cleary was unanimously approved Tuesday for $25,000 in property and personal income tax benefits over five years. The Renaissance Zone Authority’s approval recommendation will have to be confirmed by the city and the state to take effect.
With high-end granite countertops, cabinetry, sound systems, walk-in showers and Jacuzzi tubs in each unit, the investment comes out to around $425,000 to buy one of the condos. Pine said it comes out to about $240 per square foot.
I have had dozens of conversations with legislators over the years about these exemptions, the original intent was to incentivize developers to refurbish old, worn-down buildings and bring new businesses into downtowns. This particular project, as those in Bismarck know, was a brand-new multi-million dollar building. These sorts of condos are well out of the reach of the average citizen, and providing tax breaks to make it easier for developers to sell them was not the intent of the these laws.
During the 2013 Legislative Session, in response to local governments like Mandan abusing their power to grant exemptions to retailers like Walmart, required that smaller towns looking to use tax incentives to attract retail businesses to their areas get permission from their voters first.
Senate Bill 2314 was a small first step to reforming local discriminatory tax exemption powers, this action by Bismarck warrants immediate attention by the legislature.
Everyone deserves lower taxes, and tax laws must apply to everyone equally.
Cities should not be in a position to grant tax breaks because there are well known and well connected developers, engineering firms, architects, investors, or construction firms involved.
When some select few residents get a tax break, it means that all the rest of the taxpayers end up paying more than they should. That is part of why property taxes keep going up, and an area where local government has done everything it can to counter-act the efforts of the legislature on property taxes.
Bismarck residents need to know their city is doing what it can to minimize property taxes to them. Granting these exemptions would show that Bismarck has no interest in minimizing property taxes, except for a select few.
March 12th, 2014
Bismarck Is Setting A Poor Example For Local Government
The following is an issue specific to Bismarck, but the example can probably apply to many cities in North Dakota. At issue is the priorities that our elected officials put on the things taxpayers expect the city to take care of (needs), and the things more people would consider to be nice to have (wants).
As anyone in Bismarck knows, Washington Street has pretty much always been a bottleneck street. There are two bottlenecks, the one in the center of the city and the one at the far north end of the city. As traffic in the city has increased, that has become more and more of an issue.
On the far north end of the street is where a lot of growth, including the most recent middle school, has occurred. Residents who have been paying higher and higher property taxes due to ever-rising property values have been waiting for something to be done to ease the situation.
The city has been working on a plan, but because the Federal Government can't be trusted for funding anymore, the commission had to table the planand wait for a more stable financing situation.
One might react to that "well ok, at least they aren't raising my taxes to do it."
But hold on, in the very same issue of the Bismarck Tribune on March 11th, 2015 there is also a story about how a group of wild eye visionaries have a plan for expanding the Civic Center, and developing a "big city" sort of project downtown.
Since 2008, there have been a couple different plans for developing this area of town. It started with the failed attempt to entice CanadInn to build a hotel next to the Civic Center. Pretty much every plan has revolved around the city building a very large parking ramp.
This is why, in 2010, the City of Bismarck bought the Strip-Mall across the street. Other local developers have been acquiring property at high prices in the area to be able to take advantage of future development. The parking ramp would likely be as big as the $13 million ramp just built in downtown, perhaps bigger, and certainly more expensive as it would tie into other buildings.
The development would almost certainly take advantage of any tax incentive programs the city might be willing to offer.
So with these two stories showing up in the exact same issue of the Bismarck Tribune - one about the city postponing a major infrastructure project due to a lack of federal funding, and one about the city paving the way for big time developers to get rich with the help of public resources - what should taxpayers think?
Whatever they think, they should certainly be asking their elected leaders about priorities.
The state legislature should also watch this situation closely as it deals with less revenue due to oil prices. Cities like Bismarck need to get used to there being less federal and state tax dollars coming to them - and as a result work more on making sure current residents are happy with the what they are getting for their local taxes.
The pendulum is swinging fast, and local governments need to get ahead of it this time instead of falling behind.
November 30th, 2015
Bismarck Sales Tax Plan Illustrates Misplaced Priorities
City's never-ending desire for higher taxes ignores the current economic realities in North Dakota.
As conservative of a state as North Dakota is, and for as much as the legislature is willing to at least make small moves to reduce tax burden, local government just cannot get enough of your money!
In Bismarck, for example, since 2006 there have been no fewer than three major sales tax increases proposed, with only the jail tax passing.
• 2006: People, Places, Parks was the Park Districts attempt to increase the sales tax for their purposes – that was defeated by a two to one margin.
• 2008: Quiet Rail funding via the sales tax was requested by the city without an increase, and still failed.
• 2012: Civic Center: The city tried to convince voters to increase the Lodging and Restaurant tax to fund the $90 million Civic Center expansion. The commission went and passed a $35 million expansion plan without the tax.
• 2014: Burleigh/Morton combined regional jail needed a ½ cent sales tax increase, and passed.
Hot off its decision to provide $35 million worth of corporate welfare to the FiveSouth project, the Bismarck City Commission now wants to increase the local sales tax by another 1% to provide $17 million a year for road repairs. The question for local taxpayers to ask now should be: how is the city budget so messed up that it needs to increase the sales tax? The answer requires remembering the last time the city tried to increase the sales tax.
In 2010, then-mayor John Warford came up with a plan to add a 1% sales tax to do what the current 1% sales tax does (buy down property taxes) and then use the old 1% sales tax to expand the civic center. It was the quintessential definition of a shell game.The public voted down the $90 million dollar (Civic) Event Center expansion, so the city went ahead and proceeded with the now-complete $30 million expansion plan using the city’s hospitality sales tax on hotels and restaurants.
After finding a way to defy the voters on the Event Center, the city commission says it can’t fund the most basic of all things government does – building and maintaining roads.
How can this be? Why is the hardest thing for local government its most basic role?
The answer can be found, in good measure, by looking at the city’s tax abatement policies.
Every time the city gives a property owner a partial or full property tax break for years on end (i.e. Renaissance Zone), or diverts the property tax revenue from a section of town to something other than the general fund (i.e. Tax increment Financing – T.I.F.) those are dollars that cannot be used for the basic functions of the city government – like roads.
The need for a sales tax increase is a direct result of the city’s decisions in other areas.
Apparently the mayor’s philosophy for governing means that nothing the city commission does has an impact on the city’s finances, and that it should not be brought up. He verbally slapped commissioner Marquart by saying “that’s totally irrelevant; this is sales tax not property tax.”
Money is money. All of the city’s taxes go into the general fund, unless the city chooses to divert or abate those taxes that should apply to certain properties.
Nothing happens in a vacuum, every city commission decision has an impact on future needs – despite what Mayor Seminary may think.
Luckily, the tide may be already turning against this plan to increase the sales tax. Both commissioners Parrell Grossman and Steve Marquardt have, as part of their candidacy declarations, said they do not support the sales tax increase idea.
Voters will just have to be sure to hold these two commissioners to that, and get another willing to say NO.
Bismarck Residents Must Keep Pressure On Tax Hike Plans
February 18th, 2016
Mayor Mike Seminary will be on 550 KFYR this afternoon (February 18th, 2016) , tune in and call in with your questions or comments at 701-258-0550.
Last week Thursday there was an outstanding turnout to the the Bismarck-Mandan Chamber of Commerce's townhall forum regarding the proposed sales tax increase. Well over 150 people showed up and had a lively exchange with the Mayor and some city staffers.
Comments spilled 40 minutes over the 90 minutes allotted for the town hall meeting with a repeated theme challenging the city's incentives used for downtown projects and the city's ignoring previous votes that have gone to residents.
Testimony challenged Mayor Mike Seminary's proposal to add a new sales tax due to a 37-year tax increment finance district in downtown Bismarck, a new TIF district approved for FiveSouth, Bismarck's Renaissance Zone. It also disputed the perception that the city commission renegged on expanding the Bismarck Event Center even though residents rejected it in a citywide vote.
Seminary said the incentives were unrelated to sales taxes. He added that the city commission has voted that 66th Street interchange projects be paid by the state Legislature, but the city cannot ignore roads within the city that need to be widened, such the rural 43rd Avenue and Divide Avenue that lack the capacity to support traffic. Seminary said the downsized Event Center expansion used existing funding sources and did not increase hospitality taxes as residents voted on.
Of the people who chose to speak, the message was overwhelming against the notion of raising the sales tax - with the caveat that if a tax increase is truly needed, it has to be highly limited to specific projects and those specific projects need to make sense
Mayor Mike Seminary continues to adhere to the notion that growth in Bismarck necessitates higher tax rates for everyone. The mayor also continues to assert that decisions that affect revenue streams are unrelated to the city's budgeting problems. How can he or any of our commissioners really believe that decisions made on thinks like TIF and FiveSouth have nothing to do with his espoused need to raise the sales tax?
At the February 11th town-hall meeting hosted by the Bismarck-Mandan Chamber of Commerce, the mayor continued to perpetuate this distortion of reality.
Mayor Seminary seems to refuse to admit that all decisions made by the city end up affecting the city's ability to finance basic needs.
StrongTowns.org Backs Questioning Approach
A national organization called Strong Towns has voiced its opinion about the growth Mayor Seminary has been promoting.
This is not your typical conservative limited government organization.
Rather, Strong Towns is focused on smart growth, a catch phrase Mayor Seminary himself has used numerous times in recent years.
The Strong Towns Mission Statement reads:
THE MISSION OF STRONG TOWNS IS TO SUPPORT A MODEL OF DEVELOPMENT THAT ALLOWS AMERICA'S CITIES, TOWNS AND NEIGHBORHOODS TO BECOME FINANCIALLY STRONG AND RESILIENT.
Strong Towns posted an article entitled Great Questions from the Great Plains where it reviewed the questions we have been circulating for several weeks:
Last week I became aware of another group -- North Dakota Watchdog Network -- that has put forth ten questions they would like to see answered as part of this dialogue. I've given a couple of speeches in Bismarck and I know we have a lot of readers, and a few members there, so it gave me some pride to read these questions.
Has Bismarck’s growth been “productive growth” or simply “growth at any cost”?
Why hasn’t the growth Bismarck has experienced been able to pay for the public costs of the growth?
Does the city realize that the need for higher taxes proves that the growth has not paid its own way?
Why does the city have a “growth management plan” if it does not keep the public cost of growth below the revenue generated by the growth?
Has the city devised a long-term policy to ensure that the costs of growth will not outweigh the benefits of growth if voters approve a tax increase?
How will the city change its ways to ensure that the cost of growth does not exceed the benefits of growth in the future?
What actions has the city taken to ensure that growth is at worst a revenue-neutral situation?
Why should the current residents of Bismarck support growth if the growth is going to cost everybody more in taxes?
If generating more revenue from visitors is the solution, why is that not enough with the sales taxes as they are today?
How can the city prove that this tax increase will do the job?
Now I don't know anything about the North Dakota Watchdog Group. They may be far from Strong Towns thinking -- which is not reflexively anti-tax -- but, regardless, I'm happy to see these ideas inserted into the conversation. I hope policymakers take them seriously.
If they do, they will discover that the transportation investments they have been making -- which resemble the investments they are planning to make if they get more money -- are financial losers for the community. They create, at best, an illusion of wealth but are leaving Bismarck with enormous long term liabilities. It is the culmination of these liabilities that the city is now dealing with. More money to do more of the same will only make things worse.
A different approach --a Strong Towns approach -- starts with asking and answering those questions, particularly the first two. When this is done, Bismarck will see that the problem they are trying to solve is actually insolvency, not cash flow. That realization will put them on the path to become a stronger place.
Because Strong Towns comes at these issues from and engineering and accounting approach, they are considered to be more of a technical reform organization than a political reform organization. The founder and president of the organization is a civil engineer and urban planner by trade.
These questions must be answered by those wanting higher taxes and claim that higher taxes are the only way.
The public must demand that the city have a plan to make sure even more taxes are required later on.
Bismarck Commissioners Push Tax Fight To November
February 24th, 2016
Taxpayers in Bismarck can catch their breath, at least for a couple months, as the Bismarck City Commission last night voted to hold off their plans to put a sales tax increase on the ballot.
From the Bismarck Tribune:
The Bismarck City Commission won’t take action this spring to put a new penny sales tax on the ballot.
Seminary has said if a sales tax is not used, property taxes or special assessments are among the other options. But some members of the public have questioned the extent of the project and whether all of the repairs and construction really need to happen at this time.
This is a short-term victory for taxpayers.
The mayor's tax hiking train was moving very fast as of last week, and now it is almost a guarantee that he will use the next few months to build up support for this tax hike - as illustrated by the way he continues to threaten the use of property tax hikes (which do not require a vote of the people.).
The public will have to keep the pressure up to ensure this temporary victory is not turned into complacency.
Burleigh County Commission Rejects Extension of Bismarck Renaissance
State law requires the county commission and school board to approve of extensions, expansions, and amendments.
April 4th, 2016
Breaking news tonight from the Burleigh County Commission.
On a unanimous 5-0 vote, Burleigh County Commissioners voted to deny the request by the City of Bismarck for letter of support to extend the Bismarck Renaissance Zone past the May 1st, 2016 expiration date.
For taxpayers in Bismarck and Burleigh County this is a HUGE victory in the name of tax fairness and against discriminatory tax policies that amount to little more than corporate welfare.
If you live in Bismarck or Burleigh County, please contact your county commissioners by visiting their contact information page and tell them to stand their ground!
They are certain to get pressure from the city and special interest groups to reverse this decision. There are many developers that will not like this action as it cuts off a primary tax incentive subsidy for their projects. But Bismarck and Burleigh County taxpayers now know that their county commission is willing to do the right thing. Be sure to thank them and support them for this decision.
Tell them you have their backs!
For those of you not in Bismarck or Burleigh County, keep an eye on this issue and how you community reacts when it comes time for their Renaissance Zone to be renewed or expanded. The state legislature pass SB 2329 last year to allow cities to massively expand this corporate welfare program.
More updates on this will be issued if needed.
In Case You Missed It:
City Poised To Take $1+ Million Loss On Building Deal
Sale Agreement Skipped Due Diligence Process, Public Bidding.
BismarckBoondoggle.com Website Launched To Educate Public On Deal
Tell us what you think of this issue by completing our community survey.
June 1st, 2016
Bismarck, N.D. – An analysis of city financial data regarding the sale of the “Public Health Building” at 500 East Front Avenue shows that when all city capital investments from the Tax Increment Finance (TIF) district fund and City Liability Fund are included, the city will realize a capital investment loss of nearly $1 million if the University of Mary exercises its $2 million purchase option approved by the City Commission in October 2015.
A review of over 230 pages of documents procured via Open Records Request shows that the property was valued at over $2.2 million dollars prior to the city’s purchase of the property in 2003 for $1.85 million.
The issue came to light well after the agreement had been made due to unnamed sources voicing their concerns with city commission candidate Nolan Canright, who subsequently asked the North Dakota Watchdog Network to dig into the issue.
Press reports from the Bismarck Tribune in 2003 had reported the original purchase at $1.85 million, which may have been a bargain as private assessors had valued the building at $2.2 million prior to the original purchase and renovation.
City documents prior to the most recent Open Records Request had shown a $1.1 million investment in 2006 from the city’s Tax Increment Financing (TIF) district fund. Further city documents now show an additional $400,000 General Fund transfer as well as a $250,000 Sales Tax transfer to complete the work.
It now appears that the City of Bismarck has invested at least $3.6 million from various funding sources including acquisition and improvements.
A review of the audio from the October 13th, 2015 shows there was no real concern for how much the city had into the property or whether the city needed to follow an open-bid process. Commissioners and city staff are heard discussing their power to take the action under the guise of “economic development”, thus believing that would shield them from legal the repercussions of approving a no-bid at-loss sales of city property.
In the year 2000,an Attorney Generals’ opinion was issued regarding the ability of a school district to sell property below market value to a non-profit entity. Then Attorney General Heidi Heitkamp ruled that below-market value sales of real property were only permissible between governmental entities, not between a government entity and a non-profit entity.
https://www.ag.nd.gov/Opinions/2000/Letter/00Krau01.pdf
Lack of Valuation and Assessment
While the building was appraised in 2003 for $2.2 million prior to the city’s purchase, a comprehensive appraisal was not made to the building prior to entering the option agreement with the University of Mary.
Using an analysis of city-wide and TIF District Valuation increases since 2003 we can project with accuracy what the value of the property would be if it is considered to be an “average” property in Bismarck.
Below is a three scenario estimate on the market value of the building.
We looked at the historical property valuation growth rate of the city as a whole as well as the value in the TIF District. For each year we used the LOWER average valuation increase between those two set of numbers.
Then we looked at the investment the city has made into the building and developed a range of values based on whether 100%, 50%, or 0% of the renovation investment actually added value to the purchase price.
Conclusions
While it is hard to fault the University of Mary for this deal since they simply wrote a letter and made an offer, city commissioners should have paid more attention to what the city had into this building before letting it be sold at a lot in a fire sale.
With $3.5 million into the building, and a potential market value between $3.5 and $5.0 million dollars, no matter what way you look at it the taxpayers are losing at least $1 million dollars on this deal. And that number could go as high as $3 million, if the true and full value of the building is closer to that $5.0 million figure.
If any business tried to sell a property at a 30% loss in a hot market, the state and IRS would be all over that business with audits and financial investigations.
The situation with the City of Bismarck should be no different in this case.
Reactions from City Officials
Reactions have been limited so far, City Commissioner Parrell Grossman was the first to react defending the city's action.
From the Bismarck Tribune Front-Page Story:
[City Commissioner Parrell] Grossman said he considered what city assessors believed was the current value of the property in deciding to vote in favor of the proposal. While more money has been put into the building, the investment hasn’t necessarily made the property worth more, according to Grossman, who said there are significant issues that decrease its value, including mold, dampness and ventilation problems.
The fact that the property has not appreciated in value may speak more to whether it was a good purchase by the city in the first place, said Grossman, adding no one has offered to buy the property as is, and commissioners considered during their discussion that tearing down the building would cost at least $1 million.
“And that’s the value. If we thought someone was going to offer us $3 million and use it as is, I suppose that would be an option,” he said. “It wasn’t intended to be, and wasn’t, a sweetheart deal for the University of Mary.”
The building may well belong to the city for the foreseeable future, since the university has not completed the sale.
Commissioner Grossman's defense of selling the building below the cash investment that the city has invested in it is that it probably was not a good buy in first place?
That seems more of an indictment of the judgement of the commission as a whole than a defense of the way the commission went about making this deal with U-Mary. It's also a very good reason for the Bismarck City Commission to stop trying to take the role of "central planner" for how Bismarck's economy is developed.
More interestingly, Commissioner Grossman immediate went to local talk radio to downplay his comments about mold - listen to his appearance on KFYR Radio with Todd Mitchell.
*We'll have more on this issue later this week and next week, until then, tell us what you think.*
Let Us Know What You Think About The Bismarck City Commission
Visit BismarckBoondoggle.com and take our community survey.
We want to know what you think of the way the city commission is managing Bismarck.
May 26th, 2016
The issue we brought up yesterday has been making waves in Bismarck, and the responses by our elected officials are nothing short of angry.
From the Bismarck Tribune Front-Page Story:
[City Commissioner Parrell] Grossman said he considered what city assessors believed was the current value of the property in deciding to vote in favor of the proposal. While more money has been put into the building, the investment hasn’t necessarily made the property worth more, according to Grossman, who said there are significant issues that decrease its value, including mold, dampness and ventilation problems.
The fact that the property has not appreciated in value may speak more to whether it was a good purchase by the city in the first place, said Grossman, adding no one has offered to buy the property as is, and commissioners considered during their discussion that tearing down the building would cost at least $1 million.
“And that’s the value. If we thought someone was going to offer us $3 million and use it as is, I suppose that would be an option,” he said. “It wasn’t intended to be, and wasn’t, a sweetheart deal for the University of Mary.”
The building may well belong to the city for the foreseeable future, since the university has not completed the sale.
Commissioner Grossman's defense of selling the building below the cash investment that the city has invested in it is that it probably was not a good buy in first place?
That seems more of an indictment of the judgement of the commission as a whole than a defense of the way the commission went about making this deal with U-Mary. It's also a very good reason for the Bismarck City Commission to stop trying to take the role of "central planner" for how Bismarck's economy is developed.
There will be more on this issue next week, until then, tell us what you think by visiting our website and taking our community survey.
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May 25th, 2016
Bismarck, N.D. – An analysis of city financial data regarding the sale of the “Public Health Building” at 500 East Front Avenue shows that when all city capital investments from the Tax Increment Finance (TIF) district fund and City Liability Fund are included, the city will realize a capital investment loss of nearly $1 million if the University of Mary exercises its $2 million purchase option approved by the City Commission in October 2015.
A review of over 230 pages of documents procured via Open Records Request shows that the property was valued at over $2.2 million dollars prior to the city’s purchase of the property in 2003 for $1.85 million.
The issue came to light well after the agreement had been made due to unnamed sources voicing their concerns with city commission candidate Nolan Canright, who subsequently asked the North Dakota Watchdog Network to dig into the issue.
Press reports from the Bismarck Tribune in 2003 had reported the original purchase at $1.85 million, which may have been a bargain as private assessors had valued the building at $2.2 million prior to the original purchase and renovation.
City documents prior to the most recent Open Records Request had shown a $1.1 million investment in 2006 from the city’s Tax Increment Financing (TIF) district fund. Further city documents now show an additional $400,000 General Fund transfer as well as a $250,000 Sales Tax transfer to complete the work.
It now appears that the City of Bismarck has invested at least $3.6 million from various funding sources including acquisition and improvements.
Income generated by the property has returned $733,360 to the TIF fund, derived from office space rental to Wagner Financial and Bismarck State College.
A review of the audio from the October 13th, 2015 shows there was no real concern for how much the city had into the property or whether the city needed to follow an open-bid process. Commissioners and city staff are heard discussing their power to take the action under the guise of “economic development”, thus believing that would shield them from legal the repercussions of approving a no-bid at-loss sales of city property.
In the year 2000,an Attorney Generals’ opinion was issued regarding the ability of a school district to sell property below market value to a non-profit entity. Then Attorney General Heidi Heitkamp ruled that below-market value sales of real property were only permissible between governmental entities, not between a government entity and a non-profit entity.
https://www.ag.nd.gov/Opinions/2000/Letter/00Krau01.pdf
Lack of Valuation and Assessment
While the building was appraised in 2003 for $2.2 million prior to the city’s purchase, a comprehensive appraisal was not made to the building prior to entering the option agreement with the University of Mary.
Using an analysis of city-wide and TIF District Valuation increases since 2003 we can project with accuracy what the value of the property would be if it is considered to be an “average” property in Bismarck.
Below is a three scenario estimate on the market value of the building.
We looked at the historical property valuation growth rate of the city as a whole as well as the value in the TIF District. For each year we used the LOWER average valuation increase between those two set of numbers.
Then we looked at the investment the city has made into the building and developed a range of values based on whether 100%, 50%, or 0% of the renovation investment actually added value to the purchase price.
Conclusions
While it is hard to fault the University of Mary for this deal since they simply wrote a letter and made an offer, city commissioners should have paid more attention to what the city had into this building before letting it be sold at a lot in a fire sale.
With $3.5 million into the building, and a potential market value between $3.5 and $5.0 million dollars, no matter what way you look at it the taxpayers are losing at least $1 million dollars on this deal. And that number could go as high as $3 million, if the true and full value of the building is closer to that $5.0 million figure.
If any business tried to sell a property at a 30% loss in a hot market, the state and IRS would be all over that business with audits and financial investigations.
The situation with the City of Bismarck should be no different in this case.
Mayor To Defend The Bismarck Boondoggle On Radio
Listen to KFYR Radio in Bismarck this afternoon on 550 AM or at KFYR.com and call in at (701) 258-0550 and tell the mayor what you think.
Tell us what you think of this issue by completing our community survey.
June 2nd, 2016
The story that won't go away in Bismarck continues to be The Bismarck Boondoggle.
KXMB News in Bismarck covered the story and obtained some quotes from city commissioner Parrell Grossman, and Mayor Mike Seminary. Both Grossman and Seminary are in full spin mode trying to justify the below-market-value and below-cash-investment sale of the property.
Grossman, fresh off his attempt to say the building was full of mold (followed by his backtrack on the mold on KFYR Radio) is now comparing the building deal to putting a new engine into an old truck:
"We needed to do that to keep the people there but my analogy is that if you have a 1974 pick up truck and you have to put $2 thousand into it to replace the engine, it doesn't make that truck worth anymore. Unfortunately that's the situation here," says Parrell Grossman, City Commissioner.
It's a fairly funny comparison. Commissioner Grossman compares the current building to a 1974 pickup that needs an engine for $2,000. First off, for $2,000 that better be a fresh crate engine. Secondly, if you do that, you plan to get many winters out of that pickup and you think it is worth the investment. You don't turn around and sell it for half of what you have into it right away. If it wasn't worth an engine, it will end up on BismanOnline for $500 bucks before you put good money after bad into it.
Since Commissioner Grossman himself said the building probably was not a very good investment to begin with, the analogy does not really hold water - unless he and the city consider the building to be a lemon.
Mayor Mike Seminary of course promoted the deal as good because of hypothetical future economic impact, and increases in property tax revenue. He did not mention the property is in the TIF District (Tax Increment Financing District), and that there will be no property tax revenue for the majority of the project because the University of Mary is a non-profit school and pays no property taxes the way it is already.
Why Sell Office Space (at a loss) When More Is Said To Be Needed?
Missing from any comments by local officials is the 2014 news story that the City of Bismarck was in desperate need of up-to $34 million worth of office space in the near and mid-term future.
According to this December 9th, 2014 KFYR-TV report, the city needs lots of office space:
Tonight, city commissioners learned which departments need more space.
Studies analyzed how effectively space is used, and consultants found that the city county building and the police department need to expand.
They said evidence storage needs to be expanded because it's already at capacity.
Renovation costs range from $590,000 to $34 million.
"It gives us a good concept of what we're hearing and seeing from our staff, as well as what we will be able to continue at this level of service, and what that will look like," says city commissioner Josh Askvig. "But I don't think, and I didn't hear that in the motion, is why I second it. This isn't an end all, be all."
The commission agreed to have staff look over the findings and prioritize the needs.
Obviously the city does not need $34 million worth of office space if they can sell one of their biggest office buildings at a loss.
And if they wanted to tear down the current Public Health Building and use the lot for a consolidated center for city offices, now they can't because they are selling the property at a loss to the University of Mary.
Lack of Leadership and Priorities Sets Bismarck Up For Major Problems
The latest pitch for higher taxes in Bismarck last night included the revelation that the city is on track for massive deficits if taxes are not drastically increased. However, no answers on how the city got to the point, or why this discussion only started in the last 9 months were provided. City staff are not responsible for the situation, but are being put in a position of explaining the lack of leadership by the city commission.
July 1st, 2016
Yesterday's Bismarck-Mandan Chamber of Commerce Forum was sparsely attended with only about 35-40 local residents and business owners attending. While most of the information was the same as that presented at the February Townhall, the difference last night was thatrather than Mayor Mike Seminary making a political pitch, City Administrator Keith Hunke was making the finance argument. While he did his best, it is clear he has inherited a mess and that there is a distinct lack of leadership in the City of Bismarck.
Click to read the Tribune story.
Number one on the list of things for Bismarck residents to be concerned with is the assertion that by 2018, the city will be looking at a $12 million deficit due to lack of revenue for infrastructure.
From the Bismarck Tribune's Nick Smith:
Hunke said if the city were to move forward on the larger high priority projects, deficits could begin to appear in 2018, at an estimated $12.2 million. By 2021 it could spike to more than $55 million if nothing were done to raise revenue.
“We can’t operate in a deficit,” Hunke said, adding that several options are available.
He said a second penny city sales tax would provide another $17 million annually, which would go a long way in funding road projects. Projects are typically financed through federal dollars, city sales tax and special assessments.
Other, more painful, options have been reviewed that could raise the annual $17 million which city officials consider necessary.
Hunke said one is a local fuel tax of between 72 cents and 98 cents per gallon. However, instituting such a program would be expensive as well as difficult to develop and execute.
Other options include a 90 percent increase in property taxes, a lot fee of about $69 per month assessed to city lot owners and a one-time, $30,000 fee to developers of city lots.
He is right, a 90% increase in property taxes at a time when the state's role in reducing property taxes is coming into question because of state revenue shortfall would be much more painful.
But how did it get to this point?
How have city commissioners over the last decade and more let it get to this point?
Questions Remain Unanswered
As stated earlier this year and backed up by the group StrongTowns, city leadership must start answering some questions:
1. Has Bismarck’s growth been “productive growth” or simply “growth at any cost”?
2. Why hasn’t the growth Bismarck has experienced been able to pay for the public costs of the growth?
3. Does the city realize that the need for higher taxes proves that the growth has not paid its own way?
4. Why does the city have a “growth management plan” if it does not keep the public cost of growth below the revenue generated by the growth?
5. Has the city devised a long-term policy to ensure that the costs of growth will not outweigh the benefits of growth if voters approve a tax increase?
6. How will the city change its ways to ensure that the cost of growth does not exceed the benefits of growth in the future?
7. What actions has the city taken to ensure that growth is at worse a revenue-neutral situation?
8. Why should the current residents of Bismarck support growth if the growth is going to cost everybody more in taxes?
9. If generating more revenue from visitors is the solution, why is that not enough with the sales taxes as they are today?
10. How can the city prove that this tax increase will do the job?
Clearly there is a problem in Bismarck - and it starts with leadership - and that starts with the Mayor.
If your priority as an elected official is to spend your time defending yourself, and attack those who question your leadership, then perhaps you should worry more about the decisions you are making and less about what projects you can claim credit for.
Fiscal Malfeasance
There is no reason to wait till 2016 to talk about impending budget deficits in 2018 while you are voting in 2015 for huge taxpayer-funded, economic-development, corporate-welfare, subsidy programs.
It's time for leadership in Bismarck to stand up and do the job - or get out of the way. Leaving city staff on stage to explain what is going on, and not offering solutions other than "give us more money" is proof that these is a major leadership gap in Bismarck.
Are taxpayers and voters in Bismarck being misled about how bad the city's finances are?
October 13th, 2016
It appears that we now know why Bismarck Mayor Mike Seminary pushed back his plan to raise the sales by 1%.
Because 1% just won't be enough to do the job.
Today's, Bismarck Tribune story reveals that what was being sold as a $249 million need for infrastructure has ballooned to a full half-billion in a matter of 3-months.
A task force will advise Bismarck officials on balancing growth and infrastructure needs, without creating urban sprawl beyond what the city can afford as it mulls more than $500 million in utility, service and city building projects.
[...]
The action was taken after City Administrator Keith Hunke outlined estimated costs for projects in existing city borders and where growth and infrastructure might reach.
[...]
Yet, Hunke's figures went beyond the $249 million in road projects identified in those presentations, as he broke down the city into quadrants where growth is occurring and expected to grow. "We brought in the other essential city services -- $100 million in water supply mains and sanitary sewer mains," he said.
Part of this new figure likely includes addressing the south Bismarck flooding issue, but that figure was previously quoted as being in the range of $18-25 million - far from the additional $250 million now being represented.
Mayor Mike Seminary continues to refuse to explain why the growth in Bismarck is not paying for the demands created by the growth:
"Our needs continue to grow and we're running out of money to fund them," said Mayor Mike Seminary, noting he had proposed a second penny sales tax. Developers come to city officials from outside of the city core and they stretch both financial and human resources, he explained.
"We have to have a discussion about how that can happen, how we can make that happen efficiently. ... They will meet and come up with viable options on how to meet growth, paying for all of the infrastructure that they think we should pay for and what funding mechanism," said Seminary.
Video: Bismarck's Problems Are From "Urban Sprawl"
October 13th, 2016
Since our email went out this morning, I have received numerous requests to see the video pertaining to this issue.
We have posted it on YouTube and you can watch it by clicking here. (it's about a half hour long).
Bismarck is growing, but because of the way the city is being managed, that growth is apparently a burden not a benefit.
These are major issues, and it seems they are being trickled out to the public.
When will the public be given the full picture, including why and how it got to this point?
City Of Bismarck Seeks To Slam East Main Property Owners With Massive Special Assessments
March 28th, 2017
As Governor Doug Burgum continues to talk about his Main Street Initiative, the City of Bismarck has their own initiative - higher taxes if your business is on Mainstreet (and out of the Tax Increment Finance District).
This afternoon I went and personally visited with a couple property owners on East Main Avenue in Bismarck that were hit with notices of massive property tax increases in the form of special assessments.
One of those people is Jerry Caufield, owner of Spas Etc who was featured on a local KXMB segment yesterday..
According to the letter the city sent him, he should expect to pay upwards of $31,000 split over 15 years for a special assessment to do work on Main Street.
A part of Main Street that is not part of the Tax Increment District or the Renaissance Zone.
This extra $2,000+ per year for a small business owner will represent a 28%+ increase in his property taxes - when added to his regular property taxes.
Other business owners are expected to pay even more, much more.
The Issue Is Fairness
Main Street is a thoroughfare, meaning people drive on it regardless of whether they intend to do business there. And given the fact that the city spends a lot of money in subsidies and tax giveaways to help make downtown an attractive place to go, it seems that property owners on East Main will now in part, be subsidizing traffic to downtown even more than they already are.
The City of Bismarck is in the process of studying how to deal with infrastructure needs. A task force was created for just that purpose and is releasing their finding this evening at the city commission meeting. (We'll have more information on that as it comes out.)
I have been told there is an organized effort to protest this special assessment district, hopefully these folks on East Main can be a part of a new way of doing things and not be caught on the last phase of the old way.
The old way isn't working and it is hurting small businesses and taxpayers.