A two-year tax exemption on new residential construction in Minot will remain for just the first $75,000 in home value.
The Minot City Council voted 5-8 Monday against raising the exemption value to $150,000. Aldermen also voted 10-3 to continue to work toward establishing Tax Increment Financing districts, which would provide tax breaks to some developers.
The 2009 Legislature increased the value on which cities and counties can choose to grant a tax exemption for new home construction. But Minot aldermen questioned the need to increase the incentive to build new homes in Minot.
"We are not in a market where new home development is in a lull," Alderman Chuck Barney said. "It's throwing good money into a project that doesn't need any money."
"This is not a tax exemption. It's a tax redistribution," Alderman Ron Boen added, referring to the shift of taxes to other residents that exemptions create.
Joel Feist with the Minot Association of Builders said the tax exemption increase is needed to compete with other cities that are raising their exemption values.
"I don't see that it is detrimental to the city to help give these people some incentive to build these houses in the city of Minot. These houses pay for themselves over time. It's a good thing for the city to say we want people here," he said.
Bruce Walker, a Minot Realtor, said Minot shouldn't rest just because times are good.
"We need to continue aggressively marketing the city," he said.
John Coughlin, a Minot developer, said he is concerned that Minot could end up with a housing shortage unless there is encouragement for people to build. He said the oil industry could bypass Minot if there is a housing shortage.
"We should do everything we can as aggressively as we can to provide housing. You have to start with housing. We will not bring jobs to town if they don't have places to live," Coughlin said.
About 180 homes were built in Minot last year, although not all claimed the tax exemption.
Voting to raise the exemption value were Dave Lehner, Dean Somerville, Randy Burckhard, Mark Jantzer and Boen. Voting against were Hardy Lieberg, Bob Miller, Aaron Vibeto, Dean Frantsvog, Larry Frey, Jim Hatlelid, Scott Knudsvig and Barney.
The vote on TIF districts sends a proposed Urban Renewal Plan and General Development Plan to the Minot Planning Commission for review before it comes back to the council for a hearing next month. Some aldermen questioned the need for the plans, drafted by a city committee to provide for tax increment financing.
Tax increment financing is a tool that uses future tax gains from an improvement project to finance debt associated with the project. It provides a way for cities to promote economic development and build needed infrastructure or restore blighted areas.
"We are putting in place something that is going to cost taxpayers money," said Vibeto, who served on the draft committee. "We had a hard time actually identifying need, and without need, I don't think we need to have this plan."
Alderman Chuck Barney noted Minot's plan sets a framework for the council to process requests from developers looking to finance their projects. Council approval would be required. There is no automatic eligibility even if developers meet requirements of the plan.
Voting to proceed with the plan were Knudsvig, Burckhard, Lehner, Miller, Frey, Frantsvog, Hatlelid, Jantzer, Lieberg and Barney. Voting against were Vibeto, Somerville and Boen.
Minot homeowners would continue to be eligible for two-year tax breaks on $75,000 in new residential construction.
The council decided against increasing the value to the $150,000 now allowed in state law.
Joel Feist with the Minot Association of Builders said the $75,000 figure represented the average home value in 1983 when the state first provided for the exemption. Today the average home value is $175,000 to $200,000.
The Ward County Commission recently adopted the tax exemption at the $75,000 level. The county didn't previously allow any exemption.
The committee also approved an annual service agreement with Minot Area Development Corp. The agreement provides $320,000 in marketing money, $25,000 for business expansion and retention and $96,240 for work force development.