Fargo and FedEx Are Between a Rock and a Hard Place on Property Tax Exemption

The Fargo City Commission discussed and approved a $660,000 property tax exemption for FedEx on July 18, 2016.

Earlier this week I wrote about the City of Fargo giving FedEx a $660,000 property tax exemption (here’s a summary) for a new facility they’re building at the airport there. The commission approved the exemption despite a representative for the company telling city commissioners that the company would build the facility without it.

It seems FedEx is now trying to walk this back a bit. In a statement from the company given to Mayor Tim Mahoney, and subsequently shared with me by the city’s communications manager, FedEx now says the incentives available from the city were “considered” as a part of their move.

Here’s an excerpt, take special note of the “statement” section.

fedex

Full document here.

You’ll note that the statement, which I take as intended to help legitimize the city commission’s decision, doesn’t exactly dispute the idea that FedEx would have come to Fargo without the incentives. A Fargo airport official told Valley News Live’s Chris Berg that discussions began on this move in April 2015, and the agreement was signed in March 2016.

The incentives were just approved this week. It sure seems like the move was a done deal before the incentives were approved.

If Fargo forked over a steaming plate of tax exemptions to a company which didn’t really need them, that’s bad. Taxpayers will rightly perceive it as a frivolous sort of abuse of these incentives which are often controversial to begin with. But if FedEx really did come to Fargo because of the incentives that may be a bigger problem…

But let’s stipulate for a moment that FedEx did move to Fargo, at least in part, because of the economic incentives on offer. This opens up a whole new can of worms for this deal, because FedEx is moving this facility to Fargo from another North Dakota city.

Grand Forks, specifically.

Two city commissioners – Tony Gehrig and Tony Grindberg – voted against the incentives for FedEx. The former is a philosophical objection to incentives policies generally, but the latter made a more salient point I think. That state policymakers might see a problem with one North Dakota city using incentives to poach a company from another North Dakota city.

“Grindberg, a former state lawmaker who generally favors incentives, said it’s wrong to offer an incentive that encourages a company to leave another North Dakota city to come to Fargo,” Fargo Forum reporter Tu-Uyen Tran wrote. “He warned that lawmakers are scrutinizing incentives given out by cities.”

There’s the rub.

If Fargo forked over a steaming plate of tax exemptions to a company which didn’t really need them, that’s bad. Taxpayers will rightly perceive it as a frivolous sort of abuse of these incentives which are often controversial to begin with.

But if FedEx really did come to Fargo because of the incentives that may be a bigger problem for Fargo city leaders as it’s going to draw some blow back over the use of economic incentives to hurt another North Dakota city. That may actually be worse for the city.

Which illustrates the absurdity of these incentives arms races in the first place, which pit communities against one another in a competition to see who can give these gigantic businesses the biggest pot of gravy.

And for the record, I’m glad FedEx is operating in North Dakota. I just don’t think they should get a tax exemption. Especially not for moving from one North Dakota city to another.

UPDATE: This from Twitter seemed apropos:

Here’s the video of the Fargo City Commission discussing and approving FedEx’s incentives from the 18th.

Rob Port is the editor of SayAnythingBlog.com, a columnist for the Forum News Service, and host of the Plain Talk Podcast which you can subscribe to by clicking here.

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