Dec. 13 2021 Grand Forks Olive Ann Second Proposal

City of Grand Forks
Staff Report
Committee of the Whole – December 13, 2021

City Council – December 20, 2021
Agenda Item: Olive Ann Boutique Hotel Property Tax Incentive
Submitted by: Todd Feland, City Administrator
Staff Recommended Action: Approve moving the Olive Ann Boutique Hotel forward to the Local
Government Advisory Committee (LGAC) for further review and recommendation of a property
tax incentive.
December 13, 2021 – Committee Recommended Action:
December 20, 2021 – Council Action:
BACKGROUND:
The proposed project is an expansion of the Edgewood Corporate Plaza at 322 Demers and the expansion
includes the construction of an estimated 89-unit Olive Ann Boutique Hotel and renovation of the existing
Edgewood Corporate Plaza for supporting space for the new Olive Ann Boutique Hotel to include lobby,
fitness, salon, laundry, and other support boutique hotel support areas. The proposed project has changed
from the original application with the incorporation of the Cloud 9 Events into the existing Edgewood
Corporate Plaza and subsequent reduced office space and additional support space for the boutique hotel
in the existing Edgewood Corporate Plaza. The alternate project plan results in the reduction in the
project cost estimates from approximately $36.5 million to $25.6 million primarily in the reduction in
areas of construction and related soft costs. Cloud 9 Events is nearing final completion and the applicant
plans to start construction of the Olive Ann Boutique Hotel in the spring of 2022. The Olive Ann
Boutique Hotel and Cloud 9 Events includes the project team of the local development company, JLG
Architects, and Northridge Construction.
Based on the applicant’s request for greater than five (5) years for the property tax exemption, Baker Tilly
completed its third-party financial review, analysis, and recommendation of the project. With the City
Council concurrence, the property tax exemption recommendation review will be presented to the LGAC,
which consists of representatives of the four local taxing entities. City Council President Dana Sande and
City Council Vice President Jeannie Mock serve as the City’s LGAC representatives and as Chair and
Vice Chair respectively. The recommendation from LGAC will then be forwarded to City Council for
preliminary action at which point a public hearing date (approximately 45 days later) will be set. During
that time-period, the property tax exemption request and recommendation will be heard by the County
Commission and School Board, per North Dakota Century Code requirements.
ANALYSIS AND FINDINGS OF FACT:

• The application process allows for further financial review of a tax incentive request prior to final
review and approval.
• The third-party financial review takes into consideration appropriate financial industry standards and
expected rates of return and the like, which helps to depoliticize the decision-making process and
“right-size” the tax incentive structures. Baker Tilly performs this due diligence service for other
regional communities and has assisted the City in this process for other incentive projects.
• The timeline of the tax incentive process is approximately three months from beginning to end and
includes City Council Pre-Application tax incentive approval; third party financial analysis; LGAC
review and recommendation; City Council preliminary recommendation and public hearing date
setting; Grand Forks County Commission, Grand Forks Public School Board, and City Council final
actions.
• The Olive Ann Boutique Hotel project is in a Grand Forks Opportunity Zone as certified by the State
of North Dakota and United States Department of Treasury and the applicant is proposing to use this
Federal tax incentive on a portion of the project as a complement to the local tax incentive.
• The Olive Ann Boutique Hotel project is in the Renaissance Zone and has been approved to use this
state and local tax incentive program and Cloud 9 Events has also been approved to use the
Renaissance Zone incentive program.
• The Olive Ann Boutique Hotel project meets and is aligned with the public purpose benefits
requirements of the use of tax increment financing to include:
o Achieving high quality redevelopment and private investment on sites, which would not be
redeveloped otherwise
o Removing slum/blight and/or rehabilitate a high visibility/high priority site
o Offsetting increased costs of infill development (e.g. demo, site remediation) over and above
the costs normally incurred in “greenfield” development
o Enhancing and diversifying City’s economic base
o Making meaningful contribution to the City’s tax base
o Retaining and/or increasing number and diversity of jobs that offer stable employment and/or
attractive wages and benefits
• The Olive Ann Boutique Hotel project meets and is aligned with Downtown Action Plan’s Principles:
o Identify priorities and strategic opportunities to encourage appropriate development, improve
underutilized spaces, and activate civic assets to their highest and best use.
o Identify best practices for continued efforts to make downtown Grand Forks a more livable,
walkable, and thriving urban center.
o Drive investment to Grand Forks and maximize return on both public and private sector
investments.
o Integrate and synchronize the aesthetics and amenities of anticipated public and private sector
projects.
o Develop high impact action steps that provide an ongoing roadmap to the future.
o Encourage broad public engagement and support throughout the community
• The Olive Ann Boutique Hotel project meets and is aligned with the Downtown Action Plan’s Big
Ideas:
o Create bold public spaces.
o Animate street life downtown.
o Improve access to and around downtown.
o Spur development in key emerging areas.
o Mobilize the right community policies, partners, and resources to improve downtown.
• The Olive Ann Boutique Hotel meets and is aligned with the Demers Avenue experiences and themes
of the following:
o The Arrival – 6th Street.
o Lifestyle – 5th Street.
o Learning + Creativity – 4th Street.
o Attractions – 3rd Street.
o Nature and Health – Greenway and Red River
• As an infill development project, the Olive Ann Boutique Hotel does not require significant City
infrastructure development and investment. Fifth Street and the associated streetscape from Demers
Avenue to First Avenue North is scheduled to be reconstructed in 2022 and will coordinate this
strategic street and streetscape investment with the construction of the Olive Ann Boutique Hotel.
• In addition to the five-year, 100 percent Renaissance Zone tax incentive, the applicant requested an
additional 10-year, 100 percent tax exemption for the applicant’s project due to provide for additional
cash flow and to meet targeted investor returns.
• Preliminarily and based on third party financial due diligence, the property tax exemption
recommendation is for an additional 10-year property tax incentive in the form of a Payment of Lieu
of Taxes (PILOT) for the Olive Ann Boutique Hotel portion of the project. The 10-year PILOT
property tax incentive is in addition to the already approved five (5) year, 100 percent property tax
exemption through the Renaissance Zone. The additional 10-year PILOT is recommended only on
the Olive Ann Boutique Hotel portion of the project and as follows: 100 percent for years 6-10 and
80 percent for years 11-15.
• The applicant, Mr. Phil Gisi, and the Baker Tilly Director, Mikaela Huot, will be available virtually
for the Committee of the Whole and City Council meetings on December 13 and December 20
respectively.
• Additional Olive Ann Boutique Hotel project information will be provided as it comes available.
SUPPORT MATERIALS:
• Baker Tilly Director Mikaela Huot Memorandum – Olive Ann Hotel and Event Center Project
Review of Developer Request for Property Tax Incentives dated December 10, 2021
• Grand Forks Renaissance Zone Project GF-63: Olive Ann Staff Report dated February 18, 2020.
• Olive Ann RE LLC Renaissance Zone Project Application dated January 17, 2020.
• Edgewood Development Group, LLC – Tax Increment Financing (TIF) Pre-Application Staff Report
dated November 4, 2019.

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City of Grand Forks

Committee of the Whole – December 13, 2021

Agenda Item: Olive Ann Boutique Hotel Property Tax Incentive

Submitted by: Todd Feland, City Administrator

December 13, 2021 – Committee Recommended Action:

December 20, 2021 – Council Action:

ANALYSIS AND FINDINGS OF FACT:

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