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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.


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.


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.

City vs TIF Values


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.

-Dustin Gawrylow, Managing Director

North Dakota Watchdog Network

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