Erling Haugland v. City of Bismarck
Case Background:
In the 1970’s, the Housing and Community Development Act of 1974 led to the enactment of state statutes providing for “Urban Renewal”. One of the “tools” provided in North Dakota Urban Renewal law is designed to assist in financing the costs of remediating slums and blight in cities using tax increment financing (TIF). In Bismarck, the initial area of redevelopment under “Urban Renewal” was the block now occupied by the Radisson Hotel.
When using TIF, the county auditor freezes the taxable valuation of a property in a TIF district and in subsequent years directs the taxes paid on the increased value of the property (increment) to a TIF account that is used to pay the costs associated with redevelopment of the property.
Under state law, when the project costs are fully paid, the city is required to report that fact to the county auditor so the property could then be properly taxed for the benefit of the Bismarck School District, Bismarck Park District, Burleigh County, and the City. And any money left in the account is to be sent back to taxing jurisdictions.
In the case of the Radisson, the "increment" value of the property has generated no tax revenue for any political subdivision other than the City who uses the money to fund projects in the Bismarck TIF district.
In addition, the City has subsequently expanded the TIF district to include all of downtown Bismarck while unlawfully taxing the entire TIF district at a “base level” originally established in 1979 for all political subdivisions with the "increment" going into a TIF fund. The fund has more than $15 million which the city now uses to favor politically connected developers, lawyers, economic development directors and other implementers.
On April 5, 2010, the North Dakota Policy Council filed a lawsuit against the City of Bismarck on behalf of Erling Haugland, a local property owner. The NDPC believes that these practices violate the North Dakota’s Urban Renewal law as well as the equal protection clauses of both the North Dakota Constitution and the U.S. Constitution, and the uniformity in taxation and gift clauses of the North Dakota Constitution.
On January 14, 2011, Judge Donovan Foughty, a district court judge, dismissed the case, siding with the City of Bismarck. Haugland is debating his next move.
The Stakes:
• Force cities to obey the laws when using tax increment financing.
• An equitable business environment that doesn't treat one property owner better than any other.
• A realignment of priorities from business subsidies to schools and fire and police protection.
• Disallowing the City Commission the ability to circumvent the voters who previously disapproved of quiet rail.
• A chance for the court to uphold individual constitutional rights and protections contained in the North Dakota constitution.
• Putting an end to abuse of the "gift clause" of the North Dakota constitution that prohibits corporate welfare.
North Dakota Policy Council Files Complaint Against City of Bismarck
Case Documents:Tax Increment Expenditures: 1982 - 2008 (PDF)
City of Bismarck's Answer to NDPC's Complaint (PDF)
Map of Bismarck's TIF District (PDF)
Bismarck's CORE Projects (PDF)
Bismarck's Renaissance Zone Projects (PDF)
Case Timeline:April 5, 2010 - Case filed with Burleigh County Court.
April 20, 2010 - City of Bismarck requests case be moved to Federal Court.
June 14, 2010 - Case is moved back down to State Court.
January 14, 2011 - Case is dismissed by District Court.Media Coverage:
Radio
NDPC President Curly Haugland's interview with Joel Heitkamp, KFGO - Download (MP3)
Click Here to listen to it on the web.
North Dakota
Bismarck Tribune - "Judge throws out lawsuit against city"
Bismarck Tribune - "Sorting out TIF's legal requirements"
Plains Daily - "Report: ND Property Tax Relief Short-Lived"
Bismarck Tribune - "Lawsuit filed against the City of Bismarck over TIF funds"
KXMB - "Lawsuit filed against city of Bismarck"
KFYR - "Group Files Lawsuit Against Bismarck"
AP - Dickinson Press, Grand Forks Herald - "Bismarck use of 'tax increment' money challenged"
Bismarck Tribune - "North Dakota Policy Council executive explains stand on tax increment financing"
Bismarck Tribune - "Quarrel over downtown TIF funds has supporters and opponents"
National
AP - Forbes, Boston, Newsweek, Worldnews, CNBC -
"Bismarck use of 'tax increment' money challenged"
Tax Increment Financing 101
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