The first thing Kevin and Nancy Horneman did with their newly purchased, downtown Bismarck building was rip off the old, cumbersome canopy and the tired, gold lettering above it:Golden Dragon.

Next, as they began to asses their new space, the layers of ceiling and flooring, they began to apply for downtown incentives and grants to finish the job of renovating the inside and updating the outside, a project they plan to begin this spring.

They plan on sinking about $200,000 total into the two separate spaces, and about $60,000 on the new facade, which will include opening up the first floor with large windows. They're selling one side of the building, and opening up the other for leasing opportunities.

Down the street, a new, nearly $3.2 million office building stands proud on top of the place where the husk of the old Corwin-Churchill once stood.

The tenants of the building -North Dakota Bankers Association, Architectural Concepts Inc., Kirkwood Bank-were looking for viable space downtown.

"We just preferred being downtown," said Richard Bohrer, one of the three owners of the building and owner of Architectural Concepts. "We could've been on a much bigger lot, probably, and had a lot more green space. But it just appealed to us more, to be downtown. I think with some of the (downtown) renovations going on, long-term, it's a good idea, too."

And those tax exemptions made building downtown pretty attractive, too, he said.

Across the river, Mandan Guaranty &Title is completing its nearly $750,000 renovation of the old Legion building. They gutted the entire thing, leaving only the four outside walls before completely renovating the inside and outside.

The company also received tax incentives for investing in a downtown, Renaissance zone building, making the decision to locate in the older building pretty attractive.

"It wasn't a deciding factor, but it was a big help,"said Karen Johner, president.

Kevin Horneman said they wouldn't have sunk so much into the Golden Dragon if there weren't incentives available.

"If the community doesn't have the goal or the drive to rebuild its downtown, and they just leave it …"Horneman said. "If it's not something that's sponsored, it's not worth doing."

A feeling shared by many investing in the cities' downtowns:Without the incentives, investing in the area is harder to justify. The buildings are old, parking is lean.

But others say such incentives are wasteful of taxpayer money, pumping dollars into buildings that should be leveled or taking business away from other parts of town.

In 1999, the state Legislature passed North Dakota's Renaissance zone program, which allows tax incentives for businesses willing to move into or invest in an otherwise dying part of town.

Most cities or towns in North Dakota designated their dwindling downtown areas for the incentive program, and according to some, it's working.

The state required towns and cities to develop action plans for establishing qualifications for what's eligible for some very attractive tax credits and exemptions: Property or business owners can qualify for hefty property tax and state income tax exemptions.

The investments into the downtown areas far exceed the amount of money lost in property taxes, and advocates of the program say cities will get back those property taxes within two years after the tax abatements expire.

In Bismarck, at least 50 percent of the value of a building in the Renaissance zone must be reinvested into capital improvements to the building before the owners qualify for tax incentives; the incentives are an up to five-year, 100 percent property tax exemption and an up to five-year, 100 percent income tax exemption for businesses.

Lease-holders of a space can qualify for incentives if they invest $10 a square foot. New construction, such as the new building Bohrer, Jerry Splonskowski with Northwest Contracting and Rick Clayburgh with the Bankers' Association invested in, also qualify.

Since the inception of Bismarck's Renaissance zone in 2002, 45 projects have been approved, equaling a projection of $14.1 million in downtown capital investments.

The city is projected to lose about $2.25 million in property tax abatements for those improved properties.

On the projects completed to date, Kim Lee with the city planning department said the ratio of investment versus what the city is losing in property taxes is 14.5 to one.

An estimation of state income tax abatements for proposed projects in Bismarck comes to $2.86 million, Lee said. One property is estimated to receive $530,000 in state income tax abatements, which is nearly 13 percent of the purchase price of its building.

In Mandan, 27 projects approved since its program's 2005 inception come to $4.19 million of investment. Total five-year property tax benefits come to $517,000, and total income tax abatements are estimated at more than $723,000.

On completed projects, the ratio of investment to property taxes is about eight to one.

Downtown property values seem to be increasing in both Bismarck and Mandan; Ellen Huber, business development director for Mandan, said they saw a 5 percent increase in values last year. Bismarck has seen a 20 percent increase in valuations since 2002.

Other benefits advocates point to:Job retention, job creation, increases in sales tax.

Gordon La France, manager of the state renaissance program with the commerce department, said the program was created to, of course, stimulate economic growth in dilapidated areas of town, but also to provide attractive incentives for new businesses.

According to Lee with the Bismarck City Planning Department, 143 jobs have been created with Renaissance zone projects; in Mandan, that number is at about 30 jobs created since inception.

But Bismarck City Commissioner Steve Schwab has some contention with those numbers.

He points out that jobs created only count new jobs for downtown and don't necessarily mean the jobs are new for the city; his concern is that businesses may move from properties or leases in other parts of the city to take advantage of the benefits in the Renaissance zone.

"What happens when their five-year tax breaks run out?"Schwab said, adding that he also feels the approval process may be too lax.

City Commissioner David Jensen said giving tax breaks to people who own buildings or property in a selected area is a legal scam.

"You're using taxpayers' money for tax breaks to fix up businesses and properties,"Jensen said, adding that many of the older properties should be torn down instead of rehabilitated. The cost of continuing to maintain those types of buildings are too much, he said.

"Give some tax incentives for tearing down some of these buildings and rebuilding them,"he said.

The new building on the Corwin-Churchill site is an example of a healthy use of money, he said: It's new and has extensive parking, what downtown needs.

La France said the program is not a fix-all for the cities, but rather a tool intended to help cities redo infrastructure where it's needed most.

But he also said the program is working. Taxable values are going up, cities are recouping their costs quicker, businesses are blooming in would-be dilapidated areas.

"This program will succeed if the people who are managing the program work at it,"he said. "What I've seen across the state is that city planners are taking this very seriously. They just want to make their cities a better place to live."

(Reach reporter Crystal R. Reid at 250-8261 or at crystal.reid@;bismarcktribune.com)