TIF district for Mitchell equipment dealer moves ahead

Farm Forum

A new equipment sales and rental store could be open in Mitchell by June 1, after plans for a special taxing district moved ahead on March 4.

The Mitchell Tax Increment Financing Review Committee unanimously recommended a $200,000 TIF district be created to help pay for drainage at the building site. The plan will still go before the Mitchell Planning and Zoning Commission twice, and the Mitchell City Council, before final approval is considered.

Doug Smith, general manager of Morris Equipment, told the committee of his company’s plan to place a sales and rental store on a vacant lot south of the Mitchell Ramada Inn and Suites in southwest Mitchell. If the process continues to receive approval, he

said, work could start in April.

“The plan is to be open June 1st. That’s what we’re shooting for,” Smith said after the 45-minute meeting. “But time keeps moving along.”

Morris Inc., which is based in Fort Pierre and owns Morris Equipment LLC, plans to construct an 11,000-square-foot building to house a Bobcat dealership with Kubota tractor and lawn-care product lines, a Grand Rental franchise and a Midstota trailer line. The business would employ seven to 10 full-time employees when it opens, and that could increase to 20 full-time employees by the fifth year of operation.

Annual sales are projected to be $3 million to $4 million in the first year of operation, with growth to $10 million by the completion of the fifth year.

Mitchell lawyer Don Petersen, who represented the firm at the meeting, said it is a “relatively small-sized TIF” that will primarily be used to create a retention pond for drainage issues. If the TIF is not approved, the development may not move forward, Petersen said.

“It’s not corporate welfare,” Petersen said, noting the TIF’s cost will be repaid by tax revenue. “We’re bringing in a business here that will do $10 million in sales.”

If it gets final approval, the TIF should be given a 20-year life, he said, although the plan is to pay it off in half that time. Petersen said asking for a 20-year lifespan is a hedge against an economic downturn and interest rates increasing.

The city would issue a bond to cover the costs, according to Mayor Ken Tracy and City Planner Neil Putnam. The revenue from the increased tax value of the land will cover the bond payments, they said.

TIF Committee member Bryan Hisel, who leads the Mitchell Area Chamber of Commerce and the Mitchell Area Development Corp., said the proposed development will serve as a form of “in-fill” to place something in a lot that has been vacant for decades because of drainage concerns while other areas had businesses placed on them.

“I just thought that was smart public action,” Hisel said.

In a TIF district, financing is issued to cover the cost of initial development work.

The new and higher property taxes sparked by construction in the district are then captured for an agreed upon number of years to pay off the financing. During that period, the tax revenue flows to the debt instead of to taxing entities like cities and counties, which begin receiving the revenue after the debt is paid off or the TIF period ends.

The proposed TIF plan on file with the city calls for $200,000 in financing for items including land grading, street paving, water and sewer service installation, and property acquisition.

Another $1.693 million of non-TIF money is projected to be spent by the developers. That includes $590,969 to buy the land and $1.102 million to construct the building.

The land is currently valued for tax purposes at $136,620. The improvements are expected to raise the valuation by $1.406 million. That growth is known as the “increment,” which is the portion of the valuation from which taxes will be captured to pay off the financing.

The committee’s recommendation moves the matter ahead to the Mitchell Planning and Zoning Commission, which will make a recommendation to the Mitchell City Council.

The proposed TIF will come before the Planning Commission on March 25. The council could give final approval as early as April 1.

Putnam chaired the March 4 meeting in the absence of Council President Jeff Smith, who is on vacation. Finance Officer Marilyn Wilson was also absent.