Property taxes surge after four TIFs get paid off, adding $36.7M to Mitchell's property values

Oct. 7—MITCHELL — Mitchell's property taxes have felt a big impact from a handful of Tax Increment Financing district developments that were paid off in the past two years.

The four Tax Increment Financing (TIF) districts that brought a swath of new housing developments, townhomes and businesses added $36.7 million in assessed property values to Mitchell's tax rolls, which contributed to the surge in property taxes for 2023. The handful of TIFs that were paid off in the past year and a half grew Mitchell's property taxes by 5.4%, marking the largest single-year increase over the past decade.

City Administrator Stephanie Ellwein said the latest group of TIFs being paid off early shows how valuable they can be for bringing growth and more housing options.

"To see 5.4% growth in the city is very unusual for us. We're usually under 2%. All of that TIF revenue is now coming back to the taxing entity since they were paid off, which is where the increase is coming from," Ellwein said. "When these four TIFs dissolved due to all of the associated costs being paid off, that's all shown as new growth. Because of these TIFs, it's brought a huge amount of assessed value to the city."

TIFs were initially established as a tool to help spur economic development in targeted areas where developers are seeking to build new businesses and income-generating properties.

However, TIFs have now evolved to facilitate other projects, primarily housing developments. As seen in Mitchell, many developers have utilized TIFs to help fund the infrastructure portion of new housing developments.

In a TIF, the increase in property tax revenue in the area being developed is what funds public infrastructure improvements and pays back the city of Mitchell.

Among the four TIFs that recently were dissolved and paid off, three of them were housing-related developments.

TIF No. 18 brought a swath of townhomes and apartments to the south side of Mitchell called South Point Village. The TIF began in 2012 with a 20-year time window, but the developers reached their increment dollar figure and paid the city in full this year. In total, TIF No. 18 added $15.7 million in assessed property values.

TIF No. 17, The Woods Addition housing development near Wild Oak Golf Course, also generated $12.8 million in assessed property value, while the housing development led by Probuild in TIF No. 15 added $7.2 million. The lone TIF that was not used to build a housing development but a steel fabrication business generated an $835,000 increment.

"A lot of these TIFs started about the same time frame. It's good they are paying off, and paying off early. It just means those taxes get back to the taxing entity sooner than the 20 years they are allowed to go by," Ellwein said.

Combining the increments generated from the four TIFs that recently dissolved, it amounts to a whopping $36.7 million in assessed property values.

The city utilizes property taxes to help fund city services. However, revenue from property taxes is minimal compared to sales tax. Property taxes account for just 30% of the city's annual revenue, while 57% of its revenue comes from sales tax.

While TIFs have helped bring new industry, businesses and housing options, some Mitchell residents have criticized the way TIFs are being used. Mitchell resident Steve Sibson said during an April city council meeting that TIFs are being used by wealthy real estate developers to reduce the costs of housing developments and other TIF-related projects. He claimed they were never intended to be used the way some currently are.

"They were originally intended to restore economic vitality to a blighted area, and what I've seen in this community — both at the city and county level — is they are being used to reduce the costs of wealthy real estate developers," Sibson said at the April council meeting.

The state allows TIFs to be used for housing developments like many Mitchell developers have, according to the state's Department of Revenue guidelines.

Ellwein dubbed TIFs as "one of the only tools" cities have in their arsenal to kickstart economic development, whether in the form of new businesses or housing developments. Some developers have said they would not have been able to develop a property without a TIF, such as a California developer who is transforming an old downtown Mitchell building into apartments and retail space.

Several new TIFs have sprouted this year, including one for a housing development near Lake Mitchell and another for the redevelopment of the old Ramada Inn Hotel that's been an aging, vacant building.

Since Mitchell began welcoming TIFs several decades ago, there have been 28 TIF districts created in Mitchell. All but one paid off. The lone TIF that did not pay off, located near Klock Werks, was dissolved due to the city receiving a multi-million-dollar grant to improve the low-lying, flood-prone area.