MITCHELL — Mitchell’s property taxes have felt a big impact because of a handful of tax-raise funding district developments that have been refunded over the past two years.
The four tax increment financing (TIF) districts that brought in a slew of new subdivisions, townhouses and businesses added $36.7 million in assessed property values to Mitchell’s tax rolls, which contributed to soaring property taxes for 2023. The handful of TIFs that have been paid over the past year and a half have increased Mitchell’s property taxes by 5.4%, marking the largest single-year increase in the course of the last decade.
City Administrator Stephanie Ellwein said the latest group of TIFs paid early shows how helpful they can be in bringing growth and more housing options.
“To see 5.4% growth in the city is very unusual for us. We are generally below 2%. All of that TIF revenue now goes back to the tax entity since it was refunded, where the increase is coming from,” Ellwein said. “When these four TIFs were dissolved due to reimbursement of all associated costs, it all resulted in new growth. Thanks to these TIFs, it brought a huge rateable value to the city. »
TIFs were originally created as a tool to help stimulate economic development in targeted areas where developers are looking to build new businesses and income-generating properties.
However, TIFs have now evolved to facilitate other projects, primarily housing estates. As seen in Mitchell, many developers have used FITs to help fund the infrastructure portion of new housing developments.
In a TIF, increased property tax revenue in the area being developed is what funds public infrastructure improvements and reimburses the Town of Mitchell.
Of the four TIFs that have recently been dissolved and repaid, three of them were housing-related developments.
TIF #18 brought a strip of townhouses and apartments to the south side of Mitchell called South Point Village. The TIF started in 2012 with a 20-year time window, but the developers hit their dollar increase figure and paid the city in full that year. In total, TIF #18 added $15.7 million in assessed land values.
TIF #17, The Woods Addition housing development near the Wild Oak Golf Course, also generated $12.8 million in estimated land value, while the Probuild-led housing development in TIF #15 added $7.2 million. The only TIF that was not used to build a subdivision but a steel fabrication business generated an increase of $835,000.
“A lot of these TIFs started around the same time. It’s good that they’re paying, and they’re paying early. It just means that those taxes come back to the taxing entity sooner than the 20 years that they are allowed through,” Ellwein said.
Combining the increases generated by the four recently dissolved TIFs, this equates to $36.7 million in assessed land values.
The city uses property taxes to help fund municipal services. However, revenue from property taxes is minimal compared to sales tax. Property taxes make up only 30% of the city’s annual revenue, while 57% of its revenue comes from sales tax.
While TIFs have helped bring in new industries, businesses, and housing options, some Mitchell residents have criticized the way TIFs are being used. Mitchell resident Steve Sibson told an April city council meeting that TIFs are used by wealthy real estate developers to cut costs for subdivisions and other TIF-related projects. He claimed they were never meant to be used as some are now.
“They were originally intended to restore economic vitality to a degraded area, and what I’ve seen in this community – both at the city level and at the county level – is that they are used to cut costs for wealthy property developers,” Sibson said. at the April city council.
The state permits the use of TIFs for subdivisions, as have many Mitchell developers, per state Department of Revenue guidelines.
Ellwein dubbed TIFs as “one of the only tools” cities have in their arsenal to kick-start 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 converting an old building in downtown Mitchell into apartments and commercial space.
Several new TIFs have sprung up this year, including one for a subdivision near Lake Mitchell and another for the redevelopment of the former Ramada Inn, which is an aging and vacant building.
Since Mitchell began hosting TIFs decades ago, 28 TIF districts have been established in Mitchell. All but one have paid. The only unsuccessful TIF, located near Klock Werks, was disbanded as the city received a multi-million dollar grant to improve the low-lying, flood-prone area.