08-05-2025
Marshall Mitchell: Mitchell housing development and transmission service approved for tax breaks
May 7—MITCHELL — The city of Mitchell has refined its tax increment district guidelines.
The Mitchell City Council, during its regular meeting on Monday, May 5 approved the addition of Tax Increment Districts (TID) No. 41 and No. 42.
TID No. 41 was approved for Paul Groeneweg's Woods Apartments, a proposed 70-unit complex with two-and-three-bedroom apartments across 12 buildings.
The boundary of TID No. 41 includes the empty lots
south of First Avenue between Tiger Street and Mattie Street, as well as all of Mattie Street south of First Avenue and north of East Havens Avenue.
TID No. 42 will aid the expansion of the Dale's A1 Transmission service building, located south of East Ivy Street between South Burr Street and South Capital Street, and will generate an estimated $340,000.
TID No. 41 will be a total maximum of $4.3 million in tax financing. TID No. 41 covers the infrastructure cost of the developer at $2.28 million. Additionally, TID No. 41 is projected to cover the city's construction of Mattie Street, estimated at $2.02 million.
"We know that there is projected to be some portion of unused tax increment that should be available to support that project," City Attorney Justin Johnson said.
The city has five years to develop Mattie Street if it wishes to capture the increment revenue of the TID district, according to Johnson.
"The city holds the cards," Johnson said. "There's really no risk to us. You'll know with a lot more certainty how much is going to be able to come in to help fund the Mattie street construction."
TID developers have to certify their costs and provide final receipt totals to the city.
"If something comes in less than what they estimated that construction cost to be, then it would free up some of those funds to Mattie Street," City Administrator Stephanie Ellwein said.
Council member Mike Bathke asked why this was the second time that Mattie Street had been included in a proposed tax district, and why it failed to move forward the last time.
"There's no teeth in these deals," Bathke said.
The city's TID evaluation process has changed since that TID was proposed, according to Ellwein. Since then, the city council has requested developers to provide more reporting and certifications. Additionally, affordable housing rental rates are a key part of TID developments.
"We have a lot more oversight than what we found in the past," Ellwein said.
In 2012, the original Mattie Street project,
TID No. 17,
was proposed when the city was still accepting the debt of developments. In 2015,
Davison County Tax District No. 4
also sought to develop Mattie Street between Quiett Lane and State Highway 38, but was rejected by county commissioners.
In 2021, after a four-year hiatus from approving tax districts, the city approved
TID No. 26
and no longer takes on the debt of tax district developments.
Don Petersen, of the Morgan Theeler law firm,
who represented both TID developers, also aided the creation of the first Mattie Street tax district proposal. Times have changed for proposed tax districts.
"They've tightened down the rules and the developers have accepted those and we have to play by those rules," Petersen said.
Petersen reminded the council that developers carry the risk when building, and that a developer has five years to finish construction, according to the terms of the TID. Groeneweg plans to construct the first five apartment buildings by November, Petersen said.
Groeneweg has other housing developments as well. Groeneweg's first approved tax district was TID No. 27 for Fiala Road. Every lot in the Fiala Road development has been sold within three years, according to Petersen.
"That's just kind of a monument that shows that there's a need for this type of housing in Mitchell," Petersen said.
TID No. 41 requires the developer to guarantee rental rates will be in line with affordable housing restrictions.
"Affordable housing is expensive to build," Petersen said.
Entry-level positions in Mitchell can't afford a $350,000 house, noted Petersen, who painted the picture of saving for a down payment while living in a family-oriented apartment could enable someone to one day own a house of their own.
In the future, Ellwein plans to add more requirements for job creation to preliminary TID evaluations.
Dale's A1 Transmission plans to add 10 jobs with full benefits, according to Petersen.
Local resident Steve Sibson questioned how the South Dakota Department of Revenue would possibly approve TID No. 41 when it appears to be a mix of two different kinds of tax districts with two different goals. Sibson noted that a local tax district benefits a local government but does not have a regional or statewide benefit.
If the state classifies TID No. 41 as a local tax district, the TID would expire.
"If that were to happen, we may need to reconsider the TIF at a future date, take out whatever component the state had an issue with, and then reprocess a new TIF," Johnson said.
Petersen confirmed that the state no longer pre-approves tax districts before city council approval, a recent change at the state level.
