Auto dealership asks for tax abatement for new facility in Morris
MORRIS – Over the next month, three local government entities will consider whether to grant a tax abatement to a local automotive dealership looking to build a new facility.
The Morris City Council, Stevens County Board of Commissioners and the Morris Area School Board will all hold public hearings to consider the request from Dripps Automotive of Morris.
The company hopes to build a new 20,000 square foot facility at the corner of Highway 28 and Highway 9 in Morris – a project that may be the catalyst for further development in that area.
Dan Dripps, owner of Dripps Automotive, said the company initially considered a remodeling project on their existing facility. After they were approached by another company to buy their old building, they started looking at a new facility.
Dripps estimated the cost of the land, infrastructure, site preparation, building and equipment will be about $3.21 million.
“You pile it all together and it got to be more money than is really feasible on our end,” said Dripps. “Once we got the momentum going, there was a lot of other people that came to us and said you need to do this, it’s important for the area.”
Dripps said tax abatement is the only way to make the project financially feasible.
Judy Thorstad, Stevens County Assessor, estimated that the taxes for the proposed project, assuming a building worth about $2 million, would be about $77,000. Of that total, approximately $48,000 per year is eligible to be abated.
The city’s annual share of the abatement is about $15,000, the county’s share is $20,000 and the school district’s is $12,000. If all three entities abated their full amount over a 15 year term, the estimated total tax abatement would be about $700,000.
Property taxes on the current building are about $12,000 per year. If the abatement is approved, Dripps Automotive will pay approximately $29,000 per year in taxes at the new facility.
A memo from Mark Ruff, a financial advisor with Ehlers, the city’s financial consultants, offered a background on tax abatement and outlined the issues each municipality will need to address.
Under a tax abatement, the property pays taxes to the county and the county auditor pays each jurisdiction its share of the taxes. The local government then rebates a portion of the paid taxes to the property.
In order to approve a tax abatement, the government entity must set the term and amount of the abatement, determine that the benefits of the abatement exceed the costs and find that the project meets one of several specific objectives:
- increase or preserve the tax base,
- provide employment opportunities,
- provided or help acquire or construct public facilities,
- help redevelop new or blighted areas,
- help provide access to services for residents,
- or finance or provide public infrastructure.
“In our experience, the most important finding is the one in which the local government must find that the benefits of the project will outweigh the costs,” the memo concluded. “Because tax abatement is a flexible tool, we do recommend that the project being assisted have special circumstances that warrant assistance.”
City Manager Blaine Hill has said repeatedly that if the tax abatement for Dripps Automotive is not approved, the rest of the planned development for that area will likely not happen.
Hill said negotiations with the Minnesota Department of Transportation to decide on three access points to the proposed development have been going on for two years. If the project goes forward, MnDOT has a plan to widen Highway 28 and add a left turn lane near Superior Industries.
If the development doesn’t move forward, the Highway 28 project will likely be shelved, Hill said.
On Tuesday, Hill told the Stevens County Board of Commissioners that some other businesses that have been discussed for the development are Thrifty White, Town and Country, or a new hotel. However, none of these entities have officially made a request for tax abatement.
“Development will spark development – I think there’s going to be a lot of interest in what’s going on,” said Hill.
Hill also told the board that every potential project will need to stand on it’s own and apply for tax abatement separately.
“If a convenience store comes in here tomorrow and says I want to build out on the highway and I want tax abatement, I’m not going to support that because we already have convenience stores,” said Hill. “You don’t have to support every single project. … You have a business owner that just told you why he wants to do this project in this area and we just have to try to help him.”
The city of Morris will hold their public hearing on Tuesday, Aug. 26 at 5:20 p.m. Stevens County will meet on Monday, Sept. 15 at 7 p.m. The Morris Area School Board has not set a hearing date yet.