City approves tax abatement for Heartland Motors
MORRIS – On Tuesday, the Morris City Council approved a request from a local automotive dealership for tax abatement on a proposed project to build a new facility at the corner of Highway 28 and Highway 9 in Morris.
But for the project to move forward, the request for tax abatement will need to be approved by the Stevens County Board of Commissioners and Morris Area School Board.
At a public hearing on the request, local officials and residents heard many details of the request for the first time.
What’s the request?
Dan Dripps, owner of Dripps Automotive, said the project got started after General Motors started a push to improve dealership facilities. The cost of remodeling the company’s existing dealership, Heartland Motor Company, would be about $1 million.
Research indicated that cost of a new 20,000 square foot building would be about $2 million, with another $1.2 million for land acquisition, infrastructure and site preparation.
“We had a lot of people – a small town, people talk – a lot of people came forward and said we could really use this, it would be good for the community if we could get some kind of development in that corner,” said Dripps.
Under the proposed agreement, the city, school and county would abate a portion of the company’s taxes over a 15 year period.
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.
Given that estimate, the total abatement over that time is $225,000 from the city ($15,000 per year), $300,000 from the county ($20,000 per year) and $180,000 ($12,000 per year) from the school district for a total of $705,000.
These amounts are set specifically in the agreement and cannot increase. And if the property is valued at a lower amount than the estimate, the abatement amount will be less.
As part of the agreement, Dripps Automotive also has to set specific job creation goals. Dripps said the company has started hiring in anticipation of the project and will commit to having 35 jobs within two years. If these goals aren’t met, the company will have to repay part of the abatement.
Council member Jeff Miller asked what would happen if all three entities do not agree to the proposed tax abatement.
Dripps responded that the project won’t move forward.
“We’re stretching – we’ve been stretching all along. … We’re not in a huge, booming economy or a growing economy,” said Dripps. “This works, and without everybody doing what was set up it doesn’t work.”
Are other businesses interested?
Throughout the discussion on the development, leaders have mentioned several other businesses that may be interested in building there including Thrifty White, Town and Country and a new hotel.
Morris resident Geoff Richardson said he thought tax abatement was a good tool, but should be used to attract new businesses to the area.
“One of the things that happens out here on the prairie is that you don’t lure in a bunch of big businesses – they’re homegrown businesses,” said Morris city manager Blaine Hill. “Our business model isn’t luring businesses here as much as it is growing businesses that are here.”
“If it’s generating 15 new jobs, we’re certainly growing an existing business – that really is as good as generating new business,” said Mayor Sheldon Giese.
Richardson also asked what would happen to other downtown properties if businesses move out to a commercial development.
Michael Haynes, executive director of the Stevens County Economic Improvement Commission, said open space downtown would be good for the city because there are not many empty locations in downtown. Haynes said he is meeting with owners to make any potential vacated buildings more attractive to new tenants.
Dripps said he also has an agreement in place for Superior Industries to purchase their old building if they move forward with a construction project.
Haynes said there is also a hotel company that is very interested in buying property in the development.
“We are having a hotel built, if this project goes forward,” said Haynes. “It’s all dependent on getting the infrastructure in.”
Does this set precedent?
Any other business interested in tax abatement will have to put together a request.
“Each project has to really stand on their own as to what they’re going to be doing and what they need for tax abatement and why,” said Hill.
One of the reasons the initial cost of the new facility of Heartland Motor Company is so high is the additional infrastructure needed to get the development started.
“There is an added cost to having to come off the highway into a frontage road as opposed to getting a driveway off the highway to your business – that is what is really cranking up the cost on this,” said Hill.
“It’s unrealistic to think even that someone would come to it and develop it without this kind of assistance,” agreed Haynes. “If it’s not available I don’t see it being anything other than a cornfield for the next 30 years.”
What happens to Highway 28?
The Minnesota Department of Transportation has a planned project to widen Highway 28 through Morris, add a left turn lane near Superior Industries, and add three access points to a frontage road in the proposed development.
The access points are located on Highway 9 south of Park Avenue, on Highway 28 near the former Coborn’s building, and on Highway 28 across from Columbia Avenue.
Previously, Hill said that if the development does not move forward, MnDOT would not move forward with the proposed project. This is not the case.
In an e-mail to Hill, Bradley Cegla, MnDOT project supervisor, said the project will continue regardless of the outcome, but it would not include turn lanes on Highway 28 and Highway 9 that are set to go into the development. The project will still include turn lanes by Superior Industries.
“Please keep in mind that if the development does not happen prior to construction of this project and we do not put in the turn lanes, then if the development were to be built at a later date the developer would have to install the turn lanes through a MnDOT permit and at their own expense,” Cegla wrote.
What happens next?
Council member Kevin Wohlers, who abstained from the vote as an employee of Heartland Motor Company, called the development a “defining moment” for the community.
“We want to see the city grow, and I think once it takes off it’ll grow a lot quicker than you think,” said Council member Bill Storck.
“I think it sends a message to the business community within the city/county area that we are pro-business, we support business and we do what we can,” said Giese.
The Stevens County Board of Commissioners will hold their public hearing on Monday, Sept. 15 at 7 p.m. The Morris Area School Board will likely hold their public hearing on Monday, Sept. 22 during their regular school board meeting.