I-90 matures into dominant economic force for MitchellFrom nothing 15 years ago, area now contributes 31 percent of city’s sales tax revenue.
By: Chris Mueller, The Daily Republic
There was a time when Interstate 90 was south of Mitchell.
It took a combination of “men, steel, concrete and clay” to bring I-90 to Mitchell, said a June 16, 1966, edition of The Daily Republic. When I-90 opened in 1967, it quietly passed by the city through fields to the south. And year after year, it seemed to stay that way.
“For a long time, I didn’t understand why it didn’t build up,” said Lyle Swenson, president of the Mitchell Area Historical Society and former Davison County sheriff. “I just kept trying to figure out why things weren’t happening there.”
”Now, all of a sudden, it’s a full house,” Swenson said.
In the last 14 years, a commercial building boom has transformed the south side of Mitchell. What was once mostly empty land to the south of I-90 is now home to businesses that bring millions of dollars to the city’s economy every year.
According to statistics acquired by The Daily Republic from the state Department of Revenue and Regulation, businesses south of I-90 in Mitchell — excluding businesses west of South Rowley Street, with the exception of AKG, which opened in 2006 — produced about $166 million in taxable sales in 2012. That was 45 percent of the city’s total retail trade and 31 percent of the city’s total taxable sales in 2012, from which the city collected 31 percent of its sales tax revenue — all from an area where there was no development 15 years ago.
For comparison, the entire city of Vermillion, which is home to 10,571 residents and the University of South Dakota, had about $135 million in taxable sales in 2012 — $31 million less than the businesses on Mitchell’s south side.
But Mitchell, like Rome, wasn’t built in a day. Or a year. Or even a decade.
“We had more than $3 million in infrastructure that had to go in for any development (south of I-90) to occur,” said Bryan Hisel, executive director of the Mitchell Area Chamber of Commerce and Mitchell Area Development Corp. “Cabela’s was the key to affording that.”
Hisel, who began in his current positions in 1985, was involved in attracting the Nebraska-based outdoor retailer to Mitchell in the late 1990s. The idea to bring in Cabela’s evolved out of a failed attempt to bring an outlet center to the area south of the city, Hisel said.
More than three decades after I-90 was opened in Mitchell, the area to the south was still empty. A major project, Hisel said, was necessary to justify the cost of extending infrastructure — roads, sewer, water and other utilities — past I-90.
“Without industry or private development public entities — cities and counties — have a hard time spending revenue on expensive infrastructure,” Hisel said. “That’s why it took a long, long time.”
After years of negotiations and help from the late Harold Hagen — the former owner of Mitchell Plastics and Mitchell Manufacturing who had a hunting friendship with Cabela’s co-founder Dick Cabela — a deal was finally made with Cabela’s, Hisel said.
In 1999, Cabela’s announced its plans to build a store in Mitchell. It opened a year later, 33 years after I-90 opened near Mitchell. Cabela’s paid $2.1 million for its 120 acres of land on the south side of I-90.
With a major retailer in the area and infrastructure suddenly available, it wasn’t long before other businesses moved into the area, including two more major retailers: Menards and Walmart.
“Infrastructure creates opportunities,” Hisel said.
‘Millions of cars’
Expanding out to the interstate was critically important for Mitchell, Hisel said. The reason is simple: the interstate is a tremendous economic advantage.
In 1967, an average of 1,800 vehicles passed by Mitchell on I-90 each day, according to statistics kept by the South Dakota Department of Transportation. By 1999, that average was 8,590 vehicles per day. And by 2012, the average daily count of vehicles passing by Mitchell on I-90 was 9,918 — more than 5.5 times the 1967 average. By 2033, the DOT expects that average to increase to 13,600 vehicles per day.
“The real economics is you have millions of cars traveling on the interstate through Mitchell every year,” Hisel said.
At the level of the 2012 daily average, the yearly total vehicle count on I-90 at Mitchell would be 3,620,070.
According to the South Dakota Department of Revenue, from 1998 to 2003, Mitchell’s taxable sales rose from $275.5 million to $392.2 million, about a 42 percent increase. In that same time, Mitchell’s retail trade — a category within taxable sales — grew even faster, from $173.2 million to $266.4 million, about a 53 percent increase.
Meanwhile, retail’s significance to Mitchell’s economy was increasing. In 1998, retail was 62 percent of Mitchell’s total taxable sales. By 2003, that share had increased to 68 percent.
Between 2004 and 2012, Mitchell’s taxable sales increased from $430.3 million to $531.1 million, about a 23 percent increase. In that time, retail’s share of the city’s taxable sales remained between 67 and 71 percent.
From the roughly $166 million in taxable sales produced south of I-90 in 2012, the Department of Revenue’s statistics show the city of Mitchell collected $3.320 million in sales taxes, or 31 percent of the total of about $10.737 million in sales taxes collected by the city in 2012.
In comparison, Mitchell’s historic downtown business district had $24.587 million in taxable sales between April 2011 and March 2012, or less than 5 percent of Mitchell’s approximately $530 million in taxable sales during that time. Those downtown sales generated $491,735.30 in city sales taxes, according statistics acquired by The Daily Republic from Molly Goldsmith, executive director of Mitchell Main Street and Beyond.
Slow but steady
The downtown vs. I-90 statistics reflect a revolution in the city’s economy since the pre-interstate days of the 1960s, when the downtown district was the beating heart of the city’s economy.
“People really like choices,” Hisel said. “I think Mitchell is really starting to offer that.”
From 2005 to 2012, approximately $43.7 million was spent for the construction of new buildings or additions south of I-90 in Mitchell, according to the city’s building permit records. That represents about 27 percent of the total spent in that time in all of Mitchell.
In 2012, permits were issued for about $21.59 million in projects south of I-90, more than half the year’s total of nearly $34.4 million.
The estimated cost listed on a building permit includes only the structure and not the dirt work; heating, ventilation and air conditioning; plumbing; or other extras. Therefore, the estimate is lower than the real cost of the project.
Excluding the permit issued in May for Mitchell Technical Institute’s Trades Center, a $15.8 million project, the remaining projects in 2012 south of I-90 include a $2.45 million expansion of AKG, two 13-unit apartment buildings with a cost of $1.94 million, the new BankWest building with a cost of $700,040, and the new Leader Sporting Goods building with a cost of $270,000.
Those construction projects, with a combined total of about $5.35 million, account for 29 percent of the remaining $18.6 million in projects.
“Something new seems to be going in every 12 to 18 months,” Hisel said. “It’s very noticeable to travelers and the rest of the state.”
From 2005 to 2009, the annual value of projects south I-90 was between $2.64 million and $3.09 million every year. After a strong year in 2010, with $7.69 million in projects, the area went through a brief lull in 2011, with only about $753,000 in projects, before another strong year in 2012.
The pace of development south of I-90 has been steady, but not fast, Hisel said.
“What you’re seeing out there has taken over a decade to develop,” he said. “If it had happened in two or three years, that would be fast.”
A steady growth in population has accompanied the economic growth in the Mitchell region, especially in the last two decades.
In 1960, Mitchell’s population was 12,555, according to U.S. Census data. By 1990, the city’s population had grown nearly 10 percent to 13,798. From 1990 to 2000, the population grew another 5.5 percent to 14,558. And from 2000 to 2010, the population grew 4.7 percent to 15,254. That means Mitchell’s population grew more than 21 percent from 1960 to 2010.
With a pair of scissors in his hand, then-Gov. Nils Boe opened a 56-mile section of I-90 between Spencer and White Lake at a ribbon-cutting ceremony on Nov. 15, 1967, in Mitchell. An estimated 400 people attended the event, according to an article in the Nov. 16, 1967, edition of The Daily Republic.
The 56-mile stretch cost more than $20 million to build at the time, according to an article in the June 16, 1966, edition of The Daily Republic. Adjusted for inflation, the project would cost more than $137.8 million today.
“Maybe government, with cooperation in all areas of the state, can accomplish a good deal more,” Boe said, addressing the Mitchell Area Chamber of Commerce at a banquet following the ribbon-cutting. “We have seen evidence today as to what can be done when we all work together.”
With the completion of the 56-mile stretch past Mitchell, 367 miles of interstate were finished in South Dakota, including a 147-mile stretch from the Minnesota border to Chamberlain.
Art Rew, Mitchell’s mayor from 1966 to 1968, was with Gov. Boe at the ribbon-cutting. At the time, the interstate was an entirely new experience for the city’s residents, Rew said in a recent interview with The Daily Republic.
“They didn’t know what to think of it,” he said.
Just days after I-90 opened in Mitchell, The Daily Republic asked locals for their opinions on the new highway. Their answers were published Nov. 18, 1967.
“I don’t think it will hurt Mitchell,” said John Herron, of Mitchell. “It will pick up people passing through and it will help through traffic.”
Another Mitchell resident, A.C. Krimbill, disagreed.
“Well, I can see where it’s going to hurt us,” Krimbill said. “For through-traffic it’s the best thing there is. I do think that interstates hurt sightseeing, but I don’t think it will matter that much.”
Allen Aubert, a Dakota Wesleyan University student at the time, gave his opinion.
“If people plan on traveling through South Dakota, they will see enough while traveling along the interstate to attract them,” Aubert said.
More than 30 years later, Mitchell’s expansion around the interstate has changed how the city itself is perceived, Hisel said.
“It makes it a more progressive community,” he said. “That was not the case for many, many years.”
‘Everything you need’
Retail and hospitality have dominated the south side of I-90, but other projects are under way to add new amenities to the area, including residential units that will allow people to not only shop and eat and entertain south of I-90 but to live there as well.
A 52-unit apartment complex is currently under construction on a previously empty stretch of land west of Menards.
The first two buildings, which contain 13 apartments each, are expected to be completed in April or May, and construction of the next two is expected to begin this spring, according to Ron Muth, one of the men behind the project.
Several locations were considered for South Point Village, Muth said, but in the end, developers chose the location directly west of Menards.
“We couldn’t have built out there 10 or 15 years ago,” Muth said.
The location, which Muth described as an “untapped area,” was chosen partly because of the nearby shops and services.
“There is no question there is almost everything you need out there,” he said.
Muth declined to reveal the overall cost of the project but said the initial capital needed was “pretty significant.”
According to information in city building permit records, construction of the first two 13-unit buildings will cost approximately $1.94 million.
The construction of the complex, known as South Point Village, was announced last September. It came about as a result of conversations among local business leaders about a shortage of housing in Mitchell.
The Mitchell Area Development Corp., along with several regional partners, funded a $26,400 study to attach numbers to the city’s housing shortage.
The study, conducted by the Minnesota-based research firm Community Partners Research, found there had been “very limited” construction of new rental housing since 2000. No new conventional, non-subsidized apartment buildings have been built in Mitchell since 2003, the study says.
Among 675 conventional rental units surveyed in Mitchell, the study found there is a vacancy rate of just 1.3 percent.
Demand exists for between 45 to 50 rental units to be built each year during the next five years, or a cumulative total of 225 to 300 rental units, the study says.
MADC is not directly involved in the South Point Village project, but the development group did hold a series of meetings in 2011 that brought local developers, investors, lenders and employers to discuss the city’s housing shortage.
“It’s a start,” Muth said of the South Point Village project. “Our intention is to keep building them if they fill up.”
The first 52-unit complex will include one-, two-, three- and four-bedroom apartments, and is the first phase, potentially, of a five-phase project. Once complete, the complex could have as many as 273 apartments, an outdoor swimming pool and a community clubhouse.
The response to the first phase of the project will determine whether the others become a reality, Muth said.
Mitchell Technical Institute leased land at its south campus in 2010 to Puetz Corp. to construct a $3 million, 45-unit apartment complex to accommodate 96 students.
The project was completed in August 2010 and was financed through private investments, because state law prohibits technical schools from owning on-campus housing.
Since the school opened in 1968, MTI’s facilities have been located across the city at different campuses.
With the expected completion of MTI’s Trades Center later this year, the school will be entirely located on a campus just south of I-90. The total cost of construction, plus fees and some other costs, for the MTI Trades Center is nearly $18.5 million, according to Puetz Corp., which designed and managed the project.
MTI President Greg Von Wald views the school’s expansion as the “biggest change” in the area south of I-90 since he took over in 2008.
MTI’s new location near the interstate makes the school highly visible to anyone passing by — “always a good thing,” Von Wald said.
At its old locations, MTI was “landlocked” within the city, with hardly any room for growth, he said.
“If we needed to expand, we could do that here,” he said.
The highly visible growth in the retail and hospitality industries on Mitchell’s south side has been matched by a growing office industry on the city’s north side, Hisel said.
“It may be more subtle, but it’s equally helping drive the economy,” he said. “Even folks that live here are sometimes blind to the development happening on the north side.”
According to the city’s building permit records, from 2005 to 2012, approximately $11.9 million was spent for new construction or additions to businesses on Mitchell’s north side. Major projects in that time included $1.2 million for the Verifications Inc. building, which the company closed last year, $2 million for the Farmer’s Alliance fertilizer plant, $1.5 million for the Vantage Point Solutions building and a $1.5 million addition to Innovative Systems.
Those projects have balanced out the city’s expansion, Hisel said, providing both ends of the community with “some really appropriate development.”
“I think we’re just building neighborhoods, which is what good cities do.” Hisel said. “It isn’t exactly the Bronx, but we’re doing OK.”