As an out-of-state developer gears up to remodel the former Crafty Fox building, a Tax Increment Financing District has been created to help fund the $1.5 million renovation project and redevelopment plans of the neighboring lot.
While John Adamo, a California real estate developer, has big plans to transform the building into a mixture of 28 single-family loft apartments and retail space, he’s staring down an estimated $1.5 million in construction costs to remodel the historic downtown building. With plans to also purchase the large vacant lots across the street from the 223 N. Main St. building to add parking garages and a commercial building, the recently approved Tax Increment Financing (TIF) District No. 26 is intended to spur more development around the downtown property and help offset some of the remodeling costs Adamo is facing.
Although Adamo is purchasing the historic building to remodel it, he’s not listed as the primary developer of the TIF. Instead, the Mitchell Area Development Corporation (MADC) — the local nonprofit organization that recently acquired the building to sell to Adamo in the near future — is taking on the role as the primary developer for the TIF.
“Mr. Adamo has indicated this project can’t go forward without the TIF,” said Don Petersen, MADC’s attorney who helped develop the terms of the TIF.
When the building makeover is complete and the neighboring lot is fully developed, Petersen said the improvements are estimated to boost the assessed tax valuation of the area in the TIF boundary to roughly $3.5 million, which would generate $73,854 in annual property taxes. As of now, the full area within the TIF has a tax base value of $45,070 coming from the lone 223 N. Main St. building that’s located in the boundaries.
The TIF will create a funding source for the project that will come from the increase in property tax values from the new construction and improvements to the building. The increase in property taxes within the TIF boundaries is referred to as the “tax increment,” which the city would pass on to the developer as it generates over a 20-year window. City Attorney Justin Johnson noted that if the TIF fails to generate the anticipated $1.2 million over the 20-year window, it would fall on the developer, not the city.
“If it doesn’t end up generating the increment that is proposed here, the city won’t be responsible for any shortfall. That risk falls on the developer,” Johnson said.
The boundaries of the TIF encompass the vacant lot across the street from the former Crafty Fox building, a portion of Main Street stretching from Second and Fourth avenues, along with a portion of Third Avenue between North Rowley and North Lawler streets.
TIF to anchor city’s goal of revitalizing downtown
Adamo’s plans to develop the lot on the corner of Third Avenue and Main Street entails constructing a roughly 3,000 to 6,000 square-foot building for retail and commercial space that he's estimating could cost around $1.5 million, along with adding parking garages for future tenants residing in the neighboring building's apartments.
During the recent Mitchell City Council meeting, Petersen broke down the economic impact that the TIF is anticipated to have on the tax base within the boundaries.
“We all know that if we construct a building at $2 million, it might be assessed for $2 million, but if we remodel a building for $2 million, it may not be assessed at that much. To be conservative, we’ve estimated the tax assessed value of the building when completed will be assessed at about $1.5 million,” Petersen said at the Sept. 20 council meeting.
Petersen said the developer is asking the city to pass on a maximum amount of $1.2 million generated from the TIF in the form of grants. The developer’s agreement provides a 20-year window for the TIF to generate $1.2 million, but it will expire immediately if it reaches that amount before the 20 years is up.
Considering MADC is the primary developer of the TIF, the economic development organization will be responsible for administering the funds generated from the TIF to Adamo in the form of grants.
“We’re asking for that to be set up as a grant that also helps keep it off the rolls for the city,” Petersen said. “The $1.2 million we’re asking for with the TIF will be used for eligible TIF expenses in the building and the parking garages and infrastructure across the street.”
Adamo’s plans to develop the former Crafty Fox building come after the city recently settled a lawsuit with the previous property owners, who alleged the city of Mitchell took ownership of the nuisance building in 2019 through threats and conspiracy that violated their civil rights and conspired with the MADC to buy the property. Since taking ownership of the building, the city has made several repairs to the four-story property that was built in 1906, including window replacements, removing lead from the interior and patching up the roof.
As for the timeline of the plans, Petersen said the remodeling of the building is slated to be completed by summer 2022, while the retail building on the vacant lot across the street is planned to be constructed by 2024.
Although the TIF boundaries cover a smaller area than some of the previous TIF's the city has created in the past, city officials hope it will have a much larger impact on the downtown corridor that goes beyond the two-block radius around the 223 N. Main St. building.
With the handful of corroding downtown buildings that have been demolished in the past few years to allow for redevelopment opportunities, the city has been investing in reviving downtown. Mitchell Mayor Bob Everson said the TIF could kickstart the revitalization of an aging Main Street and bring a "big win" to downtown.
“We’re hoping it becomes an anchor to facilitate more development and improvements to Main Street as a whole,” Everson said.