As a handful of local nonprofit organizations are at risk of having their 2021 subsidy requests with the city of Mitchell rejected, three groups at 601 N. Main St. are proposed to be the exceptions.

Out of the 16 nonprofits that submitted subsidy applications to the city this year, the Mitchell Area Development Corporation, Chamber of Commerce’s Convention and Visitors Bureau, and Heartland Regional Economic Development represent the organizations that are tentatively expected to receive their requests. It’s put additional focus on the organizations and has raised interest in their role for the city and their relationships with city government.

Quite simply, have those organizations produced enough results to warrant them as the lone groups to have their subsidy applications approved?

To some, the groups have produced positive results and proved their value to the community and the local economy over the years. But its critics say some of the organizations haven’t provided much of an impact on local businesses. Among them, the MADC has drawn perhaps the most scrutiny from business owners who say the organization helps special-interest groups, not the community as a whole.

“The Development Corporation has brought a tremendous amount of business growth and industry to the city like the developments you see south of Interstate 90 where Cabela’s, Menards and several other big retail stores sit,” said City Council member Jeff Smith, who serves as the council’s liaison on the MADC board. “They also helped our colleges, Dakota Wesleyan University and Mitchell Technical College, expand by offering some land they had in the areas. Not to mention getting rid of a serious nuisance property on Main Street at Third Avenue and Main Street.”

Founded in 1986, MADC was largely created to bring economic growth and development to the city of Mitchell. Some notable examples of the MADC spurring business growth include facilitating the addition of Cabela’s and the surrounding developments along the south side of Mitchell in the early 2000s. While the MADC is not a division or branch of the city’s government, it maintains a close relationship with the city of Mitchell, which is what it was designed to do.

The same goes for the Chamber of Commerce, which was established in 1961 to serve as the marketing arm for the city and local businesses. The Convention and Visitors Bureau (CVB) is a division of the Chamber that’s tasked with promoting the city’s businesses and tourist attractions like the Corn Palace. Both the Chamber and MADC are made up of board members consisting of local business owners and community leaders.

For Council member Steve Rice, both entities serve a vital role for the community that merits the approval of their requested subsidy funds. At Monday’s meeting, the council will vote on the proposal to approve MADC’s $167,000 subsidy application, the CVB’s $250,000 request and Dakota Heartland Development Association's $30,000, equating to $447,000 in funds.

However, the remaining 13 nonprofit groups’ subsidy applications that amount to a combined total of $181,750 are proposed to be rejected due to the financial issues caused by the pandemic. But that could change on Monday, as the council will consider a pitch to approve all of the applications with a 25% reduction.

“We need to continue marketing the city, and that’s our marketing arm. With the virus, I think it is even more important that we market ourselves and show what we can do to attract people,” Rice said.

Since 2007, the city has contributed a total of more than $2 million to the MADC in annual subsidies. According to the most recent public tax returns from the Internal Revenue Service (IRS), as of 2017, the MADC ended the year with just over $4.3 million in net assets. The financial picture for the Chamber wasn’t as strong as MADC’s. The Chamber ended the year in 2017 with a little over $1.9 million in net assets.

Prior to his resignation, Mark Vaux, former executive director of the MADC and Chamber of Commerce, stated in a December 2019 interview with the Mitchell Republic that the $167,000 worth of subsidy funds is largely allocated for operational expenses. The MADC's total expenses in 2017 amounted to $576,561, according to their tax return. Of that, $308,376 was spent on salaries, compensation and employee benefits.

The annual subsidy application is the only funding tie the city has with the MADC. Mitchell Mayor Bob Everson noted the subsidy funding can be reduced or denied outright by the City Council, which allows the council to have some leverage in monitoring the progress being made by the organization each year.

“They go through the same subsidy application process that all other organizations or entities do such as Dakota Counseling and the Prehistoric Indian Village," Everson said. "If they aren’t bringing economic opportunities and developments, the City Council can choose not to fund their subsidy requests. But I have confidence in the MADC and believe they will bring that economic growth to Mitchell.".

Land transactions, Main Street developments

In July 2018, Vaux became the executive director of the Mitchell Area Development Corporation and Chamber of Commerce. Under Vaux’s leadership, the business scene changed drastically. Buildings were knocked down. Real estate was sold.

And seemingly every time there was a major change, the MADC has been involved. To some, these moves are for the betterment of the city’s future. But to others, like Main Street business owner Megan Suarez, the MADC's decision to sell the former Casey's lot on the corner of Seventh Avenue and Main Street for an extremely low price without opening it up for a Request For Proposal (RFP) — which is similar to a bid opening — was "unfair."

After the city transferred the Third and Main building to the MADC roughly a year ago for the group to take on the project of demolishing the Main Street eyesore that caused major headaches for the city and nearby business owners, the MADC acquired the corner lot that sits empty in downtown Mitchell. In addition, the First United Methodist Church recently transferred the former State Theater lot — which sits next to the Third and Main lot — to the MADC as well.

However, the organizations have experienced drastic change themselves, as Vaux and Sonya Moller, former director of the Chamber of Commerce, resigned in late August.

The land acquisitions on Main Street have sparked questions regarding the relationship between the city and the MADC, which City Administrator Stephanie Ellwein said has led to several misconceptions.

The city has the ability to utilize the MADC for streamlining particular processes such as addressing nuisance properties like the recently demolished Third Avenue and Main Street building. Considering the MADC is a private nonprofit organization and not a branch of the city’s government, the group has much less restrictions when it comes to demolishing a building and selling or developing land.

Bypassing the requirement to hold public bids that later have to be approved by the City Council is one process the MADC can exercise that the city can’t, Ellwein noted. Had it not been for the city's option to call on the MADC and transfer the Third and Main building over to the group, Everson said the corroding building could still be standing, elongating a downtown eyesore and street closure that impacted the whole community.

“If we wanted to sell a building we own and put it back on the tax rolls, we would have to declare a building as surplus that would take several City Council meetings, which would then allow us to put it out for bids,” Everson said. “But the MADC can go out and talk to private developers and whoever is interested and use their expertise to decide which development opportunity makes the most sense for bettering our community.”

According to Ellwein, a South Dakota codified law states the only entity or organization that the city can legally transfer buildings or properties to is a municipal economic development corporation such as the MADC, without having to declare it surplus. However, the city can legally resell a property it purchases to a private developer through a bid opening. But Ellwein said it’s a long, complex process that can come with grave risks.

“When we have a situation like we had at Third and Main, we can’t just legally transfer the building to a private person or entity like we can with the MADC. With the MADC’s expertise in developing, we have trust that they will make the right decisions to avoid another incident like Third and Main,” Ellwein said. “So the $1 transfers to the MADC are ways of streamlining things that we can’t do with private groups.”

During the 6 p.m. council meeting on Monday at City Hall, the council will decide whether to approve the subsidy applications for all of the entities at 601 N. Main St., while the remaining groups requests hang in balance.