Updates
February 17, 2012: no evidence that Menard's is coming to Williston any time soon. Very interesting. My hunch is they couldn't get the employees they would need.
Original Post
Link here. The Williston City Commission voted to approve a Tax Increment Financing District for a new retail center west of town Tuesday.Data points:
A TIF District would be created for the 200-acre Sand Creek Town Center site planned by Granite Peak Development.
City Auditor John Kautzman said the value of land and improvements for Phase I of the district was $5.7 million. A total of $1.45 million would be assessed through the TIF District.
- Original story earlier this year, click here
- Menards announced April 5 intent to build a 200,000 square-foot facility on a 16.5 parcel of land on this 200-acre development
- The development area to be called Sand Creek Town Center
- Development site north of US Highway 2 along 35th Avenue West (to me this sounds like it is just west of the bypass that swings around Williston on the west side)
- In addition to $5.7 million up front for Phase 1, the city would also commit $2.5 million of sales tax revenue created from new retail stores; right now Menards is the only occupant
- In addition to $5.7 million up front for Phase 1, the city would also commit $250,000/year for nine years in STAR Fund dollars
- The TIF District would be paid off over 15 years
- Sand Creek was where I spent many days of my boyhood tramping around exploring and catching fresh water life, mostly frogs with legs to small to eat. I learned to start a campfire using flint and steel in this area as a boy scout. But that was about all. I wasn't very good at the outdoors stuff. I did learn that it's cold to camp out in January in North Dakota
I don't know if this is how you do it, but: $1.45 million TIF assessment + (9 x $250,000) + $2.5 million = $6.2 million vs the $5.7 million appraised land value and improvements
I cannot deny that as a commissioner I also wouldn't have some anxiety. The oil industry is well known for boom and bust cycles. What I would most be interested in is how much will the improvements for Phase 1 cost. If I understand the story correctly, the $5.7 million for the first phase is the value of the land as well as improvements. If nothing is built there, the value of the land is fairly low. If the improvements are nominal, one could argue that Menards, the other retail stores that might come in, and Granite Peak Development could share in the costs.
I have never been in private business, no little to nothing how commercial real estate works, so take my 2 cents worth for what it is: 2 cents worth.
It would be nice to see Menards in Williston, but would Menards come if asked to share a bit of the risk in improvements? Of course, Menards will argue they are committing to huge risk by just buying / leasing the land and building the facility.
the problem i have with TIF, is that it expects the Existing Business's to help subsidize the county/local city Property tax rolls, while allowing a new business to come to town to compete against the other similar business.There is NO reward for Existing Business.
ReplyDeleteIn the case of the Menard complex, my recollection is the Menard Family has been estimated to be worth in excess of 1.2 Billion Dollars according to Forbes magazine.. that a lot of tif
I was a bit schizoid -- not knowing which way to go -- when posting the comments and my story above. I was close to saying that Menards needs Williston more than Williston needs Menards.
ReplyDeleteI was ready to suggest Menards foot more of the infrastructure costs if they wanted to come into Williston.
When the promoter said these trigger points are customary, I would have argued that the explosive growth in Williston is not "customary." Williston does not need to give incentives for building material companies to come into Williston.
The reason I hesitated to write all that was that if Menards choses not to come to Williston, Willistonites will continue to spend their "construction dollars" at the Menards in Minot. I would like to see those dollars spent in Williston, although one can argue if that is really such a big deal right now. What percent of total revenue coming into Williston will Menards represent? My hunch: a very, very small percentage.
I would need a lot more information before voting.
My real concern is (and I voiced it in an earlier blog posting): Williston City Commission and Williams County Commissioners members are doing this as a part time job; minimal staff; and if we think some of our federal leaders are in over their heads, I am concerned that local leaders are dealing with projects and volumes of money well beyond what they are used to dealing with.
As I understand TIF, at least here in Minnesota at least part of the future tax revenues are used to pay off improvements that the developer finances.
ReplyDeleteIf structured correctly there is no additional liability to the municipality, just a lost revenue stream until the TIF is paid off. A prime example around here is the Mall of America. This had a TIF for most of the development excluding the central amusement park.
The cows do eventually come home. MOA had a 20 ro 25 year TIF. It opened around 1990 so there is under five years to go if the TIF was 25 years.
Menards seems to have money. Here in the Twin Cities, MN it seems to open a couple of new "super-Marards per year. Last fall they did a full tear-down of one one the west side of Minneapolis closing it for a new Super-Menards. They also bought an old restaurant/nightclub on the south end of the city. This will give then the "footprint" for a new Super-Menards.
As noted, Williston might have been able to hold out for a better deal, but at risk of losing Menards in Williston. Again, my concern is the level of expertise negotiating the deal on both sides of the table.
ReplyDeleteRe the comments by "Don". I am wary of all TIF's but Menards might overbuild the infrastructure to avoid future "boom-town bottlenecks". I would really need to see the full proposal and be able to understand it to say.
ReplyDeleteWhat always fascinates me is people who are opposed to giving things like TIF's to companies that already have deep pockets. If a project is cobbled together with "shoestring financing" there is a greater potential for "rock and hard place" problems down the road.
One example is the our Mall of America which says that it is "recession resistant". It was built and opened "zero debt". In economic downturns the stakeholders of MOA may not get the return they had hoped for but with no mortgage there is dramatically reduced risk of project foreclosure and bankruptcy.
To "Don" Forbes wealth estimates need to be taken with a "grain of salt". Randolph Hearst, son of "Citizen Kane" and father of "Patty Hearst" was given a net worth of $1.8 billion by Forbes. After he died the probate put his wealth at $26 million. Forbes Magazine apparently ignored "Citizen Kane's" will which said that 5% of profits of Hearst Corporation will go decedents but that Hearst Corporation (estimated value $40 billion last figure I got) will be run by a majority outsider board until the last decedent living when William Randolph Hearst/"Citizen Kane" died passes on. Then Hearst Corporation will be dissolved or sold and the money will be dispersed to the descendants born after "Citizen Kane" died.
ReplyDeletePatricia Hearst, "Tanya" kidnapped by the Symbionese Liberation Army was born three years after "Kanes" death will get the big money when she is eighty-five or ninety years old. She is doing fine now but not huge money.
The point of this is top beware of the Forbes wealth list. William Randolph Hearst probably got a good percentage of the 5% of Hearst profits?revenues? but wasn't eligible for an equal portion of the main Hearst Corporation.
with a bit of digging Forbes should have known that.
I am way over my head with the Williston TIF but you can write the liability any way you want. I am extrapolating from tobacco settlement securitisation, a subject I know pretty well but let's run with it.
The worst is a liability for Williston to make up the shortfall. This would involve a payment liability for a shortfall if oil prices tanked. Williston would want to avoid this. If crude oil somehow goes way down this liability is the last thing that Williston would need.
The next thing is to extend the TIF into the future. This would need to be carefully structured for interest penalty but it would work.
The last option is "real time revenue only" to pay off the TIF. The difference in these options is the interest rate yield of the TIF bond. (which we want to keep low)
My ideal solution would be to have Menards sponsor/finance this TIF with a contract that only allows TIF extension if there is a shortfall of revenues. Menards could hold or sell this in the future. If the project takes hold and is a success the TIF will be easily be paid off. If Menards makes money on this so be it!
This would be a "hedge" for Williston if the agreement is carefully structured so Williston is not liable for TIF financing shortfalls.
Unless something significantly different is mentioned that hasn't been mentioned yet, I don't plan on posting (m)any more comments on Menards. It appears new comments are simply variations of all that has been already said.
ReplyDeleteIn all seriousness, a there really are no businesses like Menards in Williston. Where in Williston can you go and have a choice of storm doors, light fixtures, granite countertops, windows, etc... without having to order it from one of the local stores? I think a Menards will be just hte start of more retail to come. I still to this day don't understand how the town with the 2nd largest taxable sales for a ND city, only has Wal-mart...when towns similar in size to 1/3 the size have both Wal-mart and K-mart.Williston needs a K-mart or Target to compete with Wal-mart. Shelves in Wal-mart are always empty, it is so busy there. It is ridiculous this town doesn't have more retail.
ReplyDeleteBefore the boom it was a gamble to put in a big box store. Now the problem is the cost of the land, availability of good sites, and most of all, size of the workforce which can't find housing. I think the housing situation is going to be the issue here whether more retail can come in.
ReplyDelete