MANKATO — The city of Mankato is finalizing the sale of the last available parcel in its industrial parks, which have been a magnet for hundreds of new jobs and tens of millions of dollars of additional tax base over the past half-century.
But city leaders aren’t scrambling to buy more land for future industrial growth. Instead, they’re relying on a new approach centered on keeping the land sales in the private sector.
“It is one of the most innovative approaches I’ve ever run across for a city to use,” said Tom Halter, who owns land on Mankato’s east side that’s the new hotspot for industrial development.
Five years ago, the city proposed a development agreement with Halter and other landowners just outside the city limits. Mankato, with help from a state economic development grant, would extend Adams Street eastward through their properties to Blue Earth County Road 12 — providing transportation access and utilities to the farmland.
Under the deal, the property owners would provide the land for the road at a discount. The landowners would be free to sell their land to whatever buyer they choose, but the assessments associated with the cost of constructing the road and utilities would be forgiven only if the buyer was a manufacturing company creating good-paying jobs.
If the landowners, by contrast, sold to developers planning residential subdivisions or low-paying businesses such as strip malls, they would have to pay the infrastructure assessments — bills that could run from $200,000 to more than $300,000 for each of the seven parcels totaling 170 acres.
“That means we as landowners actually became selective of who the potential buyer would be,” Halter said. “… It’s kind of a carrot and stick deal.”
To date, one development got a bite of the carrot and another is accepting a swat from the stick.
Halter sold 24 acres of land to Truck Center Companies of Omaha for a new Freightliner truck sales and service center, which will relocate and greatly expand a dealership currently located on Fourth Avenue. The $9 million project will create a two-story dealership totaling 119,000 square feet — larger than Mankato’s Target store — while creating and retaining 83 jobs initially and growing the workforce to an estimated 125 over five years.
The job creation means the assessments will be forgiven.
Across Adams Street, Kato Moving and Storage is planning a self-storage building with virtually no associated full-time jobs being created. So the city will be reimbursed through assessments paid by the landowner and/or Kato Moving and Storage for that property’s share of the Adams Street extension.
The previous model
Of course, if the city owned the land, via a municipal industrial park, the City Council could be even more directly involved in choosing buyers who pledge to create jobs that pay livable wages.
That was the case in the recent council decision to authorize the sale of a five-acre parcel on Energy Drive for $303,000 for the construction of a 30,000-square-foot building costing $4 million that will be used by Dakota Supply as a wholesale distribution center for building, plumbing and electrical supplies.
“That would result in about $25,000 a year in city property taxes once fully developed,” said Community Development Director Paul Vogel.
The business will employ six to eight people with wages of at least $18 an hour plus benefits and one or two positions paying significantly more.
“For instance, the branch manager of that facility would be making upwards of $100,000 a year,” Vogel said.
Less than a year ago, the city sold 11 adjacent acres for $523,000 to the Rice Companies for the construction of a 50,000-square-foot multi-tenant building to be leased to contractors, small manufacturers or businesses in need of warehouse space.
The $6 million project is expected to pay city taxes of $42,500 a year. Rice Companies will be a major tenant, initially employing seven with the number growing to 15 within five years and wages and benefits averaging $32 per hour.
The company didn’t identify other planned tenants but said one would create 11 jobs paying an average wage of $29 per hour plus benefits and two others would provide a combined 12 jobs with hourly wages averaging at least $25 plus benefits.
The Eastwood Energy Center industrial park was created in 2008 with the purchase of 70 acres of farmland. Not including the two most recent sales, six developments occurred in the park totaling nearly 287,000 square feet of building construction and nearly $20 million in assessed market value, according to city documents. Those six pay $533,000 in property taxes annually, including $141,000 to the city, and created or retained an estimated 300 jobs.
Earlier industrial parks dating back to the 1970s resulted in the development of over 170 acres and created more than $57 million of assessed market valuation.
The new approach
Mankato’s history of purchasing and selling land for job-creating development has been successful, and Vogel said the council may decide in the future to get into the industrial-park business again.
But the new strategy seems to be working equally well and avoids criticism of government, through municipal industrial parks, competing against the private sector in land sales.
Halter, who worked as a planning and zoning administrator in southern Minnesota in the 1970s, found himself on the opposite side of the table when he and others in his family inherited their parents’ farmland.
Mankato could have attempted to purchase the land along Adams Street and created another industrial park. But those sorts of deals have often created bitter feelings in other communities, according to Halter.
City staff and elected officials, typically negotiating with farmers when attempting to buy land for an industrial park, make lowball offers to avoid criticism from the public that they are overpaying. The sellers, who typically are reluctant to part with land that’s been in their family for generations, want a premium but worry about being subjected to eminent domain powers if they don’t agree to the city’s price.
The new approach, leaving the land sales in the hands of the private sector but providing incentives for high-quality job-creating development, avoids that “collateral damage,” Halter said.
“Everybody’s pulling in the same direction,” he said. “There’s no animosity. Good common-sense thinking.”
With the two most recent sales in the Eastwood Energy Center, the only remaining vacant parcels are ones where Kato Cable and EI Microcircuits have options to purchase the land for possible future expansions of their operations. Under the options, both companies are maintaining the parcels and paying property taxes.
Vogel said the lack of city-owned opportunities for industrial development doesn’t leave prospective companies in the lurch — forced to buy from the Adams Street landowners if they want to locate in Mankato. Other options are available.
A 2020 redevelopment plan is opening up land along Highway 169, including the mostly vacant 15-acre former Year Around Cab complex at the southwest quadrant of the intersection of Highways 169 and 14. This year, the city will begin planning for the redevelopment of the former quarry on the opposite side of the Minnesota River.
“While the entire quarry redevelopment is probably not going to be targeted for industrial development, there is some highway frontage north of the extension of Cleveland (Street) which could also be an attractive development,” Vogel said.
As spots fill up, the city might look to the south to replicate the Adams Street model. The area surrounded by Highway 22, Blue Earth County Road 90, Monks Avenue and 200th Street — more than 1,000 acres about a mile south of the current city limits — is being eyed for potential future growth.
“That may be an attractive area for additional industrial development, particularly as you move closer to County Road 90,” Vogel told the council at its most recent Economic Development Authority meeting.
The first step would be an “alternative urban areawide assessment,” something that was previously done for the land between Mankato and Eagle Lake. It involves the city working with county, state and federal officials to identify issues and concerns about development and mapping out what sort of uses would be appropriate in which areas.
Council member Karen Foreman wondered if the city, flush with $800,000 in proceeds from the final land sales in the Eastwood Energy Center, should be looking to finance a land purchase just south or east of the city limits for the next industrial park.
Vogel said the council could make that choice, but staff would recommend continuing to use the private-sector-based approach that seems to be spurring increased activity along Adams Street. He also noted that the EDA is allowed to use the proceeds from the previous land sales for priorities beyond job creation.
“I do want to remind the EDA that those funds can be used for other purposes such as housing and the promotion of affordable housing,” he said.