Auction or direct sale; which is best for Mesquite

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The Mesquite City Council will continue to face tough decisions even after Tuesday’s meeting regarding the sale process of city-owned property near the new I-15 Exit 118 interchange and in the Mesquite Technical and Commerce Center. The councilors will continue to decide whether to use a public auction process or direct sale for economic development process to sell its land. There are pros and cons to both.

While a public auction sounds like the best option because it could potentially garner the most money for the land, there are drawbacks versus the direct sale process.

In an auction, the land price starts at the minimum fair market value using the highest appraisal. Bidders will compete strictly on price and the land must be sold to the highest bidder.

The city can’t place any conditions on the bidder for the land’s use or for time to build on the property. Potentially, the winning bidder could sit on the land for years or flip it to another buyer immediately. Should the winning bidder decide not to build out the acreage, the city will only realize property taxes from the raw land as it sits empty.

Using the direct sale for economic development process, the city potentially has much more control. Conditions for use and for time to build can be placed on the buyer. For instance, the city can tell the buyer that a certain type of business must be built on the land within three years. Should that not happen the city can take the land back.

The city can also place itself at the head of line using a 1st deed of trust should the buyer go bankrupt. Such was not the case in past years when the city put itself third in line on other property deals.

Economic incentives can be given to the purchaser in a direct sale while they can’t in an auction process. If the city uses the economic development incentive matrix approved by the council in April, up to 30 percent of the purchase price can be taken off if the buyer makes certain capital improvements. Another 30 percent can be taken off if the buyer opens a business that employs more than 40 people. The buyer would get another 30 percent off the land price if they pay employees the average Clark County hourly wage, which is just over $20 an hour.

Using the direct sale method, the city can limit resale of any or all of the land to other entities. That can’t be done using an auction process.

Knowing all that, which process is best for the city?

It all depends on whether the council decides they want a short-term gain from instant cash or a longer-term gain from more businesses built sooner who will employ more people and garner higher taxes in both land use and employees.

Anyone investing in their future can see the value of a long-term outlook.

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