16 Thoughts on “Why is Sanford being awarded a TIF? Just Curious.

  1. Last week I saw this on the PC agenda. It raised my eyebrow as well because:
    a. this is the first TIF outside the core area
    b. there are no exceptional issues I know of with this land that would make it hard to develop and/or a developer not excited to develop it

    I haven’t had the chance to ask someone in community development, but I did ask a city official. They told me it had to with the fact that this is a public/private partnership (the city putting part of the money up for the hockey and tennis facilities). I’m not entirely sure what the connection is. Perhaps the city will use the incremental tax funds to reimburse the private developers over time for costs to develop related infrastructure and in that way this is how the city will fund the portion it has promised (??) as opposed to writing one check (??). If it is something like this, I don’t really have a problem. However, I’m not sure what the actual reason is.

    A TIF district shouldn’t be created just because its a ‘neat’ project. It should only be created if the site is so exceptional and costs so unusual that its the only way (by the city judgement) that private developers will do something with it. While the new tax funds we get with the TIF are ‘new’ collections, so what we reimburse the private developer with is not existing city money, we are still giving up new funds that perhaps we didn’t have to. If developers would have done the project anyway, we’re giving up future streams for nothing. I’m not ready to condemn this yet, but it deserves an explanation definitely so we understand why this is being proposed. Maybe I’m somewhere in the ballpark. The PC meeting didn’t shed any light really on why a TIF district is being created here.

  2. Tom H. on March 9, 2012 at 10:37 am said:

    Good analysis, GregN. The TIF district, as a tool, is way way overused in this town. Why do we have to hand out so many incentives to get developments going? Doesn’t that speak to some deeper flaw in the system?

    Here is a great analysis of the “standard” development approach which is ubiquitous in this country, and explains why TIF districts are “tool[s] of decline.”

  3. rufusx on March 9, 2012 at 10:42 am said:

    As I understand TIFs they are not udsed as a way to “reimburse” any developer. Instaqed, what happens is that tbe property taxes collected on that piece of debveloped land are dedicated ENTIRELY to paying off the infrastructure improvements (roads, water, sewer, grading, drainage, etc.) vs. just being dumped into the general fund. Typically, they last 10 years or so – until the infrsatructure improvements are compeletely paid for, then the property tax $$$ goes into the general fund as usual. I.E., the TIF $$ dot’ go to “reimburse” anyone. They are simply a way to get the developer to pay for the infrastructure via tax dollars – over time – as opposed to paying for them out-of-pocket up front.

  4. rufusx on March 9, 2012 at 10:45 am said:

    If there will be city facilitues on the developed property, the city would have been entirely on the hook for paying for all of the costs of the infrastructure for THOSE facilities, and the private developer on the hook ONLY for the proportion that are for their development. I see the TIF in this case as gettiung the developer to pay for the city’s portion of the share directly, vs. out of the general fund. Just my take on it – in THIS case.

  5. rufusx on March 9, 2012 at 10:50 am said:

    I have an example here in Lennox, where a TIUF was used to extend a couple of streets about 5 blocks total into an industrial development park using a TIF for ONE industry that was being built on one end of those streets. Technically, that builder only needed about one block of street, and would only have been required to build one block “traditionally”. But through the use of the TIF, their dedicated tax dollars are paying directly for the entire 5 blocks, openng up more land for development. Tom. I thinlk there are abuses of the TIF in some instances, but a great deal of their efficacy depends on being careful in HOW they are applied in specififc instances. They CAN be good tools.

  6. I think everything stated above is pretty much true. In some cases though I think TIF funds are used to reimburse developers (I don’t think this is inherently bad by the way). I was talking to community development just a few weeks ago about the Hilton project downtown. The way it was explained to me, the developers pay for the exceptional costs on the site like remediation of the stuff in the ground, costs to take down the ramp, etc UP FRONT. After this is done, and hotel constructed, the property value of course will go way up, essentially from $0 assessed value as it stands today since its a city property. That incremental increase in tax revenues will be earmarked now since its a TIF into its own ‘bucket’ for accounting purposes. The developers then essentially will submit proof of costs for QUALIFIED expenses like tearing the ramp down, remediation of soil, etc. The TIF funds will be used to reimburse the developer for ONLY those qualified costs up to some maximum. Once that repayment is complete, the TIF could be extinguished. By doing this, the city doesn’t take money out of general funds to pay the developers for costs the city would have borne itself (tearing ramp down, cleaning soils, etc). So I believe in some cases there is reimbursement going on with the funds.

    I believe there are many cases where a TIF is used to reimburse the cities expenses for infrastructure and its basically an accounting tool much as described above, rather than pulling money from general or CIP funds. I think sometimes a city will bond a project up front, then use TIF funds to pay off the bonds and/or reimburse themselves.

    It probably can be an effective tool in the right cases. To be fair, the opponents of TIF financing will say that the land would have been developed anyway and you are just subsidizing rich developers. Really a case by case analysis I guess. The proponents would say the land like the river ramp site would sit vacant and owned by the city with no revenue if you didn’t do a TIF. Is that true? I have no idea.

    Maybe the city is going to use the funds to reimburse private entities. Maybe they will use it to help fund/repay the infrastructure they’ll have to build like sewers and roads out to that site. Need more info.

  7. l3wis on March 9, 2012 at 2:09 pm said:

    “Really a case by case analysis I guess.”

    I agree, sometimes I scratch my head with some of the TIF’s they hand out. IMO, developing DT is a good investment, so I don’t understand all this talk about ‘being more risky’. Being more risky then what? Developing in a corn field on the edge of town? DT is a high traffic area, ideal for new development.

  8. John2 on March 9, 2012 at 7:42 pm said:

    gubermint of the cronies, by the cronies, and for the cronies . . .

  9. rufusx on March 10, 2012 at 3:47 pm said:

    Thank God it’s not simply government of, by and for the ignorant.

  10. rufusx on March 10, 2012 at 3:48 pm said:

    Or the knee-jerk ideologues.

  11. Dukembe on March 12, 2012 at 8:14 am said:

    I once read that TIFDs are supposed to be used only in blighted areas. What’s blighted about this land?

  12. Exactly. It seems all you have to do now to get a TIF is tell people you are a developer.

  13. Bernie Hunhoff on March 13, 2012 at 9:02 am said:

    The TIFD law was greatly modified in the 2011 legislature, and all the language requiring that it be for blighted property was stricken.

  14. Big Surprise 🙂 More handouts, rebates, and tax cuts to corporate interests in SD. But, hey, it will be easier for me to get FREE food.

  15. rufusx on March 13, 2012 at 11:22 am said:

    Thanks Bernie, that’s good to know. Must have somehow missed that at the last Municiple League meeting.

  16. l3wis on March 13, 2012 at 2:08 pm said:

    I’m sure that was probably not high on the agenda to let you know. I’m just saying.

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