Does COSTCO / Dunham really need a TIF?

I am not entirely against TIF’s, but it seems the city is starting to hand them out like candy these days (Item #30). Would COSTCO not come to Sioux Falls if they did not get a property tax break? COSTCO only comes to communities if they have the right market (enough households making over $100,000 a year). It has nothing to do with property taxes or values.
It seems city hall is handing out  TIF’s to any developer that asks for them. And who can blame the developer? Heck, Lloyd even got taxpayers to pay for some nice landscaping and a spray park in front of one his future properties costing taxpayers millions to subsidize a private developer and hotel.
TIF’s should only be given if an area is hard to develop. A flat piece of land next to 41st street doesn’t really qualify as ‘blighted’ as the TIF states;
I’m sure there is some environmental cleanup, but why is that the responsibility of a municipality in the form of a tax break? Dunham owns the land, if COSTCO wants it the cleanup costs should be included in the purchase price and development.
I will go back to my old argument on TIF’s, if the city thinks it needs TIF’s to develop land in this city, fine, but they need to be offered to homeowners also that are willing to cleanup older properties. It seems if you are a developer, hospital or a special interest all you have to do is snap your fingers and the city will bend over backwards for you offering all kinds of incentives to develop land that will already be developed for a big box store whether they get the TIF or not. I challenge the city council to vote NO on this resolution and see if COSTCO backs out. Doubtful.

18 comments ↓

#1 Pathloss on 10.16.12 at 8:24 am

Doesn’t surprise me. Ever since the rigged vote on the events center, the city has become the tap for what should be troubled developers. There’s lots of empty retail space here and along Minnesota Avenue that qualifies before this project. What is really unfair is property owners along 41st will have to pay for street and utilities upgrades. Costco does not have frontage and will escape. When there’s a fascist regime, fat cats drive out smaller businesses by hitting them with exorbitant assessments.

#2 Craig on 10.16.12 at 8:28 am

Costco might still come without a TIF, but I’d be willing to be they won’t build at that particular location. There is a reason that piece of land has been empty for so long, and part of it is a lack of visibility, while an even larger part is the environmental aspects of that area.

It isn’t likely that someone would build strip malls there because it wouldn’t be enough to draw people in. On the other hand a store like Costco is large enough and will be popular enough to draw people into a location which otherwise would stagnate.

Thus, it can (and likely will) spur additional development in that area. Without Costco, that area would most likely remain an empty lot for the next decade or two, and Costco would choose to build elsewhere. If that location falls through, where else do you think they can find a large enough lot to support them? It will be either over by I-29 off Madison, or on the outskirts of town pushing the development towards the edges that much more.

I understand the reservations about a TIF, but in this case I’m not sure you will find anyone to build on that property without one. There are costs associated with that land that don’t exist elsewhere, and if the city ever wants it cleaned up and added back to the tax rolls… a TIF may be necessary. I of course say this without any knowledge of the numbers – I’m not sure if Dunham is making some serious coin here or if they are hoping to generate their revenue off of additional development in the area. Either way I wouldn’t be so quick to shoot down the idea of a TIF… it doesn’t sound so far off.

#3 Pathloss on 10.16.12 at 8:32 am

There’s no legal recourse. The city uses their ‘Writ of Certiorari’ to prevent access to the courts. However, if the 41st Street merchants get together as a class, Costco will eventually have to pay for infrastructure upgrades and (maybe) lose their TIF.

#4 Pathloss on 10.16.12 at 8:38 am

Craig, I see what you’re saying. This tract will never be toxically cleaned without taxpayer assistance. Maybe, get Costco here then hit them hard with litigation and increasing property taxes until they finally realize they should relocate near Brandon or Tea.

#5 Pathloss on 10.16.12 at 8:54 am

I hope Costco realizes they can’t sue when the city withdraws it’s TIF and/or assessment exceptions. All developers should realize there’s no appeal into court because there’s no due process in Sioux Falls. We want it but build it far enough out of town so it can’t be annexed. Build it where there’s democracy.

#6 Pathloss on 10.16.12 at 9:07 am

L3wis, can I have your link to this topic? I want to forward it to Costco. It’s a shame if the area loses these jobs because the city insists on remaining an independent republic aside from state & US constitutions. Jobs can be rescued if it’s built neighboring.

#7 Tom H. on 10.16.12 at 9:33 am

Boo TIFs. Our entire development paradigm is so backwards — we make huge investments first (infrastructure, etc.) to attract development (usually mega-scale and heavily leveraged), rather than letting public investments follow organic, small-scale, lower-risk development. Now that the Ponzi scheme is starting to unravel (not just here, but all across the country), municipal debt will skyrocket.

There is a big bubble forming in the municipal bond market. It’s sadly predictable but no one has the bravery to change course before it’s too late.

Here’s a great article about a development pattern without projections and huge upfront investments.

#8 Detroit Lewis on 10.16.12 at 12:35 pm

Tom – Exactly. COSTCO and Dunham had already announced they are coming to town, NOW they are asking for the TIF? Something smells fishy around here, that is for sure.

#9 Tom H. on 10.16.12 at 12:40 pm

I don’t blame them for going after the TIF — it’s a good business move. The fault lies with the City for opening the tap. In fact, with so many TIFs being bandied about, a developer who didn’t get one would effectively be at a disadvantage.

#10 Tom H. on 10.16.12 at 12:41 pm

BTW, I live in the Twin Cities and shop at Costco — and my income is way under the $100k mark. After all, a membership is only $50 / year.

#11 Pathloss on 10.17.12 at 11:13 am

Tom H., yes big bubble in the muni bond market. It’s another financial and mortgage type meltdown. Huether latched onto it like he did for 30% interest on credit cards. Because it’s public funds, hopefully he’ll go to jail this time.

#12 rufusx on 10.17.12 at 11:19 am

Encouraging URBAN SPRAWL is more costly to to the citrizens in the long term than any TIF used to develop within the existing bounds of the city.

#13 Pathloss on 10.17.12 at 11:41 am

I wonder if Lloyd & Dunham types realize they too can’t sue the city. Make me mayor and I’ll use Home Rule to cut off their water. They should consider turning witness in exchange for immunity. After all, it’s business. They recognized opportunity but may have to settle for a smaller gain. For Home Rule, the mayor has all the power and all the blame. When corruption is exposed, he (alone) must be made an example and do the mandatory 13 years time in federal prison.

This matter has brought 110 million into the city from stock market suckers. People of SD are hardly affected. Huether is the drug lord who spent locally trying to look legal. Home Rule is good. It can be used to clean this up and repeal Home Rule. A military type one term mayor can fix it. Then, a former city clerk can be elected and we can get back to constitutional democracy.

The unearned cash infusion, regional economic spark, midwest values, and citizens who preserved freedom will make Sioux Falls the best place to live by 2020.

#14 Detroit Lewis on 10.17.12 at 11:42 am

They approved the TIF last night, as I figured they would. The only contaminate that I understood was happening was a gas smell. Dunham admitted that one of the ‘healthcare’ industries in SF was slated for the space, but backed out. I’m curious if there was any discussion of a TIF when they expressed interest? The timeline is pretty tight also on the project (which makes it pretty obvious COSTCO and Dunham were going to move forward with or without this TIF approval, so I ask again, “If the project was going to move forward w/o the TIF – Why give the TIF?” Dunham said that he was going to receive about $400,000 next month from COSTCO, close on the property in February, start building in May and open September 2013. I may be a little thick when it comes to TIF’s but It kinda sounds like this ball was already in motion before the TIF was even sought.

#15 Tom H. on 10.17.12 at 11:43 am

rufus –
I agree, infill is always preferable to greenfield development, but that proposed development looks pretty sprawling to me. I would have loved to see some walkable urbanism with mixed-use and small blocks. I’m hoping that with the new zoning plan, such developments will be more easily accomplished. SF is really behind the times in that regard.

#16 Detroit Lewis on 10.17.12 at 11:46 am

I still have a problem with giving a multi-billion dollar big box store a TIF that is aligned with one of the larger developers in the city, yet private homeowners who choose to fix up houses in out core get no benefit like that.

#17 Pathloss on 10.17.12 at 8:11 pm

I see big box decay everywhere in the southwest US. It’s worse than just a few vacant commercial spaces. The best way to make a city look like Chernobyl is boarded up big buildings with acres of crumbled parking lot. TIf’s are meant for local investment not Wall Street robber barons.

#18 rufusx on 10.17.12 at 11:56 pm

@Tom, yep – the SF zoning ordinance is much older and behind in some regards to almost all of the surrounding communites. COSTCO does have one urban/downtown facility – in Vancouver, BC. Not enough population density DT in SF yet to support, and not sure how the current zoning ord. would allow a mutli-story commercial building at the current project site. There has been some progress in that general area in making it all more walkable/bike-able the last couple years.

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