Entries Tagged 'economy' ↓

Tax Incentives for Economic Development rarely pays off

Let’s look at some recent examples in Sioux Falls.

Uptown II; Taxpayers held the land for over 10 years collecting NO taxes for one developer, sold the land at a discount, gave them another 10-13 year tax break and in return we get an apartment building (that isn’t affordable housing) and a few parking spots for Levitt Pavilion.

Flopdation Park; State, County and City taxpayers will have spent over $30 million in infrastructure with only one tenant so far and NO signed agreements. And an employer that may provide 20 jobs at best for an Iowan Ice Cream factory.

Events Center; The building will cost taxpayers $180 million once paid for. While that may include the mortgage payments, it doesn’t include the yearly maintenance that comes from the same place as the mortgage payments, the CIP, a fund that is supposed to be for roads. While the EC may have a net operating gain, any of that ‘extra’ money doesn’t go to paying for the building or maintenance, it goes into a revolving fund that the management company uses. Than there is the supposed Economic Impact, since the EC has been open, tax revenue in Sioux Falls has actually gone down.

When you watch the latest episode of Last Week notice the part about the Fargo City Commission and how they approved a tax incentive for a company that was already moving there and said they didn’t need the tax incentive, the city commission approves it anyway. Sound familiar Sioux Falls?

But hey, without all these great amenities in Sioux Falls the rich millionaire doctors wouldn’t be moving here and building pools.

Keep using out-of-state contractors and keep watching the local economy spiral downward

Obviously, in the Free enterprise world, it is hard for the city to regulate what national franchises come to town, or how much of their profits they ship out of state. But when it comes to who the city chooses to do business with, they do have control, so why keep getting in bed with out-of-state contractors?

The latest is Lyft, which I think is great, as long as it has Uber to compete with. My issue isn’t with the convenience of Lyft, but how this National franchise probably isn’t playing by the same rules as our local cab companies, in other words giving the outsider the advantage. Seems odd that in the dead of the night under secret negotiations that did not include our city council, Lyft can now operate in Sioux Falls. So how did this happen so quickly? My guess is that Lyft isn’t following the same rules as the SF cab companies. Which is fine, as long as all of those regulations are lifted for the local companies also, which I’m guessing are not. Since our local cab companies will not be able to play the same kind of baseball as Lyft, they will eventually go bankrupt, and 25% of what you pay in cab fares from now on will go straight to California. So much for circulating in the local economy.

But there seems to be a trend here from the current administration. We also hired SMG and Ovations to run the Events Center. SMG is based out of Pennsylvania and Ovations out of Florida. Not only do their profits leave the state, they don’t promote any of the shows, so the out-of-state promoters all suck like a vacuum money out of our community. Add that to the fact that taxpayers have to pay around $10 million a year in a mortgage payment from our CIP (money that is supposed to be used on roads). As for the money the EC ‘makes’ that get’s put back into a rotating fund that SMG and Ovations uses as their disposal, so even if you believe the ‘operating in the black’ lie the mayor is constantly spouting, we as taxpayers in SF don’t see one red cent.

Besides Lyft, last week the city administration did it again, throwing more money out of town and out of state by hiring Nebraska company Landscapes Unlimited to run the municipal golf courses.

So while you can listen to our local politicians blame the Agriculture economy and Internet Sales for the lagging local economy, it is really the policy decisions of this administration that is sucking millions of dollars out of Sioux Falls each year.

South Dakota Middle Class left behind, working more

What we have known for awhile, the gap between rich and poor in SD getting wider;

6. South Dakota
> Middle class income growth 2011-2015: 5.0% (23rd lowest)
> Fifth quintile income growth: 9.8% (13th highest)
> Fifth quintile share of income: 48.2% (8th lowest)
> Middle class household income: $53,266 (23rd lowest)

South Dakota has one of the healthiest economies in the country. Only 2.8% of the state’s labor force is out of a job, the second lowest state unemployment rate in the country. In addition to a healthy job market, incomes are more evenly distributed in South Dakota than in most other states.

This may not remain the case for much longer, however. In the last five years, incomes among the middle 20% of earners have increased by only 5.0%, slightly slower than the 5.3% income growth among comparable households nationwide. Meanwhile, incomes among the wealthiest 20% of households in the state have gone up by 9.8%, higher than the comparable 8.4% average national income growth in the top quintile.

Did the Soccer tournament fall short for economic impact predictions

We were told that the tournament would have a major impact on the economy;

The soccer tournament is estimated to bring $17 million to the Sioux Falls area.

Lets test this prediction against July’s monthly financial report (Full Doc:7-17-monthly-fin-report).

We should have raised an additional $510,000 in sales tax revenue (3 pennies) from the year before if the economic impact was actually $17 million. But if you look at the numbers, it seems we didn’t bump up much from the month before.

For example, in June (MAY) we saw a $73,172 sales tax bump from the year before (3 pennies). Let’s say we were predicting the same bump in July (June). We had a $204,088 bump from the year before. Subtract the June numbers and you come up with a $130,916 bump from the tournament which would mean approximately a $4.3 million dollar bump. The biggest increase was in the 3rd penny entertainment tax and lodging (BID) tax which does not contribute to the city’s general fund.

$4.3 million dollar impact is nothing to shake a stick at for about a week of visitors, but it is certainly a long ways from the $17 million prediction.

Neel Kashkari, President Federal Reserve Bank of Minneapolis at Rotary

Neel spoke today at Rotary Club of Sioux Falls Downtown. He asked the audience to challenge him with tough questions.

He felt that if you are struggling finding workers or complaining about it, it is NOT that the workers don’t exist, but the wages are not high enough to attract them.

“If you’re not raising wages, you’re just whining.” (about finding enough workers)

I have consistently stood by the argument that when you pay your workers more, they spend more, which boosts the local economy, which in turn boosts the bottom line of your company. The middle class is more likely to spend more than they will invest or save if they make more, while the rich tend to put that money away where it doesn’t circulate as much.

Is SD’s anti-union, right-to-work, low wages hurting us?

Well in the rankings business, it is;

“Most states point with great pride to the quality and availability of their workers, as well as government-sponsored programs to train them,” CNBC’s report said.

It rated states based on:

  • The education level of their workforce.
  • The number of available employees.
  • The states’ demonstrated ability to retain college-educated workers.
  • The concentration of STEM — science, technology, engineering and math — workers, increasingly in demand by business.

“We measure workforce productivity based on each state’s economic output per job,” it continued. “We look at the relative success of each state’s worker training programs in placing their participants in jobs. We also consider union membership and the states’ right-to-work laws. While organized labor contends that a union workforce is a quality workforce, that argument, more often than not, does not resonate with business.”

South Dakota ranked a somewhat concerning No. 39 in this category. It can’t be based on productivity, which is always strong, so I’m guessing our low unemployment and potentially comparatively low educational attainment might have hurt us.

I truly think more organized labor will turn these numbers around.

Arts & Economic Prosperity Study (in Sioux Falls Area)

I have received a copy of the study, the FULL document is attached below.

Once you start to look at the study, it is obvious the National organization uses a boilerplate for the study, so a lot of the data in the study, or mostly the quotes are from that.

On page 3 they give our local data and economic impact, which is impressive; $105 million dollars.

Than some numbers get a little skewed. For instance on page 4 they say the average household income in SF is $71K, which is much higher than the National average of $23K. I’m wondering if this is the average income of those who were surveyed. Kind of confusing. Page 8 also has this disparity.

This disparity also shows up in ONE night of lodging on page 9. The average was about $10 a night. Not sure how this average comes about, but that seems very low, unless of course a family of five is spending the night in a campground. This gets cleared up on page 10 where the study says only about 17% of attendees spend the night in SF.

On page 11 it shows that a large percentage of residents who attend events are over 55 (56%) and have an income of over $80K a year (52%). Which isn’t such a bad thing because it is evenly spread between people younger than that and of lower incomes. The arts are truly enjoyed by everyone in our community.

The rest of the study explains how they come up with the results.

I think the study is a good start, but I would like to see a community wide study that also includes the Events Center and Convention Center (they are NOT non-profits).

FULL PDF Document: arts-econ-pros

Sioux Falls needs to do more to save it’s core

If I was running for mayor, one of my main legs on my campaign stool would be revitalization of the core. If tackled correctly, it could accomplish many goals. Not only making our core look and feel better, but it would help to reduce crime, create more affordable housing and in turn produce economic growth. It seems the city’s solution is spending our tax dollars tearing stuff down and rebuilding new which isn’t very cost effective at all;

The home is slated for demolition next week, with plans to rebuild a single family home on the lot.

Thanks to federal funding, the newly built home will eventually be sold to a lower income family. It’s all part of the Neighborhood Revitalization Program, which is funding 10 such projects this summer in an effort to improve the local housing stock and add to the city’s pool of affordable housing.

While this may sound all fine and dandy, you could probably take that same amount of money, disperse in a different way and do 4x the amount of projects. How? Like I said, if I were mayor I would reorganize community development. I would have two full-time staff dedicated to knocking on doors in our core and identifying homes and rental property that could benefit from community development loans and federal grants (I received both shortly after I bought my home, and it was a fantastic experience that I would recommend to anyone buying an older home that needs some TLC). I would also change the TIF program for what it is truly intended for, creating affordable housing out of blighted properties. I would give landlords and individual homeowners who are willing to fix up old properties an opportunity to apply for property tax abatement.

Like I said, this process could be very simple and would produce better neighborhoods while producing economic growth. Giving TIF’s to sprawling apartment buildings or luxury condos just doesn’t cut it. Just imagine if we took the millions in TIFs and spread them out to hundreds of homes and smaller unit apartment buildings, the impact that would have?

The problem is big development has a chokehold on our city government right now, they have them by the balls. Just look at the DT parking ramp or Flopdation Park, we are spending close to $50 million dollars on infrastructure that does almost ZERO to rehabilitate what we already have in our core, and while it is not a total waste, it certainly doesn’t make economic sense.

Why do you think the city wants to crack down on rental registry? They want to squeeze the little guy out by seizing their property thru code enforcement and handing it over to the big guys. Every one that I have spoken to who own small rental properties that have registered have been bothered by mailings and phone calls to sell their property to a major developer. Is the city selling or giving away this information? Makes you wonder?

The next administration and council need to work with the little guys to help clean up our core and let the big developers play on their own, they are certainly not going anywhere, and they will survive with out our corporate welfare. It’s time to get back to the basics.

Another Bar Napkin contract OR the real deal this time?

Rumor has it they have an actual committed tenant for Flopdation Park. Hopefully they have an actual signed purchase agreement this time, instead of a handshake and a wink;

The Sioux Falls Development Foundation will make what it’s calling a major announcement Friday involving Foundation Park.

Remember, as of right now, South Dakota and Sioux Falls taxpayers have committed over $30 million to this project so far in infrastructure costs. We have a stake in this process. Will the Development Foundation deliver this time? And if they secured a new business for the area, will it provide over 50-100, living wage jobs?

This is a good start, but can you fill in the blanks?

I guess the CVB has been listening to my requests for economic impact of the Events Center and other entertainment venues in the city;

“When there’s something big going on in town, people are at gas stations, filling up their cars to drive home.  They’re eating in the restaurants.  They’re shopping all over the town,” Schmidt said.

All of this made for a lucrative 2016.  Schmidt says concerts, plays, sporting events, conventions — you name it — brought nearly $500 million into the city.

Hey this is great, but without details, it’s just all fluff. I would like to see the formula the CVB used to come to these conclusions, I would also not only like to see the sales figures of the EC but of all the entertainment venues. We own, operate, take care of and pay the mortgages of these facilities, we have a right to see the numbers.

This story was just a teaser that leaves me with more questions.