Tax Incentives for Economic Development rarely pays off

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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

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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

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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

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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

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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.