Annexation Fairness

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As a longtime reader of DaCola pointed out a few days ago;

Warren Phear;

Speaking of foundation park. Something I would love to see the Argus follow up on. This I know. 820 acres were purchased by whoever for $24,000 an acre. The anchor tenant just bought 54 acres for $106,000 an acre. How did this land come to be worth so much? It came to be worth so much on the backs of SF water users. Getting the needed infrastructure to foundation is costing tens of millions of dollars. To pay for water and sewer to foundation the city raised those rates. Not once, but each year. The gift that keeps on giving. In the 2018 CIP the city allocated $29,000,000 to just get sewer to foundation. Stop and think about it. That is more than the admin building. 5 million more than the indoor pool. All for what? So somebody, don’t know who for sure, can make $80,000 an acre in profit. For 820 acres. Not a bad deal, once you consider who made that land worth that much.

I’ve been following the Annexation study group meetings lately, and one of the main points of the people that may be affected is, “How will this benefit me?”

As you can see from Warren’s comments, annexation was essential to launching Flopdation Park, and the benefits are numerous. The park is receiving millions in corporate welfare in the form of city infrastructure. Of course, the city ‘thinks’ they will recoup these costs in property tax revenue and platting fees. There is also the economic impact and job growth. I don’t think those costs will be recouped for decades, if ever.

So why would we charge annexation neighborhoods directly for these same kind of infrastructure upgrades? Shouldn’t the city just absorb these costs since they would essentially recoup some of this with new frontage fees and property taxes? While I am on the fence whether to NOT charge them nothing, I don’t think the current proposals are equitable, especially for properties that are older. I think maybe an additional fee of $500 a year for the next 20 years may be more palatable, or less.

But there is the bigger question here. If the city feels that they would have to charge homeowners directly for the annexation upgrades, is the annexation even worth it to the city coffers? I guess what I am trying to say is if the city can’t just absorb these costs equitably, is it really worth annexing them? Show to me that it will make our city stronger financially by annexing these islands than I would be all for it, if not, like Flopdation Park, it’s just a handout that benefits no one, and maybe that is why they think they should charge for the upgrades upfront. Now if we could only apply that philosophy to tax dodging Iowa ice cream makers.

Posted in: Annexation, Foundation Park, Sioux Falls

The Events Center ‘Investment’

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There was often a lot of talk to the run-up to the vote for the Events Center about ‘economic impact’. But was that ‘impact’ ever really broken down? And who is benefitting (economically) the most?

In all fairness the mortgage on this facility, to reach probably well over $180 million (not including operations and maintenance over the next 30 years) will be paid for out of the CIP, one of two pennies the city gets from sales taxes.  So in some ways visitors to our city and EC will help pay that mortgage. But even if the sales generated from the EC (lodging, fuel, food, tickets, etc.) was around $200 or $300 million a year that is only $2-3 million into the CIP, a far cry from our $10 million dollar mortgage each year. The comparison kind of reminds of how much taxpayers have put into platting fees versus the developers.

Also factor in whether the place will stay in the black with operations, maintenance, upgrades, etc. Even with sponsorships, it may squeak by, and on a generous note, if the EC actually makes the city a profit each year, will that money go into the CIP to help pay the mortgage? A question that has only been vaguely answered by several city officials saying the same thing, “That’s a possibility.” Which means . . . NO.

Let’s face it, if the facility does make a profit, we may never know, because profits will quickly be eaten up by the managing companies that run the facility and promoters. I have a feeling we will magically always end just a little in the black each year, with someone else besides the lowly citizens of SF enjoying the spoils.

So besides the public supposedly benefitting from this economic impact (we will get to that in a moment) who else has REALLY benefitted (economically) from the EC’s construction?

– The bonding company that sold the bonds gets a percentage of the sale, instead just a flat fee.

– Mortenson and several contractors have benefitted, and depending on how the siding gets fixed, they may also come out smelling like roses on that also.

– Hotels, restaurants and other businesses that see an uptick in business when an event comes to town.

– Ticket brokers and scalpers are making a mint from the convoluted way the EC sells tickets. Pre-sales to fan clubs, naming sponsor employees and several other ‘gimmicky’ ways tickets are pre-sold. Something the city claims they ‘can do nothing about’ even though they could implement a city ordinance that bans out-of-state ticket sales until after tickets are sold to the general public.

So what benefit is there to the General Public?

Besides the trickling in of a few million to the CIP, the public really isn’t getting any economic benefit from the Events Center, except another bond to pay off, money that could be spent on better parks, roads, water and sewer, and host of all kinds of other things that actually improve quality of life in Sioux Falls besides a top-40 country concert or a bull riding circus. And most of these things we don’t have to pay for out of pocket after standing in line for 18 hours.

Okay, so we determined the economic impact to our personal wallets isn’t really there, so what about quality of life? Is overpaying and finding it difficult to purchase affordable tickets to the EC for a couple of concerts a year really worth our mortgage? Personally I don’t think it is, and that is why I voted against the facility. The math wasn’t just fuzzy, it just doesn’t add up.

But even those who voted for the place and are willing to go see the latest ass in cowboy hat play the place, do you find any value in the facility or how it may have improved your life? That will be the hard question we will be asking over the next couple of years, as tickets get more expensive, maintenance and operational costs go up and a possible lawsuit that we will probably lose over the siding come to surface.

So enjoy your new events center Sioux Falls commoner, because we sure are paying a Helluva a lot for it and not getting much in return except a mortgage bill.

Posted in: Event Center, Sioux Falls

Arterial Road Funding to be discussed Tuesday at SF City Council Informational meeting

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platty-fatty

I think this graphic pretty much says it all

City councilor Kenny Anderson Jr. Plans to discuss proposed changes to arterial street funding. Anderson and Public Works Director Mark Cotter will be making a joint presentation.

This of course all stems from the 6 year anniversary (2008) of raising the 2nd penny tax to a full penny after developers and city administrators made false promises to the city council in order for the tax increase. The developers haven’t even came within striking distance of their promised 60% input. The entire tax increase was based entirely on lies and a failing economy that was evident at the time of the increase.

One proposal would be to keep the tax increase in place and simply ONLY match developers platting fees for arterial road expansion. Any additional money from the tax increase would go towards existing road maintenance, not expansion.

Posted in: Arterial Roads, Developers, Development, Public Works, SF City Council, Sioux Falls

The building boom? Just more expense for you and me.

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I have posted about this so regularly over the past year, I am almost dreading beating this dead horse again;

The city already has issued a record $524.3 million in construction permits this year, slipping past the previous mark established in 2007.

“Can we imagine any other city across America that wouldn’t want to trade places with Sioux Falls today?” Mayor Mike Huether said last week, when he and city planning director Mike Cooper announced the record.

As I have mentioned in the past, this is a good thing, on SOME levels, on others not so much. The one thing that stuck out in the article was the hesitant public buying homes;

In the early 2000s, every new house going up in Sioux Falls was matched by a corresponding new apartment unit, he said. But the 928 multifamily units permitted this year is a record, and combined with 265 townhome units is twice the number of single-family housing permits issued.

Part of that apartment push is tied to a low vacancy rate in the city, a reality shared in places such as Omaha, Rochester, Minn., and Des Moines, developer Craig Lloyd said. People hit hard by layoffs and the housing bust see opportunity in Sioux Falls with jobs and the quality of life, Lloyd said, but often are wary of taking out another mortgage.

“We’ve had people over the last couple of years say, ‘If I never see another house payment, I’ll be happy’ … because they lost their shirt with the last house payment they had,” he said.

Part of the multifamily construction surge is changes in lending laws and downpayment requirements, said Steve Van Buskirk, director of land development for Van Buskirk Cos. For younger residents and potential first-time homebuyers, the downpayment requirements are just too high, Van Buskirk said. And the tightening of financial regulations on credit scores and histories makes it difficult as well.

“The starter home market is the weakest point in this market,” Van Buskirk said. “People are choosing apartments rather than the new starter home, which averages in the $150,000 to $180,000 price range. Right now, they’re going to the monthly rent route.”

To me this says a couple of things. 1) a cautious public, people got their asses handed to them during the economic downturn, mostly because they were sold houses they could not afford, that they paid too much for to begin with. 2) People really can’t afford to buy a home in SF.

I know what you are thinking about my second statement, but believe it or not, while the developers in SF are getting bank loans to build everything from hot dog stands to luxury hotels (and TIFs to boot) the average Joe is just happy he didn’t lose his entire retirement, and he is certainly not looking to be chin deep in a mortgage.

What does this all really mean? Well, if you are investing in an apartment building, you are gonna make some money. Developers are also doing well by building new properties that are leased before the paint dries and paying off their bank loans with the use of TIF’s instead of paying property taxes.

While I could go on a very long rant about money these folks are making using public incentives, I really am not in the mood for a novel comment from Craig 🙂

I will say this, we have learned NOTHING from the last time we went full boar on development, the market dropped, platting fees went in the toilet, and sales tax payers were left holding the bag for arterial roads.

My bigger question is whether this growth is sustainable? Remember, as taxpayers (sales, property and enterprise funds to utilities) we pay the lion’s share to infrastructure maintenance and new construction. Is all this new growth sustainable 10-15 years down the road? Are we creating new annexation that is unneeded?

But the real question to come from this announcement is “When is the development community going to pay their fair share towards infrastructure?” It’s one thing to brag about a half-billion dollars in growth, it is entirely something else to brag about how this growth is helping to supplement our infrastructure. All I hear is crickets on that front.

But I guess that’s not how we do things in Rome, uh, I mean, Sioux Falls.

Posted in: Developers, Development, Sioux Falls

Do developers in Sioux Falls really need taxpayer incentives?

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So what do the ‘poor’ developers in town think about this?

Sioux Falls building permits continue on record pace.

As predicted, total construction value for the year has already topped more than half a billion dollars. From January through September, the total construction value of permits issued came in at $502,143,850.

New manufacturing accounts for $23 million and commercial construction for nearly $36 million. The number of apartments also outpaces single family homes. New residential housing totals $208.7 million.

The largest year for construction activity was in 2007 with $523 million in building permits issued. Sioux Falls is on track to break that record by the end of the year.

Don’t get me wrong, I think this is fantastic news for our city and developers. It seems the economy has bounced back, for them. So as a city government we need to ask some important questions since development is doing so well.

• Should we raise platting fees so developers are putting in the 40-50% they promised originally? (Taxpayers have put in almost 13x more then developers since the 2nd penny got raised to a full penny).

• Should we limit TIF’s to affordable housing, instead of for luxury condos, big box stores and luxury hotels?

• Should there be a public amenity tax implemented on development that benefits from publicly funded frontages (River Greenway) As Don Kearney, Parks Director recently said about the RG, “The public/private property lines are virtually seamless (sic).”

• Should we continue to annex land and expand our infrastructure when there is already a lot of land within the city limits that needs to be developed or redeveloped?

• Do our zoning laws really need to be drastically changed to Shape Places, but instead be broken up in to smaller zoning laws?

It seems development is moving along swimingly in Sioux Falls, now let’s tweak it so ALL of the citizens in SF can benefit from this economic development, not just the developers.

Posted in: Developers, Development, Sioux Falls