I warned SF city councilors before approving TIF #17 that the TIF was unneeded since Costco already intended on buying the land whether it was contaminated or not. Councilor Jamison said this at yesterday’s informational meeting;

“. . . read in the SF Business Journal the Costco property sold for $4 million . . . caught my attention TIF #17 that we passed . . . the TIF was for 30 acres, and 15 acres was sold to Costco, anyway, the point is, we provided a $4.9 million TIF for that project, he (Developer, Dunham Companies) paid $2.1 million for the land, sold half of it for $4 million, that means he owns the other half he is going to put the apartment complex on  . . . nothing . . . I suppose . . . he made out like a bandit.”(sic)

Essentially, the developer is getting $8.9 million for a $1 million dollar investment. WOW! It would be like getting a property tax break that was 4x the value of your home. Of course, Diamond Jim defended the TIF saying it was needed to develop the land and sell. What a load of crap. Dunham made out better then a bandit, that was highway robbery of the highest order.

Jamison suggested that in the future that the council gets told what the property ‘may’ be sold for before awarding a TIF, he also suggested there be a mechanism to revoke a TIF if this kind of boondoggle happens in the future. I saw this hoodwink a mile away.

37 Thoughts on “Dunham-Costco TIF, hellava a deal

  1. Two words come to mind….

    Darrin Smith

  2. I swear the show Boss was required viewing for any city leader under Huether’s rule.

    (If you don’t know what that is, watch it on Netflix. Immediately. It’s one of the best TV shows in recent years.)

  3. anominous on April 24, 2013 at 3:56 pm said:

    At least they got all the headstones moved.

  4. Debra on April 24, 2013 at 3:57 pm said:

    Great Job Council Member Jamison for asking your questions in a public forum! That’s risky with ol’Huether at the helm……

  5. TIF’s should be left to the taxpayers to choose if a business deserves it. It’s called ballots people. 4.9 million given to a millionaire. Wonder how he got to be a millionaire?

    Hope they shoved some cash in his casket…..Well Fargo has a HELL of a lot of banks.

  6. rufusx on April 25, 2013 at 1:23 am said:

    How many times do TIFs’ mechanisms have to be explained to you all? There is NO – ZERO – NOT ONE DIME of cash that goes to the developer/owner. All tat happens is the TAXES COLLECTED are dedicated to the specific street and infrastructure improvements @ the location vs. just going into general fund. There is NO TAX “BREAK”. The tax rates and amounts remain THE SAME as they would be if there were no TIF.

    Ah well, if a whiner needs something to whine about – he/she’ll simply, make something up when lacking anything real.

  7. scott on April 25, 2013 at 6:30 am said:

    Then why does a developer “need” a tif?

  8. Testor15 on April 25, 2013 at 7:34 am said:

    If the developer gets the TIFF there is more money to be made .because the they can do their project without using personal funds. Dunham like Lloyd are experts at using everyone else to make their fortune. Self made… LMAO

  9. Tom H. on April 25, 2013 at 9:21 am said:

    rufusx – It is a tax break, albeit a very cleverly hidden one.

    When a developer develops land – say a new housing subdivision – he is responsible to install basic infrastructure like roads, etc. For a concrete example, let’s say that he spends $10M building the homes and $1M building the roads.

    If he gets a TIF, then the excess property taxes that he would have paid over the original value of the land – say, $50k per year – go back to this land to pay for the $1M in infrastructure improvements that are already his responsibility. In this case, it would pay for them in 20 years (probably more, with inflation and interest).

    The important thing to remember is that the developer is responsible for the infrastructure improvements from the get-go. With a TIF, there are two possible outcomes:

    1) If he holds onto the houses (for whatever reason), the excess property taxes that he pays go back to him to pay for the infrastructure improvements that he was already responsible for. In effect, he is essentially allowed to not pay those taxes and use those monies to pay for his own responsibilities.

    2) If he sells the houses, then he is allowed use the property owners’ excess property taxes to pay for the infrastructure. In effect, he is essentially allowed to collect taxes from the homeowners to pay for his own responsibilities.

    So yes, it is a tax break and a direct subsidy to developers. It might be warranted in certain cases when the community has a vested interest to see a property developed that, for a variety of reasons, is not possible in the free market. This is certainly not one of those cases.

    And it goes without saying, in a properly functioning development market, TIFs should be the exception rather than the rule. The fact that this is not so, even in high-demand neighborhoods like downtown, should tell us that something in the system is broken.

  10. Ruf, I explained it above. It would be like giving me a property tax break that is 4x what my home is worth. YES, the $4.9 million is the developer’s money, but it is money he gets to spend on improving HIS property vs. helping the greater good of the county and school district. Ruf, WE GET IT! And it is f’ing Bullshit.

  11. Craig on April 25, 2013 at 4:31 pm said:

    In some cases TIFs make a large amount of sense. In areas that are blighted or that need massive amounts of infrastructure improvements, they might be worthwhile, because chances are developers would shy away from those areas.

    Think of some of the core areas downtown. Do you really think someone would invest millions in some of those areas when it requires a lot of demo and environmental cleanup when it would be a lot cheaper for them to go to the edge of town where all they need to do is plow under a cornfield?

    As to the Costco TIF, I really don’t know if it was necessary. There is a chance had it not gone through, Dunham wouldn’t have been able to sell the land for as much because the environmental cleanup costs in that area are going to be significant. This means that Costco may have thought they were better off somewhere else – and that likely means urban sprawl.

    Thing is – we don’t know, and any of you who claim you konw Costco would have built in that exact same area with or without a TIF – well you are full of it. Because nobody knows. We can guess, we can assume… but we don’t know.

    What we do know is there seems to be a lot of misinformation floating around about TIFs. It seems as if people think there is money actually being paid to developers (there isn’t) or that school districts somehow get screwed over (they don’t). The truth is the land is still taxed – but it is taxed at the current or old value… not the value after the project is complete. This is why the school district and the county doesn’t complain because they are still getting the money they are used to getting… and they know after the TIF expires they will get even more. They also know that there is likely to be even more development in the area due to the TIF, which means more property tax revenue in the end.

    It is in all of our best interests to keep development and redevelopment at the core of our city rather than on the edges. TIFs are just one tool to help that happen. Obviously they are not always warranted, and in the past few years we seem to have gone TIF-happy… so some analysis is needed, but let’s not panic and suddenly think TIFs are evil or that they should never be used.

  12. Tom H. on April 25, 2013 at 4:39 pm said:

    Craig – interesting point about urban sprawl. Big box stores are, in my opinion, generally a poor use of land, but if it had to go somewhere, I’m glad it went in a location where infrastructure already exists and not out in a cornfield on 105th & Louise.

  13. Winston on April 25, 2013 at 6:21 pm said:

    I think I am going to ask my employer if they have any “TIF” program for their employees. You know, where the employee’s health insurance contribution costs are frozen so that any raise received can be an actual cost of living increase, rather than just additional funds to the pay for the yearly increases in health insurance……jk….I guess some of us are just in the wrong business…..

  14. rufusx on April 26, 2013 at 12:24 am said:

    TIFS don’t “cost the taxpayers” anything. They are not so much a tax “break” as they are a tax “shift”. $$$ is not “given away” as if it were some sort of wealth transfer payment. And anyone who takes the “standard deduction” on their income tax has NO ROOM to squeal about “tax breaks”.

  15. Winston on April 26, 2013 at 1:07 am said:

    But TIFS do cost taxpayers, because the overall tax base is less than it could be, thus potentially raising taxes on the remaining tax basis.

    Although, the TIF benefactor is a part of this latter class, they share their TIF benefit costs with all of the rest of the taxpayers, rather than paying it all themselves.

    The “standard deduction” analogy is apples and oranges.
    Every Federal taxpayer has the right to a standard deduction or possibly a more lucrative itemized deduction, but TIFs only go to those who can afford to pay the game.

  16. Winston on April 26, 2013 at 1:39 am said:

    “Beneficiary,” not “benefactor”, and “play” not “pay”…. Although, you may have to pay in order to play around here….Which would then make the beneficiary a benefactor(?)

  17. I would like a TIF to put in a swimming pool in my backyard. I will hire people to build it and maintain it.

    Are you in favor of that TIF rufus?

    Taking money that you should be paying and using towards increasing the value of your property is clearly a tax break.

  18. Craig on April 26, 2013 at 9:32 am said:

    LJL – a more accurate analogy would be for you to use a TIF to install a neighborhood pool that you would use as well as your neighbors. You would still pay taxes on the current value of your property, and after the TIF expires you would then pay taxes on the full “new” assessed value. The improvement of this pool wouldn’t just benefit you but rather would benefit the area.

    In the case of the Dunham TIF, those funds go into things like environmental cleanup, infrastructure improvements such as roads, lighting, storm sewer improvements, landscaping and grading etc. You can easily argue many of these improvements benefit the landowner and developer, but they also improve the area (for example widening a street or the addition of a median and turn lanes on Grange would most certainly improve that area).

    The other aspect we need to remember here is this project (and other like it) are bound to result in other development. So the other available lots in that area will probably sprout new development. You will see property values in the adjacent areas increase because there will be more traffic, more shoppers, more money being spent in the area. That means the schools and county benefit from these increased taxes.

    Now think of the flip side. A big box retailer opts to build so far South that they are in the Harrisburg School District. Guess who gets the tax revenue? Guess which county gets the tax revenue?

    Now you can start to see why Minnehaha County and the Sioux Falls school district aren’t about to complain about a TIF… because they understand it will actually result in increased revenue for them even without the actual original development (Costco) factored in. Then, when the TIF expires they get even more, and with a little luck it spurs growth and redevelopment in the area which expands and strengthens the area rather than allowing it to stagnate and remain empty.

  19. Craig on April 26, 2013 at 9:44 am said:

    L3wis: “It would be like giving me a property tax break that is 4x what my home is worth.”

    Well let’s think about what it would mean if homeowners could have the same deal.

    You agree to continue paying the same level of property taxes as you do today for the next ten years, and in return you are able to improve your property to 250% of the original value but not have to pay any additional taxes.

    So you purchase your home for $100k… that is what you pay taxes on. You add a second story, remodel the kitchen, add an in-ground pool, a sun room, and a new triple stall garage, and a new master suite complete with one of those toilets with the heated seat. So now you have $250,000 into the property – but you are still only paying taxes on $100k. Sweet deal right?

    The problem is, not many people are willing to improve property on that scale because chances are you would still be in between a bunch of $100k homes and you would price your home out of the market. Also, if we are fair a true TIF would benefit others as well (as I said to LJL) so some of your improvements would need to be wider sidewalks or new storm sewers or grading which diverts rain runoff away from your neighbors.

    Not many homeowners want to spend money on things that benefit the community rather than themselves.

    I would support some type of program to allow this to happen though – but it would need to be targeted to certain neighborhoods that need the development and that would raise property values in the core of the city.

    However when you think about it – we sort of already have some programs like this. If you find a vacant lot by the Cathedral district, there are programs from the state, county, and city which will help you build a new home there. If you own a historic home, there are programs that will allow you to renovate without having to pay full value. It might allow you to get new siding, a new roof, or install new mechanical systems all on your historic property and you don’t have to pay a dime in extra taxes for something like eight years.

    There aren’t programs for everyone – but there are targeted programs for our oldest homes and oldest neighborhoods…. isn’t that how it should be? Shouldn’t we invest in the core of the city rather than allowing tax incentives for someone to update their 1995 ranch style home?

  20. Winston on April 26, 2013 at 11:50 am said:

    There is no “sweet deal”, because as long as you acquire the necessary building permits for your home improvement projects your increased tax assessment will follow….

  21. We are speaking in terms of a TIF Winston… not what occurs today, but rather what might occur if there was a TIF option for individual homeowners.

    One of the problems is if you give a tax incentive to homeowners they will likely only use it to benefit themselves and there is less of a chance it translates to the neighborhood around them (unless a large percentage of their neighbors do the same). In commercial development, there is a much greater chance of secondary development as a result of the original project.

  22. Winston on April 26, 2013 at 5:46 pm said:

    I think I know that Craig, but even with your home improvement TIF scenario, it is still not a “sweet deal” if homeowners obtain the necessary building permits….

    The bottom line is this. TIFs exist because they can serve a purpose at times, but the question we must all ask ourselves is….”Would Costco have come to SF with a without a TIF?” I think safely the answer to that question is “Yes.”

    TIFs used in the Costco example create an unnecessary middleman (developers) at the taxpayers expense because it reduces the potential overall tax base.

    With the Costco example, we witness first hand how TIFs empower local developers with a “pay to play” mentality when it comes to dealing with potentially new businesses from out of town who want to come here.

    This may be to strong of an analogy and maybe unfair, but it is reminiscent of a “syndicate” approach to business, with an unnecessary middleman and the taxpayers picking up the tab with a potentially smaller tax base for our local governments to work with….

  23. Keep drinking that KOOLAID Craig and Rufus…. The rich got richer and we picked up the tab.

    I think it is quite clear that a Costco is not a public entity such as a public pool. You keep rambling on while they keep running up the debt.

    Enablers.

  24. Costco looked at several sites and submitted preliminary plans for at least one other one that was in the area. The reason they didn’t pull the trigger on that one was that the owner (not Dunham or Lloyd) jacked the price up once they figured out it was Costco. Believe it or not, but Sioux Falls is sending mixed messages to the large companies who might consider locating here: “Hey we’re open for business, but yeah..we’re also kinda dysfunctional”

    And the site they went to is a former tank farm, so that’s where the TIF applied since by design they are to incentivise sites with potential challenges. Did Dunham take advantage of the way the planets lined up for Costco? Sure he did, but he also had a knack for finding a way to get deals done where others couldn’t. You can posthumously bash the man for that, but I’m just happy it’s still within the law to knock one out of the park from time to time.

  25. rufusx on April 27, 2013 at 1:28 am said:

    Winston – please explain how the overall tax base (the total assessed value of all properties in the city) is “reduced” by transforming a vacant lot into a 4.5 MM structure that will be paying taxes IN PERPETUITY.

    Again, please pay attention – that property is not EXEMPT from paying taxes – the FULL rate just like any equally valued property does. The taxes it pays are simply dedicated to paying for SPECIFIC INFRASTRUCTURE IMPROVEMENTS vs. going into the general fund.

    LJL – You’re not picking up any tab at all. The developer – and Costco – and who ever occupies the remainder of the land – are picking up the tab for the infrastructure development – IN TOTO – via their property taxes until such time as the entire cost is paid. At THAT time, they will not cease paying taxes – the will continue to do so and the taxes will go into the general fund. In the meanwhile – they will be generating a crap load of sales taxes, income taxes, and SS taxes – and their employees will NOT be depending on food stamps to eat.

  26. Going forward, the City Council is being responsible in taking a step back to re-examine the TIF process. This has been referred to the Land Use Committee (Anderson Jr., Karsky, Rolfing, Staggers) for discussion and public input.

    The first TIF was approved by the Council in 1989.

    Over the course of 20 years (1989-2009), a total of NINE TIFs were approved.

    In the last four years (2010-2013), EIGHT TIFs have been approved:

    TIF #10 CNA (Craig Lloyd)

    TIF #11 Bancroft Apartments (Bancroft Place Partners LLC., Michael Crane, Principal) BTW, ??Who are the other partners…

    TIF #12 #Phillips to the Falls (TIF District #8 was terminated in creating TIF #12) (Craig Lloyd)

    TIF #13 Raven Industries

    TIF #14 Hilton Garden Inn/River Ramp (Craig Lloyd)

    TIF #15 Sanford Sports Complex

    TIF #16 Whittier Heights (Don Dunham)

    TIF #17 Costco (Don Dunham)

    I have attended most of these TIF presentations. Darrin Smith almost always makes a point of mentioning that Rapid City is “way ahead” of Sioux Falls in terms of TIFs! As if this is some type of competition…….

    It is past time for the Council to take a close look at this process……!!!!

  27. Correction:

    My previous comment should read:

    In the last three years (2010-2013), EIGHT TIFs have been approved:

  28. rufusx on April 28, 2013 at 10:38 am said:

    Okay cr – how much property tax revenue has the city, county, state, and school district “lost” due to these TIFs? How many of them have tax liens on them for failure to pay their property taxes – IN FULL?

  29. pathloss on April 28, 2013 at 7:35 pm said:

    Costco is the big loser. They paid to much for the land and but a small portion was returned via a TIF. Their inflated annual property tax will be close to what they should have paid. Their stockholders will get this story and the stock price will suffer. Now would be a good time for Costco & Walmart to back out citing city corruption. They could get a better deal & community support when the new mayor exposes the Huether/Developers crime syndicate.

  30. From reading the comments I’ve come to conclude that TIF’s don’t cost anybody anything! Why can’t we just hand them to everybody, ala Oprah? “You get a TIF!” “And you get a TIF!”

  31. rufusx on April 29, 2013 at 12:45 am said:

    Scott, if you’ve got a potential few million-dollar project you’d like to construct on some property that has “issues” (brownfields. swamp land, etc.) you could probably get one. Especially if completing that project will produce a big increase in both property taxes and sales taxes as a result.

  32. Craig on April 29, 2013 at 9:01 am said:

    Winston: “but even with your home improvement TIF scenario, it is still not a “sweet deal” if homeowners obtain the necessary building permits”

    I think you’re still missing the point. In a true TIF scenario, taking out permits has no impact upon the property taxes until after the TIF expires. This is the same deal commercial developers get – they still pay taxes, but only on the pre-development value of the property. So in the Dunham / Costco case, they will be paying property taxes upon the land as it sits today rather than on the value after the Costco structure is in place.

    Winston: but the question we must all ask ourselves is….”Would Costco have come to SF with a without a TIF?” I think safely the answer to that question is “Yes.”

    I won’t disagree, but there is another question. Would Costco still have built at that specific location without a TIF? We don’t know… but adding a few extra million to their tab might have been enough to convince them to try a different location. That most likely would push them out towards the edge of our city… which means more urban sprawl. It might also have pushed them into the Harrisburg school district and Lincoln County… two things SF and Minnehaha County wish to prevent.

    Winston: TIFs used in the Costco example create an unnecessary middleman (developers) at the taxpayers expense because it reduces the potential overall tax base.

    No it doesn’t. It reduces nothing in the present day. It actually increases the potential tax base by promoting development. The actual Costco property won’t have the taxes increased, but they will still pay the current taxes, and there is bound to be additional development in the area which will increase the tax base. After the TIF expires, the tax level of that property goes up to the ‘then current’ assessed value… which means even more taxes for our county and school district.

    LJL: Keep drinking that KOOLAID Craig and Rufus

    People generally refer to those types of comments after they realize they have no legitimate retort, so I’ll let it slide, but if you actually took time to read the posts you will note I’m not defending Dunham or Costco here. In fact I specifically stated “as to the Costco TIF, I really don’t know if it was necessary”. I’m merely explaining how TIFs work to those of you who seem to think they are just big cash handout or how they result in the tax base going down.

    I’ve already said I think the city has gone a little TIF happy in recent years, and I am in full support of certain members of the council who want to take a closer look at how these are handed out. However if we are going to debate an issue, we need to debate the actual facts of it… not just the version of reality that we feel sounds better.

    I’ll say it again – there is a reason the school district and the county aren’t complaining about these TIFs, and that is because they know by bringing these developments in it will strengthen the core of the city and raise property values as a direct result. Check the property taxes for the land and buildings around the Costco site today, and check them again in five years and try to tell me this development reduced the potential tax base.

    Should we always allow TIFs? No. Should we have granted the Costco TIF? Can’t really say – because I don’t have enough information to go on and I have no idea if Costco would have went elsewhere had it not been for this specific TIF (and neither do you). Should we do a better job of researching TIFs before they are granted? Yes.

  33. pathloss on April 29, 2013 at 11:19 am said:

    This TIF will pay back. Sales tax revenue will more than pay it back in just a few years. A couple hundred jobs will happen. Costco is a fool for being set up and paying to much for the property. The city must keep them netted with a cash payoff. Costco needs off the record funds to pay Huether’s bribe. What disturbs me is how this is brushed by citizens. Yes, there should be a public vote before this assist is awarded.

  34. I’ll say it again a different way; Costco wasn’t interested in being on the edge of town or they wouldn’ve been here years ago, they were interested in being better positioned to their target demographic than Sam’s Club is.

    Hence there were only a couple sites they seriously considered.

  35. Can Zamby get a TIFF for bananas

Post Navigation