UPDATE: The ‘TIF’ Threat

I still remember attending the open house about the Sioux Steel Development at Josiah’s. Many people from the public offered their opinions at the meeting, as did I. I remember telling them it was a great idea, but I advised them to ‘go it alone’ and not get the city involved. I remember Rysdons’ incredulous look. Shocker! They didn’t take my advice.

It’s like the playbook never changes, when a developer in Sioux Falls wants a TIF they use the tired old threat,

Right now, the Sioux Steel site is valued at about $3.1 million by the county equalization office, resulting in an annual tax bill of $57,000. When the project is complete, the anticipated property tax payment would be around $1.58 million a year.

That equates to a 14 YEAR TAX BREAK!

Without it, parking to service the businesses included in the vision would likely be scaled down to surface parking lots, said Jake Quasney, executive vice president of development for Lloyd Cos.

“What would happen if we didn’t do the parking ramp, we’d build a scaled down version of the hotel and conference center, maybe some apartments and some surface parking,” he said.

Oh Well?

These are private developers that are already getting around $10 million from taxpayers to upgrade the river greenway along their property (something else I’m opposed to – because I think the city should just sell them Kiwanis Park and let them ‘upgrade it’). They are also ‘Private’. Why should the city be concerned if they scale back the project? Which brings us to another interesting factor. As we are trying to get the EC campus to get it’s poop in a group so the CVB (that we fund) can bring in more conventions, this private development wants to build a convention center, downtown. While I will applaud them, because it is a great idea, it is still private. So why would we give property tax rebates to a private development that will be competing with taxpayers for conventions? It is insane! It would be like paying Wild Water West to accept the City of Sioux Falls pool passes!

In this ARTICLE and STUDY they lay out what TIF’s really do;

“On average, [TIF] may be moving development from one part of the city to another, and changing the timing of the development, but there’s not more development than would have otherwise been made,” Merriman said.

Basically he is saying that you are robbing Peter to pay Paul. As I have argued, the development will happen anyway – with or without the TIF.

In addition, this is a tool with several drawbacks. According to Merriman, TIFs might “capture” some tax revenue above the capped “base value” that may have been generated anyway through natural appreciation in property values if the TIF hadn’t been created. This is money that taxpayers might have otherwise paid directly towards an overlapping school district, or for public services. And while TIF is not a direct tax increase, it may lead to higher rates or service cuts elsewhere, if the city plans on bringing in the same general property tax revenue as before TIF.

In other words, while this PRIVATE developer is getting a massive 14 year tax break, the rest of us are paying higher taxes to support it. Even with provable economic impact, those higher taxes for the rest of us don’t offset what benefit we would get from it. In other words the only one who is really benefitting is the developer.

Also take note that we have bonded for several major projects recently, the Denty, the City Admin Building, the Bunker Ramp, the new jail, the new schools and very soon the public safety training facility and water plant. At rough estimates that is about $680 million in new bonds over a short period of time with a payoff amount exceeding $1 Billion.

There is something else developers and city leaders like about TIFs;

Perhaps the biggest concern with TIF, though, is that of transparency, because of the way this mechanism effectively bypasses the public municipal budget process.

“Once a TIF is created, the operation of a TIF receives less scrutiny than other spending,” Merriman said.

In other words the public is essentially left out of that process and is usually given ZERO evidence that it will help us. But in this town, we love closed door deals, 5G is a great example of this.

Not everything about TIFs is bad, if used properly;

But TIF is good for sparking public-private partnerships that may help fund useful infrastructure that may not otherwise be appealing to investors, such as raising the height of a bridge tunnel so it can carry large trucks, for example. In the report, Merriman recommends several ways to use this tool more effectively, and make it easier for policymakers and researchers to evaluate. Most important: Cities needs to be more transparent about how they are using TIF. It’s not a magic free-money generator.

“It’s a concern about why those decisions are being made,” he said, “and why there’s a public subsidy for development that might have occurred even without the subsidy.”

So is the Sioux Steel development giving Sioux Falls residents something we need to improve quality of life and infrastructure? Not one iota. In fact the infrastructure upgrades to the river greenway along this development is being paid for by us. I would even be willing to gift the development the river greenway land, give them a smaller TIF, and have them upgrade it. There the taxpayers would benefit.

I also enjoyed this little tidbit;

The ramp portion of the project is estimated to cost about $22.6 million.

So they are going to build another Bunker Ramp downtown for about $25K a space. How is this possible? I will tell you – BECAUSE THAT IS THE F’ING GOING RATE! Never mind that hand soap sanitizer man child Neitzert has told you different. The cost for the Bunker Ramp was incredibly inflated and we said it from the beginning. With the new codes in place they will have to build this facility with the proper lighting, fire suppression and generator power – just like the bunker ramp.

I will say this, I think the concept of this development is fantastic, and I commend them on it, but like most things ‘FREE ENTERPRISE’ I also believe they can sink or swim on their own. TIF or NO TIF, it will be successful, and they know it, they just want to save a little money, that is obvious. I encourage every single public servant who is voting on this to request a comprehensive TIF study in Sioux Falls on economic impact and workforce development. I would even go so far to say that the city pays for it and has one of our public universities do it. It seems like when we ask for TIFs in Sioux Falls, it is all based on a whim, and NOT reality. Don’t be suckered by the ‘threats’. Make the one’s asking provide the evidence that this will help us. I already know the answer and this is why they avoid the study.

UPDATE: I see they are bringing out the ‘big guns’ on this, employing everyone in the (paid) media to tell us that this is a partnership with the community;

Both current downtown redevelopment projects require some level of partnership with our city government. In the case of the rail yard development, the city is being asked to sell land. In the case of the Sioux Steel development, the city is being asked to approve tax increment financing.

It sure is a partnership. The developer gets a gigantic tax break and all of our taxes continue to go up. Who wouldn’t be for this kind of ‘partnership’? Comparing the railyard project to getting a TIF is hardly a comparison. Did we get what we wanted for the land? Nope. But that was never going to happen. I think it is wise for the city to liquidate property so it can start generating tax revenue. Unlike what they did with Phillips to the Falls where the city ‘sat on’ land and held it for 11 years for a developer. They were never going to sell it to anyone else. And surprise, surprise, the same the developer is going to the trough once again.

It will be fun to watch the predictability of how this will play out. They asked for $21 million, but the city will come back and say we will give you ‘X’ amount instead. Then the city will brag about how they negotiated a better deal. It’s the old bait and switch the energy companies have been playing for years with rate increases. They always ask for double of what they really want or need then make it look like they cut a deal with the PUC. Old’s trick in the book, and our elected officials fall for it everytime.



9 comments ↓

#1 SL on 11.29.19 at 9:39 am

Well written and educational article. Sure hope that this administration takes a real look at this TIF request. We all know the reality is that this Mayor and certain council members are so busy kissing the hineys of businesses and they are overly eager to approve it. Just dump the tax load on the citizens….again.

#2 D@ily Spin on 11.29.19 at 10:09 am

The size of TIF’s over 10 million should be subject to a public vote. It has become easy for developers to ‘Nurse’ councilors and the mayor. It’s worthy of a federal investigation. Just because it’s government doesn’t mean it’s not criminal. I don’t want to live downtown. Why should I sponsor residential development there?

#3 TIFS. WE'RE INTO THEM. on 11.29.19 at 2:11 pm

When will our civic leaders take as great an interest in affordable housing as they do in parking ramps?

And just how many conference centers does a town need?

( – and Woodstock adds: “More conference centers?” ….”Haven’t they heard that the future is long distance holographic imagining get togethers?”…. #GetWithIt

#4 "Very Stable Genius" on 11.29.19 at 2:17 pm

The Argus article claimed there are 14 active TIFs on the books right now in Minnehaha County. Does anyone know off the top of their head what the total cost per year, that those 14 TIFs cost us in potential property tax revenue?

#5 l3wis on 11.29.19 at 2:33 pm

I can’t remember the total value but here is a link to them and if you click on the ‘Project Plan’ for each one, the last page gives you the amount.

https://www.siouxfalls.org/planning-dev/planning/development-programs/revitalizationincentives

#6 Warren Phear on 11.30.19 at 9:38 am

Twenty one tifs have been doled out since its inception. Twenty years of frozen assessments amounting to tens of millions of dollars of valuations not thrown into the tax system.

Take that all in and consider this. In September of ‘18 voters went to the polls to decide on a school bond issue. The annual bond impact per $100,000 of real estate property was $88 per homeowner per year. Assessed values on homes keep going up, year by year, while the lloyds of the world see their assessments frozen. Once again, the 99% are paying for the 1 percenters subsidies.

#7 Sheldon Osborn on 11.30.19 at 12:40 pm

If a developer asks the public to contribute money to a project, it seems to me the public should get an equity interest in the project too, just like any other investor. The public is taking a risk just like other investors and to not demand consideration simply means our public officials are gifting public money (tax revenues) to the developer and the developer’s investors. A TIF is an asset you can take to the bank and get money you can put in your pocket, either directly or indirectly. For the public not to get something for a TIF beyond the possibility of future tax return revenues 15 years down the road and the blue sky promise and unquantifiable concept of an improvement in our quality of life seems, at best, wrong, if not corrupt.

#8 scott on 12.01.19 at 12:01 pm

we’ve got millions and millions for tifs, so developers don’t have to pay property tax, but no money to remove snow for those of us who do pay 100% of our property taxes. what would mathew paulson tell alex jensen to say?

#9 Fear & Loathing in Sioux Falls on 12.01.19 at 2:17 pm

Ever since we discovered Alex on that Premier commercial, MP has been rather quiet.

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