Well we know the answer to that question when it came to the Bunker Ramp, but have we learned from that experience? Apparently not;

A planned housing development backed by a first-of-its-kind tax break from Sioux Falls City Hall is on track despite market uncertainty placing challenges on the project developer.

The Sioux Falls City Council in mid-October awarded a $2.1 million tax increment financing package to Nielson Construction in support of a 65-unit residential development. In exchange, the company promised to sell the home at “accessible” pricing that reflects first-time homebuyer levels.

But an email sent days later by the company to dozens of its vendors and subcontractors alerting them of cash flow issues raised questions about whether the project would happen.

“Unfortunately, with that, cash flow is short and there is going to be some delays on being paid for invoicing,” the correspondence read. “We promise that we will pay you for work completed but getting that payment in a timely manner like you are accustomed to won’t be the same.”

I was made aware of this email over a week ago and was also aware that Joe and Jon were digging around on it. While all businesses seem to endure some cash flow issues from time to time, you wonder what kind of financial vetting the city did? If any? Maybe the director of finance is too busy running multiple departments?

Mayor Paul TenHaken’s chief of staff, Erica Beck, said Tuesday that City Hall isn’t concerned that Nielson won’t be able to deliver on the project. The city is not on the hook if it doesn’t happen though, either, she said.

“We have no reason at this time to be concerned with Mr. (Kelly) Nielson’s ability to advance the project in which he was approved for tax increment financing,” she said. “Additionally, it is important to note that this is a developer funded TIF, meaning he is using private financing to fund the project.  There is no financial risk to the city.”  

Yes there is! If the city is using the TIF to build up infrastructure in the affected development, and the developer bails after the infrastructure is in place and before a house is built, we would be on the hook as taxpayers for it, just like the unfinished Bunker Ramp.

With all the six figure+ staff we have working for the city, you would think we could get at least one of them to do credit checks for these projects.

Besides being tipped off about the email, I was also told that Nielson construction was the ONLY developer willing to do this project. It wasn’t a matter of the city vetting multiple construction companies and multiple ideas and sites (like building density in the core) but a matter of picking the cheapest beer on the lowest shelf.

It would be enlightening to see if any councilors ask the planning department if anyone else bid on this project.

9 Thoughts on “Does the City of Sioux Falls vet credit when handing out goodies and TIFs?

  1. Fear & Loathing in Sioux Falls on December 10, 2022 at 12:03 am said:

    Well, it was only going to be a “dent” in the problem anyhow.

  2. Further Fear & Loathing on December 10, 2022 at 12:05 am said:

    Once again, the people of the “Village” are the ones who suffer.

  3. Mike Lee Zitterich on December 10, 2022 at 12:19 am said:

    The project has NOT started as of yet, Erica Beck is correct, if the project does not start, the city is not held to any expense. The Expenses do NOT incur until the project starts, and within the lawful time line, typically 5 to 10 years after completion, the TIF has to be reimbursed to the Developer or the Landowner whereas they begin to submit qualified expenses to the the City Finance Dept.

    Keep in mind, if the CITY had taken out a bond to up front the money, and pay for $2.1 million infrastructure project, then the ‘city’ would have risked being obligated to the expense.

    As it is now, the city is NOT on the hook for any expense, nor liability, let alone any such bond payment.

  4. D@ily Spin on December 10, 2022 at 9:19 am said:

    If there was only one interested contractor, they didn’t get the word. Unless you’re Lloyd Companies, it’s likely you won’t get paid and the city exempts itself from collection appeals into circuit court.

  5. Mike Lee Zitterich on December 10, 2022 at 1:56 pm said:

    This is a new concept that is being promoted, it is new to Sioux Falls, I do not think or believe to many of the bigger developers will risk a project like this, when they are making thousands, if not millions on larger more productive mixed-used type projects like you see near Downtown. I do not believe this is anything new, cause if you review the “State Report” from the Department of Revenue that came out this week, many towns have done projects such as this, that cost the cities, and towns a mere $200,000 to as much as $2,000,000 million. The City of Sturgis has nearly 20 of these types of TIF projects going on in their city and they only cost the the tax payers $200-500,000 on the average. They are being defined as Affordable Housing, Workforce Housing, Assisted Living Type Housing Developments.

    Click the Link below,


    Also visit the city website and review and read through TIF #11 the Bancroft Development, that is the cheapest TIF given by the City of Sioux Falls, it cost us $476,000 and covers mostly cleaning up and repairing infrastructure, widening streets to provide better parking, and to update and fix up older Utilities, Water-Sewer Systems, etc. The project helped invest further the newer school that was built 10 years ago.

  6. The Guy From Guernsey on December 12, 2022 at 9:17 am said:

    Can only imagine being in the shoes of a subcontractor receiving that email only days after learning that $2.1 million of development costs are going to be provided by the City via a TIF package!?!?

    Can’t wait to see the sea of Mechanics Liens which will result from this … if Nielson Construction is even able to procure subcontractors interested in working for “slow pay” in the current labor-starved environment.

    Speaking of slow pay, the result of this TIF package granted by the City of Sioux Falls, the local school district and Minnehaha County Treasurer will each forego 20 years of payment to their treasuries on the incremental real estate taxes from these parcels.

  7. Mike Zitterich on December 13, 2022 at 12:47 pm said:

    You do realize, that “landowners” front the costs of all developments taking place on their land, if they were not in agreement with the increased assessment of their land values, do you think they would sign off on the development?

    Furthermore, as the landowner, reaches out to contract to a specific land developer(s), they put forth a concentrated effort to clean up their land, let alone building new buildings, roads, infrastructure on their land, other public ammunities.

    IF, the landowners (property holders) agree to pay a higher tax assessment, let alone use their own money to develop “your roads, infrastructure” – should they not be allowed to get some of their ‘investment” back in return for allowing “YOU” drive on roads paid by them, for you using their infrastructure, to using public parks, and other public things on the property?

    Especially, since they are agreeing up front to provide for Affordable Housing, Assisted Living Rooms, let alone build out Commercial Facilities which in turn provide more jobs to the ‘residents’.

    It is how this ‘city’ was founded back in 1857 – land developers, surveyors, property owners came here with the idea to develop the “Area of the Big Bend of the Sioux River”

    The City can be reviewed as part of looking at 4 Era’s:

    a) 1900-1930 Economic On the Big Sioux River;
    b) 1935-1955 Urban Renewal Replacing Old with New;
    c) 1960-1980 Continuing with Urban Development Projects;

    d) 1990-1999 Transfer from Town of Sioux Falls to the City of Sioux Falls by adopting a Strong Mayor and Strong City Council to establish a new partnership with Landowners, Property Holders, Corporate Partners.

    e) That Transition brought forth the Phillips to the Falls Development, the River Greenway Expanshion, the Plan to Replace the River Ramp with new Economical Ramps, and to Develop a New Shape Sioux Falls Zoning and Planning Ordinances .

    The New Charter ushered in a newfound plan to Promote the Arts, Science, and Theatre, along side with better Planning for Roads, Infrastructure, and Buildings.

  8. Fearing the Fuhrer & More on December 16, 2022 at 12:06 pm said:

    “Economic On the Big Sioux River”? That sounds like a brief lyric from a British New Wave band from the early 80s… It would have been perfect for Devo…..


  9. no the councilors won’t ask. they’re all hand picked by Ten Haken and march at his orders.

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