Entries Tagged 'Property Taxes' ↓

How Strong Towns Principles Relate to Sioux Falls — Municipal Ponzi Scheme

I was sent this article, that I found very interesting relating to the urban sprawl of our city;

Since 2010 the City of Sioux Falls has annexed 3996 acres of land into the city. That is almost 400 acres per year. How much tax revenue did that additional property bring in? How much did it cost to annex those areas? How much will it cost to replace all the associated infrastructure when it needs replacement? The answers to those questions are hard to piece together (maybe a good use of tax dollars would be to hire a company specializing in this kind of data to pull it together for us). In the meantime, we have some anecdotal data to look at.

So Detroit is a cautionary tale for cities caught up in a municipal Ponzi scheme. Here in River City things look pretty good . Sales tax revenue is floating our boat right now. We have money in the budget. Marohn refers to this as the illusion of wealth. It looks like we have money but the residential developments on the edge of town — which don’t generate sales tax directly — are new and don’t require replacement. When that infrastructure requires replacement the property tax revenue collected in those areas probably isn’t going to be enough to pay for it. Other areas of the city that are generating revenue will have to subsidize those areas — until they can’t. It happens slowly then all at once. Welcome to Detroit.

Ironically, several years ago when I got into Strongtowns, one of the main reasons I was drawn to it’s message was what they were saying about Urban Sprawl. It soon will be very expensive to live in Sioux Falls, if we are not already there.

Guest Post: Mike Zitterich, Sioux Falls City Council and Taxes

This was an email Mike sent to City Council and gave me permission to post;

Good Morning,

After attending the 3/3/2020 City Council Session the other night listening to many interesting debates, I want to discuss a few issues that I feel are important here.

The definition of the word Surplus is where you have excess monies available at the end of a fiscal season after all expenses have been paid out for the year.

My definition of a surplus is one of which the people spent a lot of money for the year, and ‘we’ over paid our taxes. This is the proper way to think of a surplus, not to mention, build a case that this would prove that the citizens are overly taxed, and that we could very easily afford to cut the tax rates.

Lets remember here shall we, “I” like many people, only consented to give up a portion of our sovereign property rights to the “City” in order to pool our assets as one to provide us the basic necessary services to each other. Therefore we agreed to fund Basic Government @ 1% Sales Tax in order to pay for…

– Roads/Streets, and the basic maintenance and repairs needed to maintain them thru out the year.

– Public Parks, where we the people have donated, or ceded some of our land to the city in order to provide each other cheap, fun, family activities thru out the township.

– Police Department, we agreed to fund a local police force in order to protect our properties, keeping us safe from bad men and women whom may attempt to harm us.

– Local Fire Department, in order to provide us Fire, Rescue, and Emergency Safety in order keep us safe thus protecting each other and our properties.

– Public Utilities (water, sewer, lights, electricity) in order to pool our infrastructure to help provide the basic most cheapest service possible as a community.

– Public Parking, helping to provide enough sufficient space thru out the town giving us cheap, well maintained parking spaces for FREE or at Discounted User Rates to go about our daily activities as a community of conducting business.

– Public Transportation in order to provide ourselves as a community the most cheapest service possible helping to provide us a way to commute to work, school, or to do daily activities as a community.

– Basic Government Administration in order to help manage, plan, and provide those basic services to the people.

That is all ‘we’ the people have consented to, and these costs should be as cheap and affordable as possible as to NOT over tax the people.

Now, we have placed in our ordinances the ability to raise in the short term of 2 years, the ability to borrow from the people money to invest in Land, Buildings, Infrastructure, New Roads, in order to expand the city, make our daily lives better, let alone improve upon our city. This is in fact the true purpose of our 2nd Penny Sales Tax. And this should be a temporary tax that should be used for 2 year periods, in order to NOT to place a burden on future generations. We simply give the City the ability to extend that tax up to 5 years. But as we ‘vote’ every 2 years to change our councils, the mayor, those Capital Plans change with those elections.

Thus – the 2nd Penny Tax in my opinion is a temporary tax, and should be allowed to expire when ‘we’ have raised the appropriate funds to pay for the land, new roads, new buildings, new infrastructure, etc.

The true measure of what it costs our city is the allocated expenses paid for by the 1st Penny Sales Tax. That is it.

This was the point I believe Pat Starr was attempting to make at the 3/3/2020 Council Session about the Property Tax issue. IF our Sales Tax is consistently creating huge surpluses year in and year out, and our population keeps growing every year by 3,500 people – that is an automatic $2,500,000 in new sales tax revenue every year, couple that with the Mayor restricting funds, re-financing the Bonds, the interest income that comes in from stocks, bonds, and capital, “WE” should be able to stop pulling from the Property Tax that the statutes allow us to take each year. Why do we keep keep taking more from Property Taxes, when we really do not need them.

This current ‘council’ and city administration currently believe that those property tax dollars are ours for the taking, no they are not. And there is NO mandate that we must use them. The statutes simply say, if we do not take them this year, we lose them. That is fine in my book. If we truly do NOT need them to balance our city budget, why not allow the STATE LEGISLATORS re-apportion those funds back to the people directly back to the School Districts, our Seniors, our Homeless population, our Low Income Citizens, our Children’s Lunch Programs, etc. This was the point Pat Starr was making. And I agree with him on that subject manner.

Now – I was hoping that Pat Starr and Greg Neitzert would have extended that little tax debate longer Tuesday night. They are two of the most respected city councilors, Greg and his analytic skills, and Pat with his common sense and due process. This is the DEBATE ‘we’ need to have as a community, and this is the discussion that we must force. I dont want anyone to argue, or fight. No. That is not the point, but those two are probally the best at leading this debate. Not to mention, its my most favorite topic mind you. I call for a respectful discussion in order to address this growing concern of mine –> To Much Revenue leads to an out of Control Government, and that leads to higher tax rates, more expenses, more ‘wants’.

We can very effectively cut our sales tax rates, and take less and less from property tax dollars, thus rewarding the people for their good work of Saving, Investing in our City, to spending lots of money, while helping to promote the city attracting foreigners, tourists, visitors to attend our public events, concerts, and attractions. That helps produce even more sales tax revenue.

Then there is the other Misc-Excise taxes, Imposts, and Duties that fund the Enterprise Funds, Programs, and Services offered by the city that raise their own revenues totally separate from sales and property taxes. They are self sufficient and create huge profits, which then provide us the capital needed to sustain them, invest in them, manage them. Again –> allows us to cut the Direct Taxes we call sales tax and property tax, which hurt the most vulnerable in our community.

Our effective sales tax rate is 1% – it then becomes a matter of how much ‘we’ need to borrow in the short term from the people for new roads, purchase land, new infrastructure, build new buildings, etc. Thus we create cost estimates to put forth a 2 year plan raise tax dollars from the people. That is what the Second Penny is for. And we allow the government to ‘tax’ us for up to 5 years. After we raise the necessary funds, this ‘tax’ should be allowed to expire. Until the next time ‘we’ need to raise funds in the short term.

Folks, this CITY can survive on $70,000,000 in Basic Sales Tax Funds; it can survive on the $200,000,000 it raises in Misc-Excises, Imposts, and Duties we collect to fund the activities and services of the city. We do not need to keep borrowing from bond holders, if we simply DO NOT over tax the people. We should be allowing the “citizens” to pay less in sales tax, which then allows them to invest in their own properties, spend a little extra cash, and perhaps save their money for tomorrow. “They” the citizens then become more vested in our community. Our revenue will rise in due time.

I will continue to hammer at this, lobby to lower our sales tax rate in the spirit of trying to save the citizens money. Thus rewarding them for a job well done.

In the end – we must stop over taxing people, we do NOT need anything so bad that it cannot wait 5 years until we can raise the necessary funds thru the 2nd penny. We need to be responsible, prudent, and manage our tax dollars better. We can and will lower these rates soon enough. It is just a matter of time.

I strongly encourage some thought on an ordinance that would mandate that the 2nd Penny expire every five (5) years; for no less than a term of two (2) years; placing the expiration on the same two year election cycle. This means that during a councilor’s 8 years (should anyone serve 2 terms); they would have to deal with less revenue for 2 of those 8 years in office. Not only does this help the citizens, I believe it encourages public debate, more discussion on goals, agenda, future wants and needs, thus slowing down the process of pushing items thru from 1st and 2nd Hearings. There have been a few items discussed where I felt we could have followed thru and deferred them a couple weeks. Public discussion is what we need to strive for. I do not believe this hurts the city one bit, the goal is to enforce, mandate, and encourage more public discussion on our future needs. 

Our current tax revenue consists of:

  • $126-130,000,000 million worth of Sales/Use Tax
  • $65,000,000 worth of Property Tax dollars (optional)
  • $200,000,000 estimated/projected Misc-Excises, Imposts, and Duties
  • $100,000,000 in Bonds, Federal and State Loans, Grants, Budget Restraints, Bond Refinancing

    Saving the Citizens $60-70,000,000 per year for a term of 2 years should NOT harm the City at anytime. This is a City that has a net position of nearly $2,000,000,000 billion dollars after all expenses, liabilities, debts, and future obligations are paid in full. That equates to writing each ‘resident’ a check in the amount of $10,000 dollars if we were to shutdown the city. That is a lot of money. Government should not create surpluses – that means the people are overly taxed. 

Please, lets encourage this respectful discussion, lets fix our spending problem, our debt problem, lets be good stewards of the community. We owe it to our ancestors, and to our future generations.

*DaCola Note; While I disagree with Mike on several city issues, I think he nailed it in this post. It is getting more and more expensive to live in Sioux Falls, and the main reason is we are extremely overtaxed. I agree that the 2nd Penny should be reviewed every 5 years and adjusted. I also think property taxes should decrease instead of increasing each year.

UPDATE II: The FIX is in on property taxes

UPDATE II: I went and talked to the equalization department today. After reviewing the increase, they explained to me that 90% of the increase is land value, in which is formulated different now. We also calculated that my taxes will probably go up $250 dollars next year, which is NOT $2 a month, just for the record.

UPDATE: I decided to go back and look at the records I could find

From 2008-2009 the value of my home went up 1.8%

From 2009-2012  the value of my home went up 0%

From 2012-2016  the value of my home went up 10% (aprox 2.5% per year)

From 2016-2017  the value of my home went up 1.8%

From 2017-2018  the value of my home went up 1.8%

From 2018-2019  the value of my home went up 2.3%

From 2019-2020  the value of my home went up 21.9%

As I predicted and warned people, the school bond, the new county jail and the multiple TIFs we hand out are going to catch up with us. The $2 a month boloney they pitched us was a farce, because I knew they were going to make hay with the assessments. And sure enough they did.

My increased assessments year after year have been steady, but reasonable. I have owned my home for 17+ years and my property taxes have doubled in that time.

I have done little upgrades to my home, except replacing windows, doors, adding new rain gutters a privacy fence and re-shingling after storm damage. I have done NO upgrades to the interior of my house.

So imagine my surprise when I got this in the mail yesterday;

Well, I was NOT surprised, I saw this coming like a freight train. We can’t keep borrowing money in Sioux Falls and not have a way to pay those bonds, so they bleed it out of us through back door tricks like assessments. Can I afford a 21.9% increase in my assessed value? I suppose, but it also means a lot less money in my pocket.

It was interesting listening to the State Legislators talk yesterday at the legislative coffee about state funding of education. Two Republicans made great points;

• The state gives the districts money and the districts decide how that money is spent (salaries, etc.).

• Administrator pay in SD ranks at 15th while teacher pay is at 49th. I haven’t checked that stat, but I know at one time in was around 22nd. There is a obvious disparity.

• Low voter turnout at school elections. The past school bond and school board elections both had around a 4% turnout. Basically the legislator was saying, if you want to have a say on how your local district is being funded, maybe you should show up and vote in these elections. AMEN Brother! But I also have to add their is voter suppression when you use super precincts, no precincts in the northern part of our city and have district finance department employees ‘hand count’ votes, while the business director puts those counts into the system without oversight.

Who knew that owning a house that was built in 1889 could increase in value by almost 22% in one year? Not bad for a home that is 131 years old. What a joke.

Graphic of Sioux Falls Taxes

A gentleman tonight during public input at the City Council meeting put this graphic up on the overhead during his presentation. I was disappointed he ran out of time before he started to address TIFs. I should recruit him to write for my blog.

While most South Dakotans barely scrape by, $355 Billion sits here in tax free trust havens

How much is $355 Billion? It is 710 times the City of Sioux Falls yearly budget. Yeah, it’s a lot of dough, and most South Dakotans don’t have a clue our legislators are allowing this while our benefit to the state coffers is virtually ZERO;

In recent years, countries outside the US have been cracking down on offshore wealth. But according to an official in a traditional tax haven, who has watched as wealth has fled that country’s coffers for the US, the protections offered by states such as South Dakota are undermining global attempts to control tax dodging, kleptocracy and money-laundering. “One of the core issues in fighting a guerrilla war is that if the guerrillas have a safe harbour, you can’t win,” the official told me. “Well, the US is giving financial criminals a safe harbour, and a really effective safe harbour – far more effective than anything they ever had in Jersey or the Bahamas or wherever.”

That means legislators are nodding through bills that they do not understand, at the behest of an industry that is sucking in ever-greater volumes of money from all over the world. If this was happening on a Caribbean island, or a European micro-principality, it would not be surprising, but this is the US. Aren’t ordinary South Dakotans concerned about what their state is enabling?

“The voters don’t have a clue what this means. They’ve never seen a feudal society, they don’t have a clue what they’re enabling,” Wismer said. “I don’t think there are 100 people in this state who understand the ramifications of what we’ve done.”

That’s what we get with ONE party rule in South Dakota (and it doesn’t even matter which party). If we could even implement a teeny-tiny tax on this wealth, it would help us out tremendously in education, road funding and healthcare as well as many other things. We could eliminate video lottery, the food tax, reduce property taxes and help address our drug crisis in the state. But we continue to elect the greedy and the stupid (who are one in the same).

Redevelopment of the Core should have started a decade ago

I have been a follower of Strongtowns for almost 10 years now, and tried to bring Chuck into speak about 7 years ago but couldn’t scrounge up a sponsorship. I’m happy to see people trying to embrace their thinking, but I think we need to play some serious catchup.

Jodi makes a good point in her Sunday column today;

But I think a renewed focus on improving existing housing stock, redeveloping core neighborhoods and investing in infrastructure and amenities that draw people to those neighborhoods could help.

Help?! I have been pleading with city councilors for over a decade to implement a core neighborhood revitalization program through re-allocating TIF rebates to individual homeowners and small apartment owners in our core neighborhoods. It could be a multi-tier program that gives property tax rebates for certain kinds of upgrades as well as using federal grants and community development loans. While we are in the middle of a crisis right now in SF when it comes to affordable housing because we have allowed realtors and developers artificially inflate the market. We can’t cry over what we should have done, we need to implement these programs ASAP to save our core neighborhoods while creating abundant affordable housing.

Welcome to Opt-Out Falls!

Well, it was bound to happen, with ALL of our local government agencies in Sioux Falls going Bat Sh*t crazy over opt-outs, the name change is no surprise.

“I will admit I was a little surprised and kind of hurt when I found out the name change,” local philanthropist Lenny Spamford exclaimed, “I mean just how much does a no state income tax paying billionaire in SD have to give before he gets a town named after him?”

The governor, Donita Trump, didn’t seem too bothered by the change either, “I guess we kind of forced it on them, you know, by collecting over 30% of our sales tax revenue from the city and giving them nothing in return. It may not seem fair, well because it isn’t. I told you I would do things differently, and I’m delivering on that promise. Talk to you later, I have to get back to trucker hat shopping and hip-hop dance lessons.”

The latest to opt-out was the Minnerahrah County Commission today voting 6-0 for an opt-out (and 5 of them are Republicans! The shame!).

“The county, especially Sioux Falls has become the place to commit crimes, it’s like it’s trendy or something to drive from Freeman, or Menno or even Highmore to commit crimes in our county,” said county commissioner Gene Bart, “We really enjoy arresting people here and putting them in the endless cycle of the criminal justice system. Heck, just yesterday we arrested someone for looking at the Arc of Dreams the wrong way, on top of that we even put a guy away for trying to burn the newly sodded grass at the Levitt with a magnifying glass. Lawn crimes, just another mole we are trying to whack! Building collapses, not so much.”

Of course nothing gives the Sioux Falls School District more jollies than an opt-out. Superintendent Baron Von Maulher said, “We were getting such a kick out of it, I banned joke books from the IPC. Whenever I see anyone down and out around the offices, I just yell ‘OPT-OUT’ and the whole place breaks out in laughter. Of course, the finance department does get a little trepidation, because they have to ‘count’ (wink, wink) the votes. I always tell them they can do that with their hands tied behind their back and blindfolded. Worked in the school bond election.”

I asked Baron what the opt-out schedule looked like for the school district over the next 5-10 years.

“Well, since Pierre really doesn’t care how much we raise taxes, we figured we would push the envelope a bit,” Von Maulher replied, “We are going to try 6-12 opt-outs per year through the board, and if the people whine about having a choice, we will hold an election, but this time there will be only ONE super precinct, and it will be in my office.”

The city council is also infamous for raising property taxes. In fact, I don’t think a city council has voted down an increase in over 15 years.

City Council Vice Chair, and RS5 self-appointed leader, Ned Greitzert explained it like this, “When someone hands you lemons, you make lemonade, when the state hands us an opportunity to raise the tax rate, we make grenades, uh, I mean lemonade.”

Well, that would explain the potholes.

I asked him about all the other numerous increases in fees and taxes the city imposes on the citizens, and couldn’t they just take it a little easy?

“Funny you bring that up,” replied Greitzert, “The majority of the council, the ‘RS5’ as we like to call it, or the ‘He-Man Steely Hater’s Club’ is all about positivity and progressive measures to keep our city’s high level of quality of life at a maximum, that means if we are going to raise fees on water, sewer and other stuff, we have to keep that tradition of caring  and due diligence with property taxes. Wouldn’t it seem odd to you that your water bill went up last year but your property taxes didn’t? Where’s the consistency there? If you want inconsistency with taxes, just vote Steely for mayor. All she’ll do is bankrupt the city while giving taxpayers a break. The next thing you know, we will all be swimming in an outdoor pool in the middle of January.”

I didn’t have the heart to tell Ned that I didn’t know how to swim, especially under ice.

Some question why all the local entities have to constantly raise our tax rates when valuations have had record growth over the past 6 years?

Mayor TenBibleverses’ Chief of Staff took a stab at the question, “I call it the candy syndrome, something I kind of started when I worked for that last crook, I mean, mayor and quit ONLY after I was forced to write the largest TIF in city history for the Spamford Sports Complex,” said Jericho Speck, “We just started handing out TIFs, tax rebates, excusing tipping fees, ignored environmental laws, built millions in infrastructure for ice cream warehouses and just said, screw it, corporate welfare for whoever wants it. Don’t tell my pastor.”

I asked, “The Candy Syndrome?”

“Yeah,” Speck said “Whatever rich developer in town that needs a handout for NO reason at all, we just give it to them. No questions asked. No proof of economic impact. No proof of job growth, or even good paying jobs. We just make sure the request is signed and we approve it. The city clerk’s office handles petitions in a similar same way.”

I wondered if this haphazard way of giving tax cuts and tax incentives was driving up everyone else’s property taxes.

Speck responded, “What? Are you stupid? Does beer like foam collect at the bottom of Falls Park every Spring for the past 100 thousand years?! You certainly are the poster child for the large percentage of South Dakotans that don’t go to college. Ever think about taking up welding? There’s a program I could refer you to.”

I had more questions, but I had to get back to my call center job, my 8.5 minute break was over.

While this was satire, some of the sh*t is true, mostly everything but the fake names.

West River math VS. East River math

So this is an interesting story;

RCSD – $250m – $20/month increase in property taxes on every $100,000 of value  =  $240 yr
Morrison/Vik/Maher MATH:
SFSD – $190m – $2/month increase in property taxes on $100,000  =  $24 yr
So which finance director is telling the truth?
I do know that the SFSD rearranged their capital outlay levees, but the disparity is strange. I also wonder if they plan to pay off the bonds a lot faster in RC?

Property tax reduction program ‘Questionable’

The more we look into the property tax reductions over the past ten years, the more questions we have. While we are still researching this, some things that stick out so far;

DOC: Historical – Tax Reduction Program.pdf

Tax Reduction Program – Informational Jan. 8.pdf

How was the mayor(s) (Munson & Huether) able to sign off on these, through the Planning Department without the review of the city council? Or even the County Commissions and School District? Were there any state laws violated?

One of the biggest recipients was involved in many LLC’s and ownership groups related to Legacy Development. Ironically one of the persons who would have known about the reductions, Daren Ketchum, now works for Legacy.

Many of the recipients are long time established, successful Sioux Falls businesses, like Raven & Gage brothers. Why would they need tax incentives?

Some of the recipients also received TIFs on top of the reduction, for example Washington Square.

Ironically Midco received a 2018 reduction of $129K. This is just a year after announcing a sponsorship of our Aquatic Center.

Did the TenHaken administration decide to blow the lid off of this to 1) wash there hands of the practice and 2) to see if the media will do some digging around? COS Erica Beck worked in the Planning office when some of these reductions were handed out.

Like I said, we are still researching the ‘many’ connections between the reduction recipients and the previous administration and will have more findings coming soon.

Why do property tax rates continue to rise in Sioux Falls?

After watching the Sioux Falls school board meeting last night about the possible Sanford donation of land for another school, it got me thinking about property tax rate increases.

Since I have purchased my home about 15 years ago my property taxes have over doubled. In that time I had one small equity loan and a re-finance. Most of the increases have come from rate increases. While I can understand a rate increase with a community that has slow building and housing growth, that hasn’t happened in Sioux Falls. In fact when you think about record building permits over the last five years and the hot seller’s market in housing you would think that rate increases would not be needed due to this massive growth.

There are several ways increases happen. The city can raise property tax rates each year, and they have every year for probably the past 20 years or longer. Minnehaha county also has had several opt-outs along with the school district and now with a new high school looming in 2019, get prepared for another BIG increase in our property taxes.

It also doesn’t help that the county has to fund the drastic increase in criminal justice services through our property taxes. The city really should be helping to pay for incarceration with the 2nd penny and the alcohol tax really should be doubled to help alleviate those costs. It would also help if our PD was properly staffed, trained and paid to help combat crime through prevention instead of whack a mole.

That is why I am confused about the math. How can we continue to add housing and commercial property and have several press conferences about this growth yet have to raise rates consistently? So which is it? Is the massive growth adding to the tax rolls? Damn right it is. So are we being over taxed on our property? Probably, especially on private housing.

Part of the problem is all the cheerleading about building permits is kind of a false pep rally. Many of the big projects in our community are public or non-profit projects. And the ones that are not are getting TIFs or other tax abatements. In other words, the big wheels in town are seeing some big tax cuts while the rest of us are ponying up for infrastructure through higher taxes for projects like Flopdation Park.

The system is clearly broken and the city, school district, county and state need to take a different approach to funding government instead of constantly increasing our property taxes. I had a few solutions above, but I also think we should suspend or end the TIF program. It hasn’t proven that it pays for itself through workforce development or providing affordable housing. TIFs are corporate welfare in Sioux Falls and little else. I would encourage the next mayor and council to seriously look at ending this program and initiating different programs for developers like deregulation to save them money.

Let’s face it, if you are working class in this city you are getting the shaft when it comes to taxes (and don’t think apartment dwellers are immune, the high rental rates are proof property tax rates are high). Sales taxes are also very regressive. Taxing food at a higher rate to supplement teacher was and is a bad idea.

It’s time to stop the incremental property tax rate increases and use common sense when funding essential government services.