TIFs

Does the City of Sioux Falls vet credit when handing out goodies and TIFs?

l3wis December 9, 2022 9Comments

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.

Sioux Falls City Councilor Neitzert lone vote against SW Brandon housing development

l3wis October 18, 2022 6Comments

Greg decided to vote against the project because he questions the state legality of the TIF,

Sioux Falls attorney Brendan Reilly, retained by the city as independent counsel to advise it on TIF legalities, told the Council that its members have “wide discretion” about what qualifies for a TIF. And though state law prohibits TIF funds from directly paying for the construction of housing structures, the tax incentive program can be used for infrastructure directly related to housing.

Councilor Greg Neitzert, the lone dissenting vote, said he struggled to square state law that prohibits TIFs from being used to subsidize housing with the request coming from the mayor’s office.

I think the bigger question is NOT legality, I think it is legal, but TIF definitions are so wide that this would have given the council the authority to deny it. I just don’t see this benefitting lower income people in housing. Will it help people? Sure. But it does nothing to build density and bring the core back up to snuff and address our housing crisis. We can do this thru community development loans and federal grants and don’t have to issue ONE SINGLE TIF.

While I support Greg’s NO vote, his reasoning misses the mark.