TIFs

One 2 . . . Three and Four and the disappearing TIF act

Photo; Sioux Falls Business Journal

Last night during the discussion on selling the parking lot downtown, something interesting came up. Councilors were concerned that someone wanted to buy the parking lot just to convert into a private parking lot and wanted to make sure there was enough parking if housing was built there and compared it to the One 2 building next to Ace Hardware downtown (the city sold the lot for a song). In the discussion it was revealed that instead of retail on the main floor of the building it is actually now 2 levels of parking (basement, 1st floor) and in making this decision they decided to add 2 floors of apartments to the building. Now, no big deal, development plans change, but it never got re-approved by the council. Which tells me an un-elected city employee made the decision and was likely backed up by the mayor’s office.

TIFs MAY BE A THING OF THE PAST IF THE SD STATE LEGISLATURE HAS THEIR WAY

During the working session yesterday the council discussed the legislative proposals for the 2026 session and their desire to change TIF applications;

• 50% of property needs to be blighted

• TIF must also get County approval (I would also suggest school board approval since they are the most impacted – remember COSTCO refused a TIF because of school funding)

• No grants can be approved with TIF

• Any TIF over $10 million must be approved by voters in a special election

I think these are all a good start, but I would suggest one quick fix; eliminate all TIFs except for community infrastructure like water and sewer services or fire stations.

TIFs have almost NO ROI unless used to fix a community problem like blight and infrastructure needs.

At the end of the discussion Rich Merkouris asked the city attorney ‘How many TIFs in Sioux Falls were granted for just blighted areas?’ Of course, Fiddle gave his normal answer, ‘I will get back to you.’ I might dig around on it this week and see for myself. If I had to guess we have probably only put out 20% of TIFs for blighted areas.

Finally, someone in the local media is digging around on TIFs

It took the property tax discussion to get this out in the open, TIFS ARE NOT GOOD, ESPECIALLY IF USED ONLY FOR ECONOMIC DEVELOPMENT;

“That told me they were not providing the oversight on these TIFs, that they were just rubber stamping them,” Sibson said.

Well, Sibby, that is what communities across the state do. They are sold a shiny ball and they approve it.

“If they’re not done correctly, they end up being simply subsidies for certain private entities. That’s my overall concern,” Sibson said.

And that is ALL they are these days. Developer Welfare. Parking ramps and condos? How does this benefit the general public? I think if reverted back to Industrial and Affordable Housing which combined only make up 8% of TIFs across the country, you would see more value in them. I think that is what the State Legislature plans to do, or at least make an attempt at changing the law. Good Luck! Sioux Falls and Rapid City and all other larger communities in SD will fight you tooth and nail on this one.

UPDATE: Anonymous Legislator drops the bomb on property taxes and developer greed

UPDATE: I was told by a former legislator that used to serve with this person, that the person who likely wrote this is Gary Moore.

Not sure ‘who’ this legislator is, but they apparently were in the legislature for at least 14 years, they left the comment on a thread on that ‘other’ blog. Notice the trashing of TIFs, they are absolutely right, they are driving up our taxes;

A few comments on property tax and what needs to be done to accommodate meaningful and responsible legislation to address the issue.

First of all the problem was created at the local level in the name of economic development by local officials and developers. The locals wanted tools in their “economic development tool box” and the legislature always pandered to their wants. In addition developers no longer want investors to in their vocabulary, They want that investment to come from the taxpayer.

This is a complex issue and cannot be resolved in 1 legislative session, but it must be done. I saw this issue become out of control during my 14 years on the tax committee when I was in the legislature, and it has only become worse over the past 10 years.

I believe that to address this issue some concessions must be made now, they include but are not limited to:
1. Put a moratorium on the creation and limit the use of TIFD’s, by local governing bodies beginning immediately. These things have proliferated and one is never paid off before several more are initiated. 12 to 20 active TIFD’s in any local government is profound abuse.
2. Put a moratorium on the creation and/or use of any further discretionary tax formulas. These can also be used in a TIFD and that provision needs to explicitly deny that.
3. Put a moratorium on the creation of any additional subdivision taxing districts within local government.
4. Prohibit the creation of any new political/public subdivisions by the legislature.
5. Restrict/prohibit any new “opt outs” and freeze those already in place from renewing or or expanding those opt outs.
6. Freeze levies for a period for those subdivisions already in existence, except if they should choose to lower the existing levy.
7. Freeze all specials and road tax on real estate at current levels, unless it is a reduction.
8. Reduce bonding authority levels of all local governing bodies.
9. Further restrict growth in local governing bodies budgets.
10. Restrict the BBB tax, BID tax, and city sales tax to current levels, and prohibit the use the use of these taxes to only the general fund with an obligation to reduce property tax. It has become increasingly evident that these dollars are being used as a cash payout to developers with little or no regard for the taxpayer. Restrict BID boards and all other political subdivisions from giving tax revenue to any other body with taxing authority.
11. Require local governing bodies who have acquired real estate to get at minimum the price they paid for the property, rather than just a fraction of what they paid for it.
12. Prohibit any non-profit with taxing authority from asking for any local governing body for contributions outside of their tax base.
This certainly is not a complete list, but it is a beginning. I firmly believe many of these things need to be done for accountability at the local level. I blame the legislature for many of the problems associated to property tax increases. Most off the issues prevalent today are caused by the term “economic development”, in an effort to lower taxes. It doesn’t work, never has worked, and will never work. Countless studies have indicated, time and again, that these issues cause an increase in taxation rather than a reduction.

Furthermore these thing are being abused by the affluent, developers, “non profits”, and the unknowing and uninformed (local elected officials), all at the expense of the local taxpayers,
and that is a fact. Local property taxpayers are being lead to slaughter in the name of corporate welfare, and it needs to stop. If a developer thinks he/she has a valid idea he/they should have no problem finding investors to support the idea without the taxpayers investment which, is a liability on them and never produces a dividend.

I know this will be a hard sell as developers and the unknowing locals will fight it with a vengeance. It has become apparent locally that elected officials don’t run the show, they are kept in the dark and fed sh_t like a mushroom.

Ask some hard questions of local officials about current activities in your area. They refuse to answer, skirt the issue, or lie. I have investigated and found the answers and the truth. Documentation is damning.

To provide adequate property tax relief requires doing a responsible study as to the real problems associated with it. To get a responsible study all of the issue listed previously must be considered, and that cannot be done responsibly during a short legislative session.

Initiating some or all of the previous stated issues can go a long way to improve a comprehensive study and reduce inflated values and property taxes. I understand the legislature did not cause the problem entirely, but they did enhance it and became enablers for the local governing bodies, who do not responsibly use the tools given to them. I know they asked for it, but like a child who doesn’t understand, sometimes you must take away their gift until they can totally understand the ramifications of improper use.

Municipalities are allowed a sales tax. The purpose behind that was to supplement their general fund budget. Not to use as grants to developers for millions of dollars.

There is a lot going on, misuse of those dollars needs to be cornered, if it is not it will only become worse for the taxpayer.

No new taxes would be necessary if local governments were made to be responsible.

Stop the Opt Out

Local group is circulating this petition, I signed it today;

The Sioux Falls School Board just voted to approve ANOTHER opt out – this time to the tune of $2.1M for 10 years. The opt-out will allow the school district to raise additional funds beyond what they get in their existing tax levy and state aid, by collecting taxes from property owners in the district. SD Law allows citizens to bring this to a vote of the people (rather than a board of five unilaterally making the decision for all of Sioux Falls residents.) Deadline is July 17th. We will be circulating petitions to bring the opt-out to a public vote. This group will be for sharing information and locations to sign a petition (if you are a registered voter in the Sioux Falls School District) or if you would like to circulate a petition (have to be a registered voter in the State of South Dakota) you can find out more information for events/opportunities to volunteer at.

You know my feelings on this, stop handing out TIFs like candy and our opt outs would go away.

Instead of Op-outs maybe we need to make TIFS harder to get

Ever since the State Morons in Pierre changed the rules for TIFs (can be for economic development now) They have exploded. I suggest that we limit them to severely damaged lands and low-income housing. The school district just did ANOTHER opt-out, and lied to the public about our taxes increasing. A foot soldier left this comment about the opt-out on Turdbook;

As regular taxpayers are asked to fish into their pockets for $2.1 million of additional money, each year for the next 10 years, be reminded that just for the TIF package given to the developers of The Steel District, the Sioux Falls School District will forego (aka not collect) $1.05 million in real estate tax revenue from those parcels in 2026. For the TIF package given to the developer of Cherapa II, the Sioux Falls School District will forego nearly $1.2 million of real estate tax revenue from those parcels in 2026.

In other words if we started eliminating TIFs and close out the current ones our taxes would actually go down. Did you know that 80% of property taxes paid in the school district and city are from single-family owner occupied homes. So yes, we are paying for these TIFs. And for what? A parking ramp? Public art? Tequila Bar? Seriously! If we eliminated ALL the TIFs we have on the books now the school district would take in MILLIONS in revenue from the big commercial developments. Why are homeowners asked to pay the majority of taxes in Sioux Falls? It should be a 50/50 split between homeowners and commercial property. TIFs never have much of a ROI, studies for decades across the US have shown they don’t stimulate growth and produce very few jobs except when being built. TIFs are a boondoggle and the average Joe is taking it in the shorts. In memoriam of a certain developer who passed recently, the council should make steps to eliminate TIFs from our city, once and for all.