Entries Tagged 'TIFs' ↓

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.

UPDATE: Sioux Steel Development wants to get a TIF, as we suspected

UPDATE: You will see in the Planning Commission Working Session on December 3, they are already going to be talking about the TIF for the Sioux Steel Development. They will try to ramrod this TIF through as fast as they can before anyone notices what is going on.

I will stick with my main four arguments against this TIF;

• Free Enterprise and Capitalism. I think this development will do just fine with private investment and doesn’t need any tax rebates. It is just corporate welfare.

• The development is already going to receive around $10 million in tax payer subsidies from the River Greenway upgrades.

• Sioux Steel is moving all of their operations out of Sioux Falls to Lennox and replacing those good manufacturing jobs with low paying hospitality jobs.

• TIFs have yet to be proven they improve the overall economy of Sioux Falls. Oh, sure, they help the bottom line of the developer, but NO comprehensive study has ever been done in Sioux Falls showing TIFs pay for themselves in economic impact or workforce development. All they really do is raise taxes on the rest of us.

It will be interesting to hear the arguments as to why they need this TIF. It also will be interesting to hear how they are building a parking ramp twice the size of the bunker ramp for the same price.

The rumors were true, the Sioux Steel development is asking for $21.5 million in a TIF for their project they are coordinating with Lloyd Companies. They say it will be used to offset the costs of an 8 story parking ramp with over 900 stalls. Interesting they can build a parking ramp twice the size of our bunker ramp for the same price.

This is the area we should have put the bunker ramp to begin with. So now they want a tax rebate to build a parking ramp when we will have an empty one sitting downtown.

And isn’t the timing of this project also interesting? Suddenly the city didn’t want to work with Lamont so they breached the contract and now ‘another’ hotel is being announced DTSF that wants a tax rebate to build a parking ramp. And isn’t it interesting that the Mayor’s COS used to work for the developer who is working on the project and is considered an expert in writing TIFs?

As for the TIF, you know my feelings on them. They have yet to prove that the TIFs that already exist in Sioux Falls or ones we may grant have ever helped our economy. They have certainly done one thing, raised property taxes on the rest of us. And every time I have asked to show evidence all I hear is crickets. Even if I was for TIFs, I would certainly question why this development needs one? We are already going to invest $10 million in the river greenway along this development (essentially paying for their riverside landscaping and curb appeal, walkways and bike trail upgrades).

But the biggest reason we should oppose the TIF is that Sioux Steel will probably be moving all of their Sioux Falls operations to Lennox and NOT relocating in Sioux Falls. Why would we reward them with a TIF as they are taking their manufacturing business elsewhere and replacing it with low paying hospitality jobs?

Of course, most of the council will support this, and probably will give us NO evidence that TIFs work. That’s because the evidence doesn’t exist.

Sioux Falls City Councilors at Dem Forum • 4/5/2019

Janet Brekke, Theresa Stehly and Pat Starr bring their Sioux Falls SD citizen first messages to a joint Friday Democratic Forum lunch crowd on April 5, 2019.

The past TWO Parks Board meetings have been videotaped, you can’t watch them HERE under the RECENT tab. There has never been a formal press release or announcement of this to the public or city council. I found out from a personal email from Jason Reisdorfer.

Sioux Falls needs Independent TIF study BEFORE moving forward with anymore massive TIFs

With the latest news that another developer is trying to roll the city with a massive TIF, now is the time for a comprehensive TIF study. But this study can’t come from the city or from private developers. The study needs to be conducted by one of our Public Universities as a student research project. Anything the city or a private developer will produce will be fudged. Remember the siding report that mysteriously disappeared? Or the 2nd one that was edited by public works?

The study needs to determine if there has been an actual economic impact in job growth, personal wealth, ect. Over the past decade (especially since the 2008 recession) while development growth has been record breaking, we also have to realize that crime has increased, taxes and fees have gone up at record rates, housing has gotten more expensive, wages have remained stagnant and food banks and kitchens are expanding more and more.

If TIFs have helped anybody, it has certainly been the developers bottom line, because like Reaganomics it certainly hasn’t trickled down to shrinking middle class.

We need to see a study and it needs to be independent.

 

UPDATE: Is Sioux Steel Development looking for a ‘Massive’ Record Breaking TIF?

UPDATE: Big Thanks to Snevelicious for following up on this story!

So this is taking place next Thursday, April 11 (City Council Meeting Calendar)

4 PM Architecture Ideas and Presentations

Held at the receiving building of Sioux Steel Company, 196 1/2 E. 6th St.

Please park on the west side of the Sioux Steel Building or in The Market

5 PM Heavy appetizers and drinks at The Market, 196 E. 6th St

The Sioux Steel Development folks have already mentioned they want to build a 900 stall parking ramp (or around that size) they have also mentioned using TIF. What they haven’t said is how much. I believe the largest TIF ever given out in Sioux Falls was for the Sanford Sports Complex (I can’t remember the actual dollar amount, but I think it was $9 million and I believe 20 years). The rumor going around is that the Sioux Steel will be asking for a TIF in the amount to cover the construction costs of the parking ramp a number that could range between $20-30 Million dollars. The largest TIF ever given out in the history of the city. It also seems the event next week is away to smooze the city council into this.

Some would look at this as an ‘opportunity’ for the city to get out of paying for a parking ramp like we did Downtown already, but as I look at it, we shouldn’t be contributing anything. TIFs are the largest form of corporate welfare. We should be focusing tax incentives on rebuilding our neighborhoods.

Oh, but it gets even better. Another developer is rumored to be offering the city to buy some of the RR redevelopment land. He said he doesn’t want any TIFs or tax reductions, but he is only willing to pay HALF of the appraised value. They always have to have something. This developer has already raked the city over the coals for other DT developments along the river greenway.

I think it is ironic that all these FREE market, ant-socialist Republican developers in town are the biggest socialists of them all. Maybe we should rename the area ‘Karl Marx Greenway’.

When will we see a TIF Economic Impact Study?

It should be no surprise that in Jodi’s weekly column she is (gently) ringing the benefits of TIFs;

The projects that can be created here also likely won’t happen without some cooperation between the public and private sectors – whether it’s in the form of land sales, tax increment financing or use of sales tax revenue to enhance the riverfront. Maybe all of the above. And I believe as a community we need to be open to those partnerships because these are opportunities. Not guarantees.

As we know, Jodi makes her living with content marketing and advertising. Her clients would wonder what was going on if she wasn’t encouraging their ideas. She gets a pass on this one (in an otherwise great article).

Many people wonder why I am so against TIFs or other tax incentives for developers. Mostly because of the research I read on the topic. I have read studies from the East Coast, the South and the Midwest (Kansas and Iowa). Most come back with the same results, TIFs don’t pay for themselves in economic impact (jobs, etc.) Most of the studies have shown that TIFs usually have either a very small return or NO return at all.

It is important to know that in order for TIFs to be considered good for the local economy it has to have an impact on the regular Joe. When we give tax rebates and incentives to the ‘Big Guys’ those ‘unpaid’ taxes get spread around to the rest of us. In an essence we are propping up these developments in hopes of a payoff that may never come. It would be like the bank forcing your neighbor to pay your mortgage if you defaulted.

What we have seen in Sioux Falls is quite the opposite. Our property tax (rates) have continued to climb due to growth (crime/drugs, public education, infrastructure). This isn’t some study I have done, it’s just reality.

I have often chided the powers of be to provide a comprehensive TIF study actually showing us the benefits of TIFs in the Sioux Falls area. Some have even suggested to me that some of those studies have been done privately but haven’t been shared with the public for obvious reasons, dismal results.

Just because you ‘SAY’ something works, isn’t enough, you have to back it up with real data. I think the THRIVE report last year was the closest glimpse we have had that has shown our massive growth in Sioux Falls is having an opposite affect on the populous, higher taxes and the plague of low wages in South Dakota.

TIFs haven’t relieved us of our ills, one might argue that they have actually made things worse (I’m not at that point yet).

I have often said we need to revamp tax incentives in Sioux Falls by having a strategic plan to clean up our core neighborhoods from the streets up. This would have an immediate and direct impact on the people living and working in Sioux Falls and it would make our city a better place to live, which improves quality of life and helps to attract a solid workforce.

Until someone can prove me otherwise with actual data, TIFs will always be just corporate welfare to me, and little else.

Further proof TIFs only benefit wealthy developers and nobody else

It’s funny, when you start digging around on the value of TIF’s the jury seems to agree, they have little economic impact. While I have found dozens of studies to prove this, the State of SD and the City of SF have yet to provide a study proving they work. We have been using them well over a decade. Shouldn’t we have data by now that they are effective? I can tell you why we don’t, because they know what the result of that study will be as this story points out;

“Tax increment financing is not a silver bullet solution to development problems. There is no guarantee that the initial public investment will spur sufficient private investment, over time, that creates enough increment to pay back the bonds. Moreover, even if the investment succeeds on paper, it may do so by “capturing” growth that would have occurred even without the investment. Successful TIF districts can place an additional strain on existing public resources like schools and parks, whose funding is frozen at base valuation levels while growth in the district increases demand for their services.”

First off, as I have pointed out several times, we don’t have a ‘development’ problem in Sioux Falls. With over 6 years of record building permits, not enough workers to build these developments, and our out of control property tax and rate increases, the only ‘development’ problem we are having is TOO much growth, TOO fast.

There is also little evidence that TIF regularly provides the job or private sector investment that its supporters promise. Chicago is one of the largest users of TIF for economic development and its program has been one of the most widely studied. Research on Chicago’s TIF program found that “Overall, TIF failed to produce the promise of jobs, business development or real estate activity at the neighborhood level beyond what would have occurred without TIF.”

We saw this with the stupid initiative Mickelson cooked up that thankfully failed to increase tobacco taxes to fund trade education. If TIFs are supposed to help create jobs, why aren’t the developers who are receiving these TIFs helping to pay for the education and a living wage? You would think with the HUGE tax rebate they would be using that money to build a better educated workforce, instead they are only short-changing public education by sticking the money straight into their pockets.

If TIF is going to be used it should be used on things like public infrastructure – roads, sewer/water lines, sidewalks – rather than specific private businesses. This makes it harder to get distracted by non-pecuniary factors and does a better – though not perfect – job of directly helping development in general rather than a specific company or private developer. But taxpayers should be aware of the dangers of TIF and politicians and developers should not tout it as a panacea for jump-starting an area’s economy.

And with the Circus performers we have on our city council now, a TIFiliscious Revolution in Sioux Falls scares me even more. End the developer welfare programs. Eliminate TIFs, not only in Sioux Falls but the entire state.

Further proof TIFs produce NO economic growth

Once again, we are probably going to break building permit records;

With one month left in the year, the valuation of building permits in Sioux Falls is $4 million shy of the 2017 record.

Permits through November totaled just less than $735 million. At the same time in 2017, it was $663 million. That year ended with a total of $739 million. In 2016, the total was $702 million, which also was a record.

As I have pointed out, further proof that the development community doesn’t need tax incentives like TIFs, they are flourishing on their own. Some would even argue our fast growth may hurt us in the long run.

So another TIF study, this time in Missouri (St. Louis and Kansas City) shows there is very little economic impact from TIFs;

Overall, the analysis conducted in this study finds no support for the claim that TIF generated tangible economic development benefits in either Kansas City or Saint Louis. In other words, we do not find evidence that the use of TIF generated economic development opportunities that would not have arisen in the absence of TIF.

This article I think says it best;

Until cities and states adopt meaningful reforms, we can expect developers to continue asking for taxpayer subsidies whether the need is real or imagined. And as long as politicians are willing to oblige the developers, taxpayers will be all the poorer.

I couldn’t agree more.

More reasons why we don’t need TIFs

There was a couple of stories today that show when developers in the Sioux Falls area want something, they suddenly have the money to pony up.

First the 85th exchange;

The project got through the IJR at the speed it did because the area landowners upfronted the money to pay privately for the report to be compiled.

They are committed to investing $4 million to get the project through federal approvals and initial design.

“You have a consolidated group of motivated businesspeople who own a massive piece of ground that’s going to open for commercial development,” said Jake Quasney, vice president of real estate and investments at Lloyd Cos.

Isn’t it funny, when there are millions to be made, the developers have all kinds of upfront cash to get what they want done and pushed through.

Just look at Journey’s $1 million land ‘Donation’ to the SFSD;

The district’s school board made the decision Wednesday for about $4.3 million and accept a $1 million donation from the company, bringing the total cost closer to $3.3 million.

Was this a ‘donation’ or just incentive to secure building a $90 million dollar High School (and possibly other facilities?).

With record building permits again this year, and all this CAPITAL the developers have to help secure future projects, one has to wonder if TIFs are even needed anymore in Sioux Falls?

Short answer; NO.

The ‘Tifilicious’ Media Tour continues

You mean when manufacturing dumps on land for over 100 years there will have to be soil cleanup? Who knew!?

And after breaking ground, Quasney said it quickly became clear why the site qualified for some assistance.

“We are probably three months behind from where we’d really like to be,” Quasney said. “Most of that was associated with site remediation specific to petroleum on the site.”

We have known for well over 15 years this area would need major cleanup. I have said all along instead of giving TIFs the city could have budgeted over the past 15 years to cleanup the site for developers and sell it as a ‘clean site’. While I think there would have been some costs for SF taxpayers, I think the city could have applied for EPA Federal grants and even state funds to clean up the site. I think in the long run we could have sold the site as a clean site ready for development and would not have had to give millions in TIF tax rebates. TIFs are a scam, and the city continues to throw theses stories out to the media to make it look like they are needed. They are NOT, there are other options.