TIFs

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.