Madison is maxed out on tax increment finance districts, so it had to get the county to back the latest TIF district project, a plan to turn about 15 acres of farm land on the south edge of Madison into new housing and retail space:
This $875,000 TID allows Phase 3 Development, LLC to build a new development in south Madison. The multi-family housing and retail space will be located between Bethel Home and Union Avenue, just north of Madison Regional Health Systems.
…Phase 3’s development will include two 14-unit, multi-family townhome apartment units, two commercial strip malls and a fast-food restaurant on the 15-acre site. These improvements are projected to cost almost $5 million, said the project plan [Jane Utecht, “County Approves TID #4 for South Madison Development,” Madison Daily Leader, 2016.04.21].
A project of that scale must have market demand. It’s right across from the new hospital, which should synergize with the commercial space and provide folks visiting patients with an easy meal stop and others coming for check-ups a chance to hop across the 10th Street/Highway 34 bypass and run a couple errands at the strip mall shops (and, Madison, you will be making Union and 10th a controlled intersection, right, with lights and crosswalk buttons?). Bethel Lutheran Home right next door adds customers. The developers say Madison’s housing study shows demand for more rental units.
So with all this demand, why does government have to intervene in the free market? Can we build nothing in South Dakota without a tax break any more?
Tax increment financing is supposed to be a lever we use to make economic development happen where it otherwise would not, in hopeless, blighted areas. This 15 acres isn’t blighted. It’s bare land, sitting right next to a primary road, two health care facilities, and lots of hungry patients, visitors, and workers. It is opportunity.
Tax increment financing may be the first place we need to look to reform our tax system and better capture the wealth we have to support schools, roads, and other public goods. Taxpayers have already floated the loan and bought the old building that made the new hospital and commercial hub possible. Instead of leaving hundreds of thousands of dollars of new revenue on the table to pad developers’ profits, the county and school district should require developers to pay full taxes on the full value of their projects the year after they are built, just as we homeowners do. Then we might see much less pressure to cut programs and raise taxes.