Lake County Gives Tax Increment Financing to Sure Thing Across from Hospital

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:

Lake County TIF #4, south central Madison, SD
Lake County TIF District #4, south central Madison, SD

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.

28 Responses to Lake County Gives Tax Increment Financing to Sure Thing Across from Hospital

  1. Eve Fisher

    Ahem. There are friends of friends, if you know what I mean…

  2. bearcreekbat

    The Rapid City Council recently voted to do the same thing for BH Power and Light giving them a $6 million TIF to build in an unblighted area. BHP&L is an extraordinarily successful multi-state utility company that is building an office building near the western intersection of Catron Blvd and Highway 16. The new BHP&L building location is in an area with a formerly beautiful, pristine and undeveloped landscape for all to enjoy on the way to Mount Rushmore.

  3. Richard Schriever

    Hey, at least Madison and Lake County seem to have gotten to the first step in subdivision development properly – a concept plan submitted by the developer!!! City of Lennox seems to just skip all that legality/bureaucratic ordinance required stuff.

    City of Lennox developed an addition to the Central Business District with no concept plan, no preliminary plan and no engineers development plan. I mean, who needs a stinkin’ plan?? Having plans submitted and approved means you might have to actually try to stick to them!!

    Next up, new Sunshine store in NE corner of town. Again – no required subdivision plans submitted to City of Lennox by developer, but, of course, the city council is discussing extending utility services (sewer and water mains) to the property (which automatically is supposed to trigger the subdivision development process) – GRATIS! Guess who is employed by Sunshine Foods (besides the city engineer on this project I mean)?

  4. Richard, how do we get people to vote out such crony capitalists?

    Bear, I have to agree with Alderman Estes: a TIF seems entirely unnecessary to develop that choice property at Buffalo Crossing. Excellent access, lots of traffic, room for parking and much else—developer Hani Shafai needs no help to make that project happen. I notice that both he and the Madison developer used the word “allow”, as in, this TIF will “allow” the project to happen. What baloney! These TIFs are not necessary conditions.

    I notice, however, that our TIF laws (SDCL 11-9) do not require blight. See SDCL 11-9-8 for the two criteria:

    (1) Not less than twenty-five percent, by area, of the real property within the district is a blighted area or not less than fifty percent, by area, of the real property within the district will stimulate and develop the general economic welfare and prosperity of the state through the promotion and advancement of industrial, commercial, manufacturing, agricultural, or natural resources; and

    (2)The improvement of the area is likely to enhance significantly the value of substantially all of the other real property in the district.

    Even when we have blight, only a quarter of the TIF district has to be blighted. Otherwise, the developer simply needs to promise that at least half of the land will be used to expand “industrial, commercial, manufacturing, agricultural, or natural resources”. Hmm… we taking land out of agricultural use and replacing it with commercial use… is that a net gain in the eyes of this statute?

  5. allyson nagel

    More rental developments and fast food… sigh…. IF only Madison could get another GROCERY STORE… Now that I would be willing to agree with some TIF… Good grief.. only one grocery store in Lake County!!

  6. A grocery store! Imagine it: a full-service grocery store, within walking distance of Bethel’s assisted living! A grocery store would offer those residents more practical daily independence, the chance to walk through a safe neighborhood, without crossing any major streets, without having to drive at all, than any other kind of business I can think of. Plus the store would be right on the bypass, allowing trucks to deliver their goods without having to rumble through town and attracting pass-through highway traffic.

    But would even that project need a tax subsidy to get off the ground?

  7. Eve Fisher

    That project wouldn’t get a tax subside to get off the ground, Cory, and we all know it. We have been told, repeatedly, by the city commission, the county commission, the people behind the Encore Family Story, and various others that Madison doesn’t need another grocery store. Ahem. Back to my first comment.

  8. But Lake County needs to subsidize another fast food restaurant for Madison because…?

    Say, how is the thrift store doing?

  9. TIF’s for new residential developments should have never been allowed. How can you grow a community with new residents (which means additional cost for government to provide services) and not grow your property tax revenue at the same rate? Communities actually go backwards when they allow TIF’s for new residential developments. When government costs go up and revenue does not keep pace, services have to be cut. Usually that means public works projects.

    Aberdeen has been giving away TIF’s like tootsie rolls at the Gypsy Day parade. Meanwhile the city has changed the cycle in which they chip seal their streets by an additional 2 years. Aberdeen also has 3 city bridges that I’m told can not even support the weight of a fire truck. The city is now even talking of just closing one of these bridges because they cannot afford to replace all the bridges.

  10. Which Thift store Cory. They all get lost on Main between all the Dollar Stores. Oh… I am being to harsh. The thrift stores are great since no one in Madson can afford new. I dream of the Jack and Jill being back. Two grocery stores….those were the good ole days. By the way, do not even try to drive 34 to get through town. The construction has made it completely impossible. As if the businesses were not suffering enough, now you can not get to the newly remodeled DQ. Now that remodel is sweet. Seriously, check out the new improved DQ if you figure out how to get there.

  11. Craig, I could definitely use some DQ. Highway destruction be darned, Madison’s DQ has the best location in town.

  12. Scott, you make an interesting point about housing, population growth, and increased demand for services. TIFs depress the rate of tax revenue growth. TIFs could well prevent us from keeping up with the increasing demands placed on public resources by the very population and economic growth that TIFs are supposed to create. I wonder—has anyone crunched the numbers to figure out just how much money local governments have given up since TIFs gained such currency?

  13. Mr. H, you know how big a fan I am of the Madison community thrift store, because I am a community sort of fellow, but I always forget that you are friends with that Mr. Mork gentleman who is the iced cream king of east river. He is a bit of an arch-conservative based on things I have read, but if you could get him to sponsor coupons on this blog site (not sight) that we could print out with a friend with a printer and use for cheeseburgers and iced cream that would be really really neato. Mr. Mork could probably write it all off as a tax donation and you could use it for people who vote for you.

    Your Dairy Queen comment had me really wanting some cheeseburger and mustard sauce from a DQ who have really good burgers. There is one on Campbell street that has good food but is not quite as nice a place to sit in and eat.

  14. did joop or SDRC, Inc. buy $500k of TIF BONDS on NBP in 2012 before benda’s death, paying him P&I thru 2027?

  15. It much easier to get campaign donations from developers when you gift them tax breaks. Vote YES for ballot question #22 to revise campaign finance and lobbying laws.

  16. Charlie Johnson

    Since when has government giveaways been called economic development ? I thought the term was called welfare !

  17. allyson nagel

    I sure don’t see a lot of city revenue for all this so called progress… Tax giveaways and then we have Bethel housing with its church affiliation… which means… tax exempt! Plus, the bypass will need major repair and upgrades after the Hwy 34 detour takes its toll on it.

  18. Wayne Pauli

    Allyson, your comment struck a nerve. I am President of the Bethel Foundation. Why are you throwing Bethel under the bus? We did not ask for anything. We did not ask to even be in the image used in this post. What is your beef with us? The land was for sale for quite some time, anybody could have purchased it.

  19. Eve Fisher

    Wow, Wayne. Calm down. Everyone knows that Bethel is tax exempt. What’s wrong with saying that? Bethel says it on all their fund-raising literature…

  20. Daniel Buresh

    Bethel does a lot of good in the area and none of that would be accomplished without the Bethel Foundation. People give loads of money that goes to support people who otherwise would not be able to afford their services. By implementing a tax on them, you would do more harm than good by taking away the services they are able to provide for those who can’t pay for them. Pointing out such an exemption in this thread makes it appear as though the TIF districts provided for private development are the same as tax exempt statuses provided for non-profits who exist to help others. There are times where tax exemption should come into question, but in the case of Bethel, when trying to portray them as freeloaders or not footing their share, that is completely absurd and borderline insulting. They are not tax exempt in anyway because of their religious affiliation, but because of their involvement in the medical service industry. Bethel has no business being in this conversation what so ever. Whether you are a Repub or a Dem, organizations like Bethel are the exact reason why allowing tax exemptions is a good thing, not only for the organization, but for our community as well.

    If you can come up with a few million dollars, I would assure you that you could received a TIF to build a grocery store. To say it doesn’t happen because of the players in Madison is a complete lie. In fact, if you are going to make such an accusation, I suggest you lay out those connections so we know who isn’t working for us because I honestly think you are just perpetuating a myth by those who have nothing better to complain about. Grocery chains have looked at the area and due to economic forecasts, they have gone elsewhere. We are right at the population level that really can’t support two stores, but one store just doesn’t seem like enough. I always thought a customer funded co-op of some kind would be the best option. Until we can hit 10k people, you will be hard up to find a chain willing to put the dollars down to come into our area. We are located between 3 larger metropolitan areas and they know how easy it is for people to go there. They can look at the amount of outside revenue coming into Brookings, Sioux Falls, and Mitchell and they can tell when it’s a losing battle.

  21. Eve Fisher

    Wow. Another one goes ballistic. I NEVER said a word about a grocery store; I NEVER said a word about freeloaders. I didn’t put Bethel on this map, the Madison Daily Leader did, in its article back last week. I said only one thing, the simple truth. Bethel is tax exempt. So, Mr. Pauli and Mr. Buresh, if you want to attack somebody, go find the person who put this map in the paper and start there.

  22. Eve Fisher

    Sorry, I did say something about a grocery store, earlier – but what I said, I was told by a former city commissioner who told me that there would never be another grocery store in Madison. I’m sorry if that was a deep dark secret. And I never blamed Bethel for that at all.

  23. Daniel Buresh

    No one is talking to you about Bethel. No one is attacking you, in fact, no one was even addressing you as far as Bethel goes. You injected yourself into that one. When I want to address you, I will make that apparent.

    As for the grocery store, what commissioner?…and what was his reasoning?

  24. Wayne Pauli

    Eve, in the same derogatory sentence with tax giveaways Ms. Nagel lumped Bethel and its church affiliations in the subject. Bethel does not deserve that. I thought the post was about TIF’s? And besides, Bethel does employ quite a few area folks that does help city revenue which is also contrary to the spirit of the post.

  25. Charlie Richardson

    Interestingly, the county also approved TIF funds for two other recently completed rental properties. The multi-level units on South Union Avenue and the apartments on NE 3rd Street across from Baughman Park were the beneficiaries of TIF funding.
    If studies indicate the demand for rental properties is as high as they say, this begs the question, why delay placing them on the tax rolls immediately?
    As Cory pointed out, this “sure thing” development across from the new hospital doesn’t need to be funded at taxpayer expense.
    There is no need to fund nearly twenty percent of this development’s projected cost with a delayed tax incentive.

  26. Richard Schriever

    I’m not sure if the understanding of TIFs here is clear. As I understand them – a TIF does NOT give the property owner a tax break. Essentially, what it does is direct all property taxes to the funding of infrastructure improvements within the TIF district (sewer, water, curb and gutter, streets, lighting) until same are fully paid. Once those are paid for in full, the tax goes into general funds. Essentially, it is a way to accelerate the payment for costs of basic development improvements – to 5 or 6 years. Otherwise, the property owner/developer/lot purchaser(s) would be paying those costs over a 30 year period, typically as an additional part of their taxes anyhow.

  27. Charlie Richardson

    Thank you for the clarification, Richard.

  28. Richard, here’s why I say tax break. If I were the developer building the project mapped above, I’d spend X dollars laying pipes and roads along with the cost of my buildings. I’d then pay Y dollars in property taxes over the first few years. With a TIF district, I get to pay X out of Y. My profit rises from COST – Y – X to COST – Y. Meanwhile, the county, city, and school district see their tax revenues drop from BASE + Y to BASE + Y – X. More money goes to my pocket than goes to public goods. That’s a tax break as surely as the SB 159 stealth vouchers, isn’t it?

    Thinking about what Charlie said about previous TIFs for residential development: if the free market can bring workers to Madison, why can’t the free market also bring housing for those workers? Why isn’t the market creating its own equilibrium, in which the demand for labor translates into wages that would drive the construction of affordable housing?