A tax increment finance (TIF) district is supposed to be a neighborhood that the city council declares economically depressed and in need of subsidized property development. Rapid City government has decided that a TIF district can be one vacant lot:
At the June 5 Rapid City Common Council meeting, the concept of providing low-cost housing took center stage again.
That evening, council members approved the creation of a tax increment financing district for a five-unit townhouse development on a vacant lot at the corner of Dilger Avenue and Monroe Street, just north of Rushmore Plaza Civic Center [Samuel Blackstone, “Small TIF, Large Repercussions,” Rapid City Journal, 2017.06.25].
Setting aside one lot for one developer to lower project costs seems to be a recipe for crony favors. The developer in this case is NeighborWorks Dakota Home Resources, a non-profit that builds affordable housing, so the beneficiary isn’t necessarily a typical capitalist raider, but this TIF still looks very much like the kind of private or special law—”granting to an individual, association or corporation any special or exclusive privilege, immunity or franchise whatever—that our state constitution forbids the Legislature to enact. The language of SDCL Chapter 11-9, which authorizes TIF districts, seems to envision areas with multiple lots so that the subsidy does not accrue to any one developer.
One of the progenitors of TIF districts says this new single-lot TIF district is part of a trend toward overuse of TIFs:
Former South Dakota state senator Don Frankenfeld can speak to the original intent of South Dakota TIF laws, since he helped write them.
“It hasn’t turned out the way I had hoped,” Frankenfeld said in a Journal interview. “I see a TIF as a potentially useful tool in limited situations … (but) it has morphed into a welfare program for developers that taps into the public treasury and is often regarded by city government as a free lunch” [Blackstone, 2017.06.25].
I’ll repeat a point Nick and I made over the weekend: we wouldn’t need tax subsidies to build affordable housing if employers paid wages that allowed workers to afford housing.
The wages make for a twofer Cory. You raise the wages to $15.00 an hour and just about eliminate subsidized housing as well as most of Medicaid spending. That would not change things for our elderly on Medicaid nor our disabled.
So then, the TIF would be a good thing in that it could bring companies into the system here by paying a living wage their new employees. Also, it would mean more jobs as the ones that work in these TIF places are folks that already are working one or more jobs. Excellent use of taxpayer money.
exactly. Livable wage. Those that aren’t making a livable wage, we are also subsidizing with food stamps and Medicaid. Thus, it is corporate welfare for Walmart, McD’s, Burger King, etc ….cutting corporate “welfare” would totally reduce dependence on these subsidies. Yeah, the king giants of Walmart might not get to buy that 20th home, but ….eh?
When I lived in Spearfish, the “bus service” there (Prairie Hills Transit) did not pay a living wage nor did full time employees get health coverage. Several bus drivers were working two jobs (including Prairie Hills Transit) just to help pay the bills and were STILL qualifying for food stamps. All the while, tax funded money went to pay for a multi million dollar bus depot and high wages for those at the top of the food chain at Prairie Hills Transit. Corporate welfare. This is madness.
Forgot to mention, when Spearfish did the TIF district at McGuigan Ranch (it was not blighted nor was it restricting development), many realtors bought up the “TIF homes” in this subdivision and used them as rentals…..NOT what TIF’s were meant for!! It was/is a bonafide cash cow for developers and realtors. On our dime!!
Madness!!!
It seems to me that what’s happening with TIF’s can be compared to what’s also been happening with eminent domain in many areas. That is, both of them morphed into a much broader, unintended scope, with unintended consequences; namely, becoming a cash cow for fat cat developers who can more than afford their projects on their own, but demand that the public pay for a large portion of it instead.
The original intent of eminent domain was that it be rarely used and, even then, only by governments and municipalities for strictly PUBLIC benefit and use, primarily things like access roads, utilities, etc. In many states now, including my own former state of Ohio, it is being used to declare perfectly nice neighborhoods “blighted” so as to be able to tear them down for a private development project. And TIF’s now seem to be suffering the same fate. And there seems to be nothing being done to stop it, on either account.
Although, I will say that, in a particular city in Ohio that was near the one I lived in, the residents of the affected neighborhood managed to get enough publicity and outrage to generate enough signatures to put the eminent domain declaration and private project to a citywide vote. And the city’s residents voted in down overwhelmingly, to the chagrin of the clueless, arrogant, tone-deaf mayor who then, seeing the writing on the wall, decided not to run for re-election.
It’s not just Rapid City. TIF was a good idea, but it has been corrupted all over the country.
I wouldn’t worry so much about a goddam vacant lot, though. That’s pretty small potatoes, and probably could be stretched legally to actual fit the definition of “blight,” though I tend to think of it more as the kind of housing we lived in when we were poor students. Vacant lots or dilapidated housing is one thing, but in Madison, WI, they deem perfectly fine, serviceable buildings as “blight.” The whole thing is a joke. There is a mall here that is nearly empty because of bad management by the owners. They purposely drive out businesses. They are trying to blight the property so they can get taxpayer bailouts. Crooked.
Careful, Jerry: the new housing might draw new employers, but those new employers won’t have to pay higher wages because the government subsidy for housing has lowered the demand for higher wages. Arguably, TIFs are another subsidy to alleviate the need for employers to pay a fully livable wage.
Laurisa mentions projects that developers could afford on their own but which they boost their profits on by securing TIF. I wonder how often that happens, that tax dollars are invested in boosting a project that would have happened on its own.
But I want to think about blight. Blight—that vacant lot in Rapid City, deteriorating buildings elsewhere—signals that the free market has decided that place isn’t worth developing. Should we question that market decision by intervening with a TIF? And do TIFs drive development that works lasting changes on local market forces? I wonder—do we have some awesome study of all TIF efforts in South Dakota to determine what percentage have produced lasting economic improvements to banish blight from their districts?
Yes, it would seem that to use taxpayer money to bring business into the community, they should also give TIF’s on wages for those workers. The workers pay would help to bring about tax dollars that could benefit all. A stimulus package for both the developer and the layperson who will work the business at a salary that makes a living while they get proficient.