SIOUX FALLS, S.D. (KELO) — People plan for weddings and people will prepare to entertain guests.
The city of Sioux Falls is preparing for additional industrial growth with the approval of its latest Tax Increment Finance District, said Jeff Eckhoff, director of planning and development services in Sioux Falls.
“The intent of the site is to handle really big projects that might be 100 acres at a time,” Eckhoff said.
While there is interest from industry in Sioux Falls, Bob Mundt, president and chief executive officer of the Sioux Falls Development Foundation said the TIF was not established for any specific industry. Instead, the TIF is to prepare for any potential industry that may want a Sioux Falls location, he said.
KELOLAND News reported on Aug. 4 and Aug. 31 about Amazon’s plans to build a distribution center in Foundation Park. No city officials or officials from the Sioux Falls Economic Foundation have confirmed the Amazon project.
The north portion of the park, where the TIF district was created has no infrastructure. The south portion does.
The new district is TIF District 23. The 539.25 acre TIF was approved by the Sioux Falls City Council at the Monday, Sept. 15, meeting. The TIF is for development of Foundation Park North. The area is north of Interstate 90 and west of Interstate 29.
The other 12 TIF districts in the city are established with a private developer.
This TIF District wasn’t established with a private developer but with the South Falls Development Foundation. The foundation is a non-profit entity that works on economic development in the city.
The foundation will install roads, water, and sewer in the TIF District so that the property is ready if an industry wants to move in.
Under a TIF District, the developer continues to pay the existing base valuation property taxes. New taxes beyond the base created by improvements are deferred increments. The new taxes are paid but placed in a fund. The developer is reimbursed for the costs of installing infrastructure from that fund.
The foundation will use the reimbursement to pay the debt on bonds it will take out to pay for the installation of water, sewer, and roads, Mundt said. Although the foundation has successfully invested in other development, Mundt said it does not have the cash available to pay for infrastructure development. The TIF will allow it to borrow money through a bond and pay it back through the TIF increment taxes, he said.
The council approved the TIF District but the plan, which includes the details of the cost and new valuations still needs to be approved at a future meeting.
Having “shovel ready” sites makes Sioux Falls more attractive to industries, Eckhoff and Mundt said.
Other states already, including Iowa, already have property ready for building.
Some counties and other cities in South Dakota have developed TIF Districts with local economic development entities, Eckhoff said. Lincoln and Minnehaha Counties, Lennox and Brandon all have such TIFs, Eckhoff said.
“It levels the playing field for us,” Mundt said.
Industries are increasingly looking for property that already has infrastructure because they need to build more quickly in today’s economy.
A March 20 story published online by Expansion Solutions Magazine said having a shovel ready site is one piece of the plan to attract industry.
A March 24 story posted on Morning Consult, a global, privately-held data intelligence company established in 2014, encouraged U.S. lawmakers to consider shovel ready infrastructure projects as part of coronavirus relief packages.
“The time it takes to get to market (from construction) is becoming more and more important,” Mundt said.
Mundt has seen changes in how industries approach new construction and a new site in his 35 years in economic development. Industries used to long range plan for three to five years but now, it’s 18 to 24 months.
The turnaround from industries looking at property to construction once they choose may be shorter than several years ago but that doesn’t mean a new industry is already ready to move into the TIF District.
“We have prospects but it could be two or three years (away),” Mundt said. The TIF District is not being developed because the foundation already has an industry partner, Mundt said.
As the industry moves into a location in Sioux Falls, other commercial development and residential development typically follows.
New industry “will help the retail development around Walmart,” Eckhoff said as an example of the ripple effect created with industrial development.
The city was willing to create a TIF District because of the importance of having a site ready for an industry and because of increased interest from companies, Eckhoff said.
New industry means more jobs. More jobs means more employees who may live or shop in Sioux Falls, Eckhoff said.
A new industry will use electricity and other supplies which will boost utility revenue and sales tax, Eckhoff said.
The TIF can also capitalize on increased business interest in the state.
“When the (U.S.) economy is tight, South Dakota’s (profile rises),” Eckhoff said.
The Sioux Falls Development Foundation has already successfully developed about 1,700 acres in the city, Eckhoff said.
Some of the development is in the south portion of the Foundation Park.
“This is a great partnership…,” Eckhoff said.
Mundt said construction on the infrastructure is expected to start in the spring. Construction is expected to be in phases through several years, he said.
A May 2017 article posted online by Site Selection Magazine says “The ultimate test of shovel-readiness is how many prospects go from consideration of your site to a full commitment in the form of job creation and commerce.”
Planning work should start this winter after the TIF plan is approved.