How TIFs spur economic development in South Dakota

Tonight we begin taking an in-depth look at an economic development tool called 'Tax Increment Financing'. Some of the biggest projects in the state of South Dakota have been financed using them.

TIFs have been on the books here since 1978. They can help developers fund projects with big price tags and cities benefit as well.

A TIF sounds simple enough. a three letter word. How confusing could it be?
Well...very confusing.
TIF actually stands for 'Tax Increment Financing'.
But unless you work in the world of economic development it's likely you've not heard the term before.

"You ask the average South Dakotan was a TIF is and they'll say it's a disagreement among newlyweds." Tobin Morris is with Dougherty & Company, a firm that specializes in helping municipalities set up these TIF districts."It's a very powerful tool in the economic development tool box for cities and counties to use."

But what exactly are they? And why do some see them as controversial? "A TIF is being able to use property tax that will be created in the future to offset public infrastructure."

In a nutshell, if a developer wants to put in a new business or a new housing development in an area that is considered blighted or an area where there has not been previous development, they can work with the city on the development of a TIF district. Under a TIF, once the new development is in place the property's value hopefully increases and in turn the property tax does as well. But instead of paying that increased tax, the developer can instead use that money to reinvest into the project to make continual improvements.

Tobin Morris says, "Properly used it allows the government to sit at the table with the developer and define how the development is going to look and roll out."

In some states TIFs have been used since the 1950's to spur economic development.
In South Dakota they were first approved by the state in 1978.
They've been on the books for an even four decades and without TIFs, it would be more difficult to spur new development here in South Dakota because of the limited tools available to bring big projects to life.

"We don't have a state income tax that allows us to hand someone $5-$10 million from some coffer of money . so that tool allows us to say hey, here's something that you can turn into cash to help you develop this project to the level and the expectation that we have and if you're successful and if you follow through, you will get reimbursed from your TIF." Jake Quasney is a vice president with Lloyd Companies in Sioux Falls.
Quasney tells us in some cases TIFs are a necessity not only for the cities involved but for the developers as well.
To get big projects off the ground requires taking some risks and Quasney says TIFs can be a kind of insurance policy to make sure that those big projects not only get off the ground intitally but succeed in the future. "There's going to be developers in this community who need that buy in from the city and the community to make sure that those opportunities are maximized because those are not 20 year investments. Those are grandkids and our grandkids' grandkids who will be down here utilizing whatever we build there."

As an example, the Uptown Project nears Falls Park in Sioux Falls.
A part of that project now includes the Cascades development: 200 loft apartment units plus built in commercial for restaurants and shopping.
Quasney says making the Cascades a reality would have been much more difficult if TIFs were not part of the equation. "Frequently it is used for infrastructure. The project up at Uptown..the Cascades...which were under construction right now..It was utilized to clean up contamination, tear down buildings that were near...they were ready to fall over..we had six inch cracks in the walls."

And the Cascades is only one example of TIFs being used to bring new projects to life.
The Menards in Pierre.
The C-N-A building in downtown Sioux Falls.
Ongoing growth projects in Harrisburg,
And a business expansion at Vantage Point Solutions in Mitchell.

"This is a successful, South Dakota grown company...15 years...adding almost 100 jobs in the next few years and frankly having local governments support those efforts can be incredibly important." Dusty Johnson is vice president of consulting for Vantage Point and tells us while the short term story about TIFs may be one of funding new construction, the long term story is about new business, new jobs and hopefully a better economy all the way around. "It's expensive to make a massive investment. To add on an additional 25,000 square feet like we did at Vantage Point. it's fun to see those things come to fruition."