Counties push back on TIFs

Talk about it

PIERRE — Some South Dakota legislators want to restrict city governments’ ability to take county property taxes to help pay off bonds for improvements in tax incremental financing districts.

Rep. Dennis Feickert, D-Aberdeen, said property tax dollars are routinely diverted from a county government to repay a city’s TIF district. He is a former Brown County commissioner.

The legislation brought by Feickert and Sen. Mark Kirkeby, R-Rapid City, would change the relationship for TIF districts started after July 1 this year.

SB 129 would limit responsibility for the bond issue to only the government body creating the TIF district.

If a county wanted a TIF within a city, under the legislation the city wouldn’t have to pass along its additional property taxes that resulted from higher property values in the TIF district. Likewise, if a city created the TIF, the county’s additional tax revenues wouldn’t be used for the TIF.

Kirkeby said the hearing will continue Wednesday.

TIF districts are commonplace in some South Dakota cities, including Mitchell. They are often established in undeveloped areas, where TIF financing is used to build public infrastructure — such as streets and drainage — in anticipation of future development. During the life of the TIF, new property taxes from development in the district are captured to pay off the TIF expenses. Those new tax dollars are diverted away from taxing entities until the TIF is paid off; after that, the tax dollars flow to taxing entities such as counties and cities.

Ron Buskerud, a Pennington County commissioner, testified in favor of the change. He said he supports TIF districts but Rapid City has taken their use “to the extreme.”

“All we’re saying is we’d like an equal say in it,” Buskerud said. According to him, the county gave up $1.8 million in property taxes last year for TIF payments.

Speaking in opposition was Yvonne Taylor, head of the South Dakota Municipal League. She didn’t get into details.

“We would like to respond to the new measure that is being drafted next week,” she said.

Nathan Lucas, deputy commissioner of the Governor’s Office of Economic Development, spoke against the legislation because it could further restrict the use of TIF districts.

Rapid City Mayor Sam Kooiker said he has a history of “deep concerns” about TIF use and there have been significant reforms. But he doesn’t like the legislation.

“This measure in essence would gut that tool. It is one of the few tools we have for economic development,” Kooiker said.

Nine TIF districts have expired since 2011 in Rapid City. He said there can be better communications but he disagrees with giving county commissions veto power.

Feickert said school districts are held harmless by current law and therefore everyone in South Dakota pays something toward TIF bonds.

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