South Dakota, the Welfare State: Chapter 847

Say it again, kids: South Dakota loves federal money. South Dakota lives on federal money.

1. The new Inter-Lakes Community Action Partnership building will be built on Uncle Sam's dime. Madison's city fathers cheerfully announced a $290K handout from the federal Community Development Block Grant program yesterday. The new office and Head Start facility has already received local subsidy in the form of a rock-bottom sale price for the land from the city.
   
2. Heartland Conumer Power District general manager and DSU December commencement speaker Mike McDowell echoes Senator Max Baucus's complaint that the Simpson-Bowles deficit reduction plan asks rural communities to pay their fair share of the decades of debt we all have rung up. McDowell and Baucus don't want us to pay higher taxes on energy (where's McDowell work again?) or receive less in social programs for our relatively high numbers of veterans and senior citizens.
   
3. Governor-Elect Dennis Daugaard's announcement of his latest cabinet appointments includes this tiny tidbit from Dennis:
   
   

   "I want to thank Kim Malsam-Rysdon for taking on this new role as Secretary of Social Services.... At a time when federal support is falling and economic conditions are increasing demands for services, leading this department is challenging."

   
   Catch that? Daugaard is grumbling that his Secretary of Social Services is getting less money from Washington. This just days after hobnobbing in Washington with Speaker-designate John Boehner, Senate Minority Leader Mitch McConnell, and other GOP leaders who insist government needs to shrink.
   

Maybe this is why the Tea Party has such piddly rallies in South Dakota. Maybe this is why Kristi Noem still plays so coy about being tagged as a Tea Party doll. Maybe they all realize what I've been saying all along: the Tea Party/Grover Norquist pablum about getting Uncle Sam off our backs is a prescription for fiscal and economic disaster in South Dakota. We are a welfare state. Dennis Daugaard and Kristi Noem are unlikely to change that.

City Sells Rosebud Lot to ICAP at 66% Loss

Roadmap for Saving the Masonic Temple?

After holding a twice extended option for a year and a half, Inter-Lakes Community Action Program is finally laying down the cash to buy the old Rosebud property and put up its own building. Saturday's MDL (not online yet) gives a cheer for this economic development. I'm happy for ICAP... but Madison is losing big.

Let's check the numbers:

• On February 15, 2008, the Lake Area Imrpvoement Corporation bought Rosebud's downtown properties for $500,000 as part of its land shell game to lever Rosebud's undesirable manufacturing out of downtown and out to the edge of town to refill the shuttered Arctic Cat plant. (The LAIC has since sold a couple of the smaller Rosebud plots for $35,000 and $500.)
• On February 15, 2008, the City of Madison bought the main half block of the Rosebud property, across the street from City Hall, for $400,000.
• In December, 2008, the City of Madison approved a deal arranged by LAIC for ICAP to purchase the Rosebud half-block from the city for $350,000.
  
• ICAP didn't buy right away. ICAP paid $5000 for a six-month exclusive purchase option. ICAP extended that option twice, $5000 each time. Total paid so far: $15,000.
  
• The city commission will consider a purchase agreement Tuesday night that gives the land to ICAP for $135,000. Minus the option payments, the actual cash to change hands is $120,000.
• ICAP will kick in up to $10,000 for remediation costs—i.e., removing lead-impacted soil. If I'm reading the agreement correctly, ICAP will also share up to $5000 of the cost of soil testing done since this year March 31.
  
• The city will approve Tuesday a brownfields grant agreement with the state Department of Environment and Natural Resources that should put another $50,000 of federal money toward removing and replacing about 400 cubic yards of lead-impacted soil.
• The city still bears the cost of demolishing the Rosebud buildings. I don't see a cost estimate on that aspect of the project in the city agenda, but I image we could lower that cost with a Crazy Days sledgehammer contest....
  

Looking at just the property purchase costs, the LAIC and City of Madison thus appear to have arranged a $265,000 handout to ICAP, 66% of the original purchase price.

I thought LAIC exec Dwaine Chapel once told me that the LAIC doesn't believe in handouts. I am at least pleased that they have changed their tune to benefit an organization that does good work like ICAP.

But subsidizing the community work of ICAP is the only justification our city fathers can offer for this project. The land swap and sweet deal certainly aren't economic development: we've only moved players around, not added any new ones. We're not increasing the tax rolls: ICAP is a non-profit. The only stretch by which we might offer an economic justification for this fire sale is that maybe, just maybe, ICAP was saying they were going to leave town if they didn't get this property cheap, and the LAIC and city thus acted to keep Madison from losing jobs.

Given this math from the city, we have a proposal. There is another derelict property in downtown Madison, the Masonic Temple, just crying for development. My wife and I and some friends are prepared to form a non-profit organization to acquire, renovate, and preserve the Masonic temple as a non-profit community cultural center hosting a wide variety of education, entertainment, tourism, and economic development projects.

The last purchase price for this architectural landmark was $46,000. If the LAIC and City of Madison would buy out the owner for that amount, then sell it to our non-profit group at a 66% loss... well, that's less than $16,000. I could line up that funding by the end of the month.

Arrange this Masonic temple buyout and transfer, city leaders, and you don't just keep jobs: you add cultural and economic activity where there currently is none. Essentially, arranging a deal analogous to the Rosebud-ICAP deal for the Masonic temple is a $30,000 investment that creates new economic activity. What say you, commissioners?

What's the Delay on Developing Rosebud's Old Downtown Site?

Over a year ago, Madison's city commission and Lake Area Improvement Corporation played a remarkable downtown development shell game, booting Rosebud Manufacturing out of downtown to the industrial park on the edge of town, then arranging a deal with the Interlakes Community Action Program to build a new headquarters on the old Rosebud property. Jon Hunter thought these moves were great; I asked whether ICAP's move was really the best we could do for downtown development;—more like downtown maintenance, since we're not really adding any new business.

Agree or disagree, we're all still waiting for development to happen. ICAP and the city negotiated a $350K purchase price for the half-block Rosebud vacated on Van Eps Avenue. Around the beginning of 2009, ICAP paid $5000 to secure a six-month exclusive purchase option. Mid-year, ICAP extended the option for another six months, for another $5K.

Monday ICAP and the city commission will consider another six-month, $5K option extension.

Read the purchase agreement in the January 11 city commission agenda packet. It says "Time is hereby declared to be of the essence in this Option." ICAP and the city's dawdling suggest the contrary.

ICAP is essentially getting to mortgage an entire half-block of downtown commercial property for $833 a month. If the city approves the latest option extension, they'll have kept this developable property off the market for 18 months. We're collecting no property tax from it now, and ICAP expects the property to be tax exempt when (if) it finally purchases the land. We're sitting on a big vacant lot instead of creating a competitive economic opportunity.

As I've said before, ICAP does fine work. I have no beef with them. But Madison has hundreds of unemployed and underemployed (read Gehl) workers. We are 725 jobs short of our five-year goal to create 400 jobs by 2012. If I'm an aggressive economic developer, I say to ICAP, "Poop or get off the pot." I could put that land on the market, find a commercial developer who could put up something like Randy Schaefer's strip mall, and fill it with ten businesses that would create jobs, sales tax, and property tax.

Of course, I'm not an aggressive economic developer. Neither, apparently, is the city of Madison.

ICAP Move to Rosebud: Cause for Celebration?

And in unsurprising news, Jon Hunter and I disagree.

Wednesday I questioned whether Madison's sale of the old Rosebud property to Inter-Lakes Community Action Partnership (ICAP) was really the best use the city and the Lake Area Improvement Corporation could come up with. Chief of the civic cheer section (not to mention former LAIC president and board member) Jon Hunter thinks the city and LAIC did a heckuva job, Brownie, in striking this deal:

The ICAP board of directors decided it should own its own facility after leasing for the last 44 years. ICAP intends to build an environmentally-friendly, efficient structure.

The new structure will be great for ICAP in that it will better meet its needs and not have to move far. The new facility will dramatically boost the value of the property and keep the 40 or so workers within walking distance of downtown restaurants, stores and services. Everybody wins [Jon Hunter, "ICAP Investment Is Terrific for Madison and Downtown," Madison Daily Leader, 2008.12.03].

That's funny: When the city and LAIC wanted to push Rosebud out to the industrial park, I didn't hear our man Hunter saying it was "terrific" to keep Rosebud's 67 employees within walking distance of downtown restaurants, stores, and services.

ICAP's move isn't so much a situation where everybody wins as one where nobody loses... except maybe for whoever is currently collecting rent from ICAP. We're replacing an old building with a new one (plans for which remain to be seen), but we're not adding any jobs, not adding any new customers, and not adding any new retail to downtown. Stopping a loss doesn't merit quite the same rah-rah sis-boom-bah as scoring a win.