Hanks Mayoral Landslide Suggests Weakness of Tea Party Movement

Rapid City Mayor Alan Hanks won easy re-election to a second term yesterday, defeating his only challenger, Bonnie Redden, 70%–30%.

The race might be the first electoral test of the Tea Party platform in South Dakota. Redden, a fan of Dakota Voice, ran (in RCJ's Emilie Rusch's words) "on an anti-establishment platform, advocating extremely limited government, drastic cuts in city spending and the end of tax increment financing districts." She wore a pin proudly declaring herself a "right-wing nut." She's also one of the "Obama is a socialist!" criers.

Interestingly, she also campaigned on the promise to eliminate tax increment finance districts (TIFs):

She'd like go to Pierre and get TIFs erased from the books. She sees their use as "corrupt":

"When a developer wants to build something, he needs to pay for his own endeavor, out of his own pocket," Redden said. "He has no business doing it on the backs of the taxpayers and property owners in Rapid City."

The city can encourage economic development by making the business permit and license process easier -- not by luring companies like Cabela's into town with incentives.

"What we need, there will be a niche for it, and it will come," Redden said. "I will make sure there are measures in place to make it convenient and simple to get businesses started in Rapid City, but only after they come to us. It's not the city's business to pay someone to come here under any circumstance" [Emilie Rusch, "Hanks v. Redden: Stark Differences in Low-Key Mayoral Race," Rapid City Journal, 2009.05.30].

Redden also told Rapid City voters that city government should spend money on three things: police, fire, and infrastructure. "All this other stuff they waste our city money on is just that—waste," Redden told Rusch. She wanted to privatize the ambulance service, put police on horses, and cut all social programs.

Sounds very "Tea Party" to me. Rapid City and the Black Hills are a hotbed of Tea Party activity. Even I can find some things to like in what Redden said, like her suspicion of TIFs and her demand for more budget transparency.

But voters dropped her by more than a 2-to-1 margin.

So perhaps the lesson the right-wing anti-government radicals should draw from the Rapid City mayoral election can be boiled down to two words: permanent minority.

Local Stimulus: Citywide TIF for Sidewalks!

Your tax dollars at work: the first completed garage in Madison's TIF district at South Grant Avenue and soon-to-be-named Silver Street. Includes attached house out back.

Stick with me on this one; it all leads to a darn good idea!

An eager reader forwards an invitation from the Madison Chamber of Commerce to an open house Thursday (tomorrow!) from 4 to 6:30 p.m. at the first completed home in Madison's tax increment finance (TIF) district. I would imagine developer Randy Schaefer will be there, along with the Lake Area Improvement Corporation officials who have been instrumental in moving the TIF project forward.

I don't know how open the open house is*, but I would think that Schaefer and the LAIC would be happy to have you all drop by, whether you are Chamber members or not, so they could thank you personally for making this successful project possible. After all, without Madison's willingness as a community to take on the debt burden to cover the infrastructure costs for this development, and without your collective willingness to forego the increased tax revenues from the development to pay off that debt rather than to fund other public projects, the Silver Creek Circle development would still be just a pile of dirt. Instead we have two nice garages (with houses out back) and more surely to come.

So with our first TIF district already showing signs of paying off, I got to wondering if another TIF might be good for the city. Should we wangle another TIF to reduce costs for another developer and boost more housing? Or is there some other critical public need that a TIF might serve?

SE 4^th Street, south side: no continuous sidewalk!

And then it hit me: sidewalks. The TIF district doesn't have them yet (got to get all the other work done first). But neither does the south side of Southeast 4^th Street, the main thoroughfare Silver Creek Circle residents will proudly stroll every day on their way to pick up a pizza at Casey's. Neither do a number of streets all over Madison.

The city commission has a timetable for getting sidewalks implemented one street and neighborhood at a time. They did a little along Division Avenue last year; I think some streets between campus and the high school are due this year.

But why dink around? Why not get every street in Madison sidewalked up right now, this summer, right when there are a lot of unemployed folks who could use some work?

Declare the whole darn town a Sidewalk Tax Increment Finance district—a STIF!

No, really, I'm serious. Have the city float the loan for building every inch of sidewalk that remains to be built in Madison. The city makes the funds available to homeowners, with STIF money covering the full cost if you hire locally or do it yourself and half the cost if you hire out-of-towners (those figures are negotiable). The construction guys in town go ape hiring workers to dig and pour and trowel all summer long. Unemployment drops to 1%, at least for a few months. We pay off the STIF loan with the increased property tax revenue that will come from those newly sidewalked and thus more valuable properties all over town.

Plus, everyone in Madison walks more, lives longer... and works up a bigger appetite for DQ Blizzards!

STIF Districts: local economic stimulus, long-term infrastructure, lower costs for homeowners... this is the best dang plan I've come up with this year! Someone call Commissioner-Elect Abraham! He'll eat this up!

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Update 18:50 CDT: Sure enough, it's open to the public, or so I'd assume from Elisa Sand's article in tonight's MDL. 4:00–6:30 p.m., Thursday, April 23, 530 "Silver Creek Circle"—drop in, shake hands, and tell Jason and Corey good work on the building!

LAIC Building $99K Spec Houses in Madison TIF District

Speaking of building permits...

The New Year brings new construction, as workers brave the January cold to start the first houses in Madison's tax increment finance district. I found a handful of well-layered guys and a backhoe punching a basement into the frozen ground south of Southeast 4th Street yesterday.

And who are the proud owners leading the way in populating the TIF district? You and me, of course. My sources tell me the Lake Area Improvement Corporation is the holder of not one but two building permits in the TIF. Each permit is for a $98,600 spec house.

I appreciate the LAIC putting its money where its mouth is on building quality affordable housing in Madison (and $99K is about as good as it gets for affordable new housing, short of a yurt). But is this particular economic development investment the best use of the LAIC's quasi-public dollars? If there really is a need in the Madison market for affordable houses, wouldn't buyers and builders be lining up to snap up the 11 TIF lots even without a couple spec houses to stir the pot?

I'm sure the LAIC could make an effective business case based on the data from the housing study. But the LAIC continues to keep the housing study under wraps, demanding payment to read data that if publicized might actually make the LAIC's job easier.

Buying two spec houses in this particular development may spark some cries of favoritism, just as the TIF has, as the LAIC invests in this particular housing development but not others. I don't want to get too bogged down in the personal side, but it seems there is any easy way for the LAIC to avoid even the appearance of picking winners in the housing market. What if, instead of buying spec houses, the LAIC used Habitat for Humanity to pursue its goal of affordable housing? (Full disclosure: I live with a Habitat board member, and I've worked on a Habitat house.) Consider the advantages of directing some LAIC/Forward Madison money toward Habitat:

1. Non-profit Habitat builds houses the market generally won't, meaning they aren't in competition with Craig Williams, Nick Opdahl, Dennis Miller, or other local developers or contractors.
2. Habitat can build a house for around $80K. For the amounts on the spec house permits, the LAIC could fully fund two Habitat houses and spring for a really big barbecue afterwards to celebrate.
3. Habitat is a great volunteer effort. When you give money (or sweat) to Habitat, you aren't just building houses; you're building community. Talk about return on investment!

Now understand that on balance, I think the LAIC is on the right track. I've said before that if the market can't supply affordable housing, then the city and its related agencies can justify stepping in to fill that need. I think I've even written (although I can't find the link this morning) that it might be nice to see some money turned toward attracting residents with good housing, not just more industrial development. I would just like to see the LAIC use its (our?) money as efficiently as possible... and do it in an open fashion that makes the best political impression possible. (Anyone notice the irony of my recommending a more politically palatable way of doing things?)

More for Main Street -- We Already Have a Plan!

While we wait to hear back from the Lake Area Improvement Corporation on when the Main Street and More committee will have its first meeting (and who will be the point person for the project, if Tammy Jo Zingmark has indeed moved on to another job), a reader reminds me that my wife and I have already laid out a pretty good roadmap for where the Main Street committee should start. To review:

1. Renovate the Masonic Temple: This grand building deserves some upgrade and use befitting its place at the very literal heart of our community. Some Forward Madison money could go a long way toward patching up the brick work, firming up the foundation, and bringing a great business or two into the building. Imagine a movie theater, lecture hall, reception hall and meeting center, art gallery, maybe even a little coffee shop, right there at the head of Main Street, alive and vibrant, beckoning people to explore all of downtown. And even if worst comes to worst and the building can't be saved, the site is still perfect for a welcome park at the head of Main Street, just the kind of green space Tammy Jo said we need. (Remember, downtown development isn't just more buildings; any plan has to include public open space where civic events and discourse can take place.)
   
2. Resurrect the Lake Park Hotel: Instead of shunting guests out to the fringes of the city (hotels on the east and west edge, meetings at the playhouse on the north edge), why not bring our visitors right to downtown? With Rosebud Manufacturing now moved out to the industrial park, we have a great swath of buildings that could be turned into a spectacular hotel and convention center. Imagine business visitors and tourists being able to find lodging within walking distance of our downtown restaurants and shopping, city and county offices, meetings at the Chamber, even the library and the grocery store. Put the hotel and meeting space on the Center Street block right across from City Hall. Bulldoze the buildings on the south block for parking.
3. Renovate the existing downtown buildings: We have some gorgeous old brick buildings downtown. We also have some atrocious façades, god-awful plastic, metal, and plywood smacked onto that good brick. Divvy up the Forward Madison money, peel off the junk, restore the proud stone work.
   
4. If the $2.3 million sitting in the Forward Madison kitty isn't enough to cover our downtown dreams (or if the LAIC doesn't want to spend it all in one place), we lure developers with a downtown tax increment finance district. We could declare a lot of the buildings blighted: Mason's, Rosebud, the old Wenk's building along the railroad tracks... just drive down the back alleys and make your own list. Create a pay-as-you-go TIF, like they do up in Brookings: downtown businesspeople and developers invest in renovations and new businesses, and if they succeed in raising the value of their downtown property, the increased tax dollars reimburse them for their investment.

There's your Main Street redevelopment plan right there. You can find more review materials here. Let's form that committee and get to work!

Brookings Passes Tax Increment District for Housing

Floodgates opening? I hope not. But the new residential Tax Increment District (TID) approved by the Brookings City Council last week appears to offer the Madison City Commission some tips on how they can do the next TID more responsibly. Unlike the Madison plan and even the two TIDs Brookings approved last spring, the Valley View developers in Brookings will bear the costs up front:

"What we're proposing here is this be what's commonly called a pay-as-you-go tax-increment district . This is the type of plan that is the least risk financially to the city. It does not require us to issue any tax-increment bonds or issue any debt at all. Basically what this provides is the developer will be responsible for financing the cost of the infrastructure and then will be reimbursed over time with the taxincrement proceeds that the district generates over the life of the district"[City Manager Jeff Weldon, quoted by Jill Fier, "Council Approves Valley View TID," Brookings Register, 2008.06.15].

So the developers still put up the money to build the project; Brookings tax dollars don't reimburse the developer until the project is completed and showing results. If the developers don't follow through turn the land into a moneymaker, the developers are left holding the bag, not the city. What a concept!

Fier reports that the Brookings City Council imposed further requirements on the developers, setting a five-year deadline to complete the development and limiting the cost of completed homes in the development at $160,000 -- still not exactly my definition of affordable, but reasonable by the standards of the South Dakota Public Finance Housing Agency, says Weldon.

I'm still not convinced that tax increment financing for residential development is the best use of public dollars. But if we're going to intrude so in the free market, we should follow Brookings's lead: don't hand the money out up front, and don't promise the developers money without requiring the developers to carry out their promise to fulfill their stated public purpose, in this case affordable housing.

Can We Refer TIF to Public Vote?

...such was the question posed to me by a reader this afternoon. I couldn't answer for sure, so I did some looking. (Remember, I'm not a lawyer, I just like finding stuff out. My legal advice is purely unofficial; your mileage may vary.)

Yes, it appears citizens can refer a Tax Increment Finance district resolution by their city to a public vote. Folks in Aberdeen did it in 2007: after opponents got the issue on the ballot, voters turned out 2-1 in favor of a government handout for Northern Beef Packers.

But if you want to refer Madison's TIF to a public vote, you'd better hustle. The city commission passed the updated TIF resolution on May 19. SDCL 9-20-6 says you have twenty days after the publication of an ordinance to file petitions to refer it to a public vote. I haven't been tracking the Legals in the Madison Daily Leader as closely as I ought, but I would imagine it's been in there already.

Of course, this assumes any Madison residents are cheesed off enough about the TIF to go stirring up trouble with petitions and public conversation and voting. I make no such presumption. I'm just answering a reader's question....

TIF Part II: In Defense of Old Fixer-Uppers

MDL's Chuck Clement provides this coverage of the discussion of the tax increment financing district at Monday's Madison City Commission meeting:

Schaefer proposed a new housing development with homes in the $115,000 to $125,000 price range for low- and moderate-income owners. Hess told the commissioners that Madison already has housing available in the below-$100,000 price range. Schaefer said many of those homes are older houses.

Commissioner Scott Delzer agreed with Schaefer, describing many of the older, below-$100,000 homes in Madison as "fixer-uppers" that would require significant modernization to make them similar to a newly-constructed house [Chuck Clement, "City Moves Ahead with Tax Increment District," Madison Daily Leader, 2008.05.21].

Mr. Schaefer and Commissioner Delzer are correct: many of the houses currently available for less than the LAIC's $120,000 affordability criterion are older structures, and many could use some renovation. But Schaefer and Delzer both operate from the unstated and incorrect assumptions that old is bad and that everyone wants a house similar to a newly constructed house. Consider the beauty pictured here, the home built by Madison's first mayor at 401 NE 1st. You don't see newly constructed homes with that sort of character.

Instead of dedicating $330,500 to building 11 new dwellings, might not the city have an interest in supporting the restoration of existing dwellings? Consider this radical notion: instead of providing a $330,500 subsidy to a single developer, the city could divide that money into $10,000 renovation incentives for 33 existing homes... which just happens to be the number of Madison homes I find listed this morning on HomeViewSiouxFalls.com for under $120,000. $10,000 could go a long way toward helping each of those homes move on the market and encouraging low- and middle-income buyers to move in and fix up these old gems.

Again, think big picture: What would make Madison look better? 11 typical new dwellings in one cluster out back of the strip mall, or 33 existing houses all over town with new owners ready to renovate?

Mayor Hexom: TIFs for Everybody!

The Madison City Commission gave unanimous approval Monday night to the 63% increase in the debt it will take on to support Randy Schaefer's tax increment finance district. Local businessman John Hess attended the meeting to voice his disapproval of what looks to him like a handout to one specially chosen developer that gives that developer an unfair market advantage.

Mayor Gene Hexom apparently sees no unfairness in the TIF district. "The same opportunity exists for you, John, if you want to do it," the mayor told Hess at the meeting.

I think you missed the point, Mayor Hexom. Hess is making the argument that the city shouldn't be offering this "opportunity" to anyone in the first place. Certainly any of us with business interests in Madison could apply for a TIF to support our hopeful building projects. But would the city really finance every applicant? The city does have a debt limit (which we are $330,500 closer to now). Surely it would have to sort the good from the bad, pick some projects over others. And if the city can identify some private development projects, like Grant Circle, as more beneficial than to the city than others, woldn't those superior projects already enjoy the competitive advantage they need in the free market to succeed without tax subsidies?

Furthermore, Mayor Hexom seems ignorant of the fact that the TIF "opportunity" may not be available to John Hess. Mr. Hess owns some residential properties around town, but state law prohibits the use of TIF notes for strictly residential development. As I understand it. the only reason Randy Schaefer qualifies for this handout is that he happens to have a strip mall next to the proposed development, and his lawyer made sure the boundaries of the TIF district included that commercial property.

So for Mayor Hexom to say this "opportunity" exists for any interested developer is no more than technically correct: Hess could get a TIF district, if he owned a commercial property right next to a planned residential development, if he gets his bid in before the other developers swamp the city with requests and gobble up the 10% of citywide assessed value allowed for TIFs...

...and if John Hess wanted a government handout in the first place. John Hess and most businesspeople don't want a handout: they want a level playing field where their goods and services stand or fall on their own merits, without subsidy, and without having their own tax dollars going to help their competitors.

TIF Housing District: Still Affordable for City and Low-Income Buyers?

As reported earlier, the Madison City Commission considers an amendment to the Tax Increment Financing (TIF) District at tonight's meeting. The amount of debt the city is being asked to assume for this private housing development has increased 63% from $203,485 to $330,500. The new cost list (from tonight's city commission agenda packet, PDF format):

1. Acquisition of property and demolition: $45,000
2. Approx. 660 feet of water, sewer, asphalt, curb & gutter: $214,000
3. Engineering & construction admin fees: $24,000
4. Contingency/miscellaneous: $4,000
5. Capitalized interest (2 yrs): $40,000
6. Attorney fees: $3,500
   

Now I was going to compare this cost breakdown with the original details submitted to the City Commission by developer Randy Schaefer back in November. Alas, that commission agenda packet has been removed from the city website. Tonight's agenda packet contains none of the maps or explanatory materials on the proposed TIF.

The big question: will this 63% increase in costs push the price of houses in the development out of the affordable range for the low- and middle-income buyers the TIF district was originally proposed to serve? Kerry Karlson asked that question at the Planning Commission meeting last Tuesday. Schaefer "hopes the construction bids come in lower and that in the end they keep lots under $20,000" [Madison Planning Commission Proceedings, 2008.05.13].

Resolution 2678, the authorization of the TIF on tonight's agenda, includes the following:

[Clause 6.2] It is in the best interests of the City to authorize the borrowing of funds to pay a portion of the costs of the Public Improvements and other costs associated therewith for the Project by authorizing and issuing its Tax Incremental Revenue Notes consistent with the terms approved hereby for an aggregate sum not in excess of the amount of $330,500.00....

[Clause 7] It is hereby determined to be necessary and in the best interests of the City and its inhabitants that this City Commission authorize the Note to be executed in order to finance a portion of the cost of the Project.

Necessary? The mayor, the LAIC, and others may want the TIF, but need is a different question. The need originally posited was for affordable housing. If our hopes for low bids are not fulfilled and lots end up out of a typical workingman's price range, will the city still back the project to build expensive homes for more well-to-do buyers? Or is the city going to impose some accountability and say, "We only provide public funding if the houses built will cost no more than $120,000" (or provide your own threshold for "affordable housing").

Absent from the planning commission proceedings or tonight's agenda packet is any mention of the vaunted Lake Area Improvement Corporation housing study. Director Dwaine Chapel was at last week's Planning Commission meeting, but if he mentioned anything about how the TIF District helps fulfill needs identified in the housing study, nothing went on the record.

I'd flip through the housing study myself, but I got confirmation from Dwaine Chapel himself this month that any citizen must pay $250 to even look at the study. (This confirmation from the top came two and a half months after my initial question, a full month after I e-mailed Chapel directly per his staff's recommendation that I contact him directly, and even then, only after I dropped by the office in person to follow up.) Chapel says there's no law that requires the LAIC to make the housing study public.

I contend otherwise. The city is about to go into 63% more debt than expected to support a private housing development, based on a claim of a need for more affordable housing. The supposedly reliable data we have is sitting in the LAIC office. Rather than making that supposedly reliable data available only to folks with $250 to throw away, the LAIC should make that study available to every taxpayer who will be affected by this TIF district. That would include everyone in the school district and county, which will have to make up for the tax revenue they can't access in the TIF by imposing higher taxes elsewhere or cutting their budgets.

Without access to the housing study (I still have the executive summary, but more detail would help!) we are left to conduct our own assessment of the housing market in Madison. HomeViewSiouxFalls.com lists 35 homes on the Madison market right now under $120,500, the standard cited in the housing study executive summary as the benchmark for affordability in Lake County. Think they're all shacks? Check out the beauty in this picture: right by campus, within easy walking distance of the fitness center, Dairy Queen, and the grocery store, only $112,900 (call Paula Pearson, Madison Realty, 256-3888 -- and even though I get no commission, tell her the Madville Times sent you!)

Let's consider this TIF district from a different abgle: In discussing the city's requirement that homeowners pay for their own sidewalks, some of my commenters said it wouldn't be fair for the city to help pay for that infrastructure now, since homeowners in the past have all been required to pay for their own sidewalks. I seem to recall newly minted city commissioner Dick Ericsson making the same point at the candidates forum on April 3. So has the city footed the bill for the installation of sewer, curb and gutter, or any of that other infrastructure for developers in the past? If not, what is the city's rationale for offering such assistance now?

Last winter, Randy Schaefer's assurance that TIF district would serve the purpose of creating more affordable working-class housing made me think the project might have some merit. But folks like John Hess and some local realtors have pointed out that Madison already has a pretty big market of decent affordable houses. The city and LAIC appear unwilling to share hard evidence to the contrary. And even if there is a need for more affordable housing, the 63% price jump calls into question whether this TIF district will be able to meet that need.

Will the city commission address these questions tonight? Or will we hear nothing but the great smooshy sound of the rubber stamp? Come to City Hall in Madison, 5:30 p.m. tonight, to find out.

Madison Tax Increment District Price Tag Jumps 63%

The Madison City Commission will discuss changes to the Tax Increment District plan it approved last November. The original price tag was $203,485. MDL reports that the commission will discuss a supplemental resolution to cover the new cost of the project: $330,000.

O.K., prices have gone up since November, but a 63% increase in the debt taxpayers will assume on this private development? Uff da! Maybe the city commission needs to take time at its Monday meeting to ask whether this is really the bill of goods they were sold back in November.

I'll have more on this later, after I've done some reading. The May 19 city commission agenda has some details you can read for yourself. (Maybe I'll even be able to bum a look at someone's copy of the LAIC's housing study, which is still available only to folks willing to fork over $250.)