Different cities have different development strategies.
Some cities prescribe development. They do studies, create zoning laws, and fund public infrastructure in the direction they want the city to develop.
In this case, a developer usually pays only a development fee or hook-up fee for the public infrastructure. Sioux Falls is a great example of this. Development is driven by the government planning function, which includes the input of elected representatives and always includes public meetings and opportunities to comment.
The positive side of this for the developer is that the public infrastructure is in place and the zoning of the land is predetermined. It can also be the negative side. A developer may want to purchase a parcel of land for commercial development and may be told that this is not acceptable to the city because the parcel is zoned residential or industrial.
Given the pros and cons, this is the more orderly method of development. This method also allows the public to experience the benefits of the city’s strategic planning function.
The other type of development is one we see in Rapid City. That is where the developer purchases land and then seeks to change the zoning in some cases to what they feel is appropriate. Also, the developer determines in which direction the city will expand. It could literally be north, south, east, or west.
The upside of this style of development is that the free market appears to be in charge. This tests the boundaries of limited government. This style of development appears to be freer and more driven by consumer demand as interpreted by the developer.
The downside of this style of development is that public infrastructure is rarely in place when the project is ready to go. The question becomes: whose responsibility is it to develop and fund public infrastructure?
Rapid City uses tax increment financing (TIF) to create funds for public infrastructure and/or required improvements to the area.
Although complicated, the simplest version of this procedure is:
A tax increment district is developed. This encompasses the property to be developed and a contiguous larger area with undeveloped property. Once approved, all the undeveloped property continues to pay property taxes, which go directly to the city, county and state. The developed property within the area also continues to pay property taxes to the city, county and state – just as always. As the undeveloped property develops, and more property taxes are collected, the incremental change in taxes flows through the county, into the developer’s loan.
A note worth emphasizing: the developer gets a loan from the bank of their choosing for required public improvements. If the property fails to develop or the area does not develop in a way that satisfies the loan requirements, the city is not on the hook—the developer is. The city is at 0% risk in this instance.
Tax increment financing arrangements can last up to 20 years, but in Rapid City they are typically paid off closer to the 10-year mark.
The opponents of tax increment financing falsely believe their property taxes will go up as a result.
They also falsely believe that TIFs are a government subsidy. This is not so, as the public infrastructure being constructed will belong to the government and the citizens within that government’s jurisdiction. The infrastructure will not belong to the developer.
There is a great amount of false information swirling about how tax increment financing hurts the taxpayer. The only people that it hurts are those that hate government and think it’s unfair for “rich developers” to have any financial tools available to them. They also wish to resist expansion. If you ask me, it’s a liberal mindset recast as a conservative complaint.
At this point, the usual suspects are gathering signatures and misinforming potential voters about the issue. A special election on this issue will cost voters around $100,000. That’s exactly $100,000 more than it will cost voters if the Liberty Land tax increment financing district is approved and moves forward.
Please get your information from reliable sources, and not the group of people who protest everything in our community.







