Jan. 26, 2021

The two largest projects in Sioux Falls history are being built in the same place at nearly the same time – and the hope is to get the rest of the development park ready for more businesses to join them.

The Sioux Falls Development Foundation is asking the city of Sioux Falls to use tax increment financing to help fund the needed remaining infrastructure that would get Foundation Park “shovel-ready” for the next businesses to locate there. It also would establish a “competitiveness fund,” allowing economic developers flexibility in working with prospective employers.

“Whenever you can come to a prospect and say it’s a build-ready site, that you have infrastructure and utilities to it, that increases the marketability considerably,” said Bob Mundt, president and CEO of the Sioux Falls Development Foundation.

“If you’re just marketing a cornfield, most companies will walk away. If we’re able to have those costs taken care of before they come in, that speeds up the process and puts us at a competitive advantage.”

The proposal, which requires City Council approval, would establish a tax increment financing district using about 540 acres of Foundation Park. It’s estimated that land will include five to eight businesses, including Amazon’s new fulfillment center and the Asian food production facility announced by CJ Foods.

The property currently pays a little more than $70,000 in annual property taxes. By 2040, it’s estimated to pay $24 million in property taxes on a $1.2 billion tax base.

The difference between the current property tax paid and the estimated future property tax  — known as the increment — can be used to pay for qualifying costs if the TIF is approved.

In this case, those costs would include $50.4 million in infrastructure improvements such as roads, water and sewer to get the side ready; $52.3 million in platting and sanitary sewer cost recovery, and engineering and testing costs; and $30 million in a fund set aside for costs and activities associated with economic development within the district. That fund would be overseen jointly by city and Development Foundation representatives.

While the qualifying costs exceed $132 million, the TIF is asking for $94.3 million in increment.

“We are asking for roughly 65 to 70 percent of it, so we can do the basic infrastructure we need, and within that is the flexibility to do things we can’t look in our crystal ball and see,” Mundt said.

Typically, improvements such as this would be funded through large land sales, and the park would be developed in phases.

But to get enough land ready to go for multiple businesses expected to need 80 to 100 acres at a time becomes challenging, said Jeff Eckhoff, the city’s director of planning and development services.

“It makes sense to do the whole thing at once with master grading and streets. It would be hard to do it piecemeal,” he said. “The ability to do that in a traditional manner, waiting for a huge anchor tenant, probably isn’t feasible. This allows the Sioux Falls Development Foundation to prepare for the future and get out ahead and make this shovel-ready in the way that makes the most economic sense.”

The companies looking at locating in Sioux Falls are large ones that need a lot of land, Eckhoff added.

“They’re large job creators. And that’s what the vision of Foundation Park was. It’s finishing the vision of the people who put Foundation Park together.”

The property is estimated to include between 4,000 and 6,000 jobs when built out. Amazon is adding about 1,000 of those, and CJ Foods has said it will hire at least 600.

The Development Foundation is requesting a 20-year TIF, but “it’s projected to pay off before that,” Mundt said.

“The magnitude of this project, 540 acres, I don’t know that it’s been done. It’s a big project with a lot of infrastructure and unknowns, so we’re trying to do the best we can to develop a mechanism that can help us grow quickly and provide the infrastructure we need quickly, and this is our attempt to do that.”

The City Council received an informational presentation today, and Minnehaha County and the Tri-Valley School District will be briefed as well. A final vote from the City Council could come in March.

“As we approach 200,000 in our population, which we’ll probably get to next year, Sioux Falls has been elevated to another level,” Eckhoff said.

“Amazon did that for us, and the national mood and situation, and we’re getting big looks we probably haven’t had before. And we’re going to continue to get those. While Amazon was an anomaly at the time, in five to 10 years we’re going to see those types of projects come along on a much more regular basis. This is to get out ahead and be visionary and proactive and set the stage for what comes next.”