Jackson Boulevard TIF district 5 dissolved

December 23, 2018

SPEARFISH — After setting the boundaries to create tax-increment financing (TIF) district 5 in an area around Jackson Boulevard from Exit 12 to University Street in October 2017, the Spearfish City Council Monday approved dissolving the district.

City Planner Jayna Watson explained that due to the bid opening for the first phase of the Jackson Boulevard improvement project having been set earlier in the meeting, as part of the consent agenda, staff needed direction from the council going forward pertaining to the TIF district. The options were to approve a resolution to dissolve the district or to direct staff to prepare the project plan to identify what of the Jackson Boulevard improvement project amenity costs would be TIF-related, per state law.

A TIF district is a public financing system that uses future increases in property tax to reimburse the costs of public improvements built within a designated boundary. The ideas is that as real estate value increases within that boundary, higher tax revenues result, and that “tax increment” is then used to refund the costs of public improvements created to support the project, paid back to the source.

Property taxes are generally split between the city, county, and school district, but within the boundary, while a TIF district is in place, that revenue is paid to the source of the construction funds. All taxing entities continue to receive their base revenue from property taxes, with that base is set at the formation of the TIF district.

TIF district 5’s boundary was set on Oct. 2, 2017, around Jackson Boulevard, extending the boundary out a full block to Kansas and Illinois streets, from Exit 12 to University Street, and city staff and the council emphasized at the time of the formation that TIF district 5 was an option to pay for the amenities above and beyond the roadway and utility improvements.

“After some reconsideration of whether or not we should use this method, I believe it is the indication of staff that we probably should dissolve tax increment district number 5, so that’s really what (the) resolution … does,” Watson said. “It simply dissolves it, and then all the monies that have been collected so far, which, we haven’t received yet, but we may in early January, would then be returned to the county and then returned to the taxing entities.”

She added that expected revenue from the district for the amenity package would be $200,000 to $300,000 of potential revenue collected over 10 years, should the council choose to proceed with a project plan to utilize TIF district 5.

“Originally, we thought that this would be an economic development type of opportunity, but perhaps the council has other priorities as well, so option 1 (to dissolve the district) is preferred by staff,” Watson said.

Mayor Dana Boke agreed with the recommendation.

“I think with some changes in the TIF … law from last year, I think it’s probably best to just dissolve this and then move forward with something different (in terms of funding options),” she said.

The Legal, Finance, and Public Safety Committee also recommendation the dissolution of the district on Dec. 12.

“It may sound a little bizarre to discuss about walking away from tax-increment finance revenue,” City Administrator Mike Harmon said during that meeting. “In discussing this particular TIF district, the mayor and I both feel that it doesn’t necessarily meet the spirit that the state law is after with regard to establishing TIF districts, and in light of future economic development opportunities in front of us, we wouldn’t want to complicate things moving forward, so our recommendation is to dissolve this TIF district … because it doesn’t meet the spirit of what TIF is used for.”

South Dakota Codified Law 11-9-8 outlines the required findings in a resolution outlining a TIF district: “ (1) Not less than twenty-five percent, by area, of the real property within the district is a blighted area or not less than fifty percent, by area, of the real property within the district will stimulate and develop the general economic welfare and prosperity of the state through the promotion and advancement of industrial, commercial, manufacturing, agricultural, or natural resources development; and (2) The improvement of the area is likely to significantly enhance the value of substantially all other real property in the district.”

The council Monday unanimously approved the resolution to dissolve TIF district 5, which would be published Dec. 28 and become effective Jan. 17. Councilman John Lee was absent.

The bid opening for phase 1 the Jackson Boulevard Street and Utilities Improvements Project was set for 1:30 p.m. Feb. 8. Phase 1 would run from Exit 12 to the area near Spearfish Creek. The project, identified for redesign/reconstruction on the city’s five-year capital improvements plan, runs approximately 1.1 mile from the city’s jurisdiction of the roadway coming off of Exit 12 to University Street. In addition to basic utility and roadway improvements, goals of the project including replacing infrastructure, increasing storm drainage capacity, and resurfacing roadway; adding streetscape design to improve aesthetics/beautification along one of the main corridors into Spearfish; and increasing traffic safety, traffic calming, and access management/reduction of conflict points, meeting Americans with Disabilities Act requirements, and providing safe crosswalks.

The overall preliminary project budget is estimated between $7 million and $8 million, and the construction portion of the project was pushed to 2019-2020, after it was originally slated to begin in 2018.

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