City delays decision on Washington Square TIF

Officials at City Hall want more time to decide whether to use a special tax designation to aid in a $30 million building and parking project in downtown Sioux Falls.

A family that owns a piece of vacant downtown property at the northeast corner of 12th Street and Main Avenue wants to build a nine-story mixed use building featuring condominiums, office space and retail, as well as a 189-space parking lot. They say the project isn’t feasible without some assistance from the city in the form of tax increment financing (TIF).

Designating a TIF district allows a developer to use the increased taxes that come with an improved property to pay for a portion of project costs for up to 20 years.

The Sioux Falls Planning Commission was slated to hear the TIF proposal Wednesday night with a recommendation of denial from Sioux Falls Community Development, the arm of city government that processes TIF applications. But just hours before commissioners convened, Sioux Falls Community Development’s Brent O’Neil said they agreed to extend negotiations another month.

“I think both sides just felt having another month to discuss the project could be beneficial,” he said.

Chris Houwman, who co-owns the land as part of Washington Square LLC with his three brothers and father-in-law, said the next month will be used to convince Community Development the Washington Square project, which has been in the works since last fall, is a viable candidate for TIF assistance because it aids in economic development for the city of Sioux Falls while also improving what he called a blighted piece of property.

“Our goal is to give that area the economic injection that the CNA Surety building did on the East Bank,” Houwman said.

Economic projections compiled for Washington Square LLC put the project’s 10-year economic impact between $35 million and $145 million, depending on how the building is used. Parking would be limited to office tenants during the day but would be free to the public after business hours.

Those projections also determined $6.3 million in eligible costs could be covered by a TIF. Houwman said they’re asking for $4.6 million.

The diversion of the increase in property taxes “is critical for the project to be financially viable. Using best-case scenarios and modeling, where all condo units are sold within two years of initial construction, the project’s return on equity is negative without the use of TIF,” Sage Consulting, the firm hired by Washington LLC, said in a statement earlier this year. “With TIF, the return increases to a more acceptable, positive rate.”

The TIF application included endorsements from neighborhood businesses like Home Federal Bank, the State Theatre and the Washington Pavilion.

BY THE NUMBERS

•Current property value: $319,200

•Estimated future property value: More than $30 million

•Current property taxes paid: $7,917

•Future property taxes estimated: $495,921

School district’s tax share:

Before: $4,792

After: $312,876

City’s tax share:

Before:$1,654

After: $108,012

County’s tax share:

Before: $1,142

After: $74,537

*Sage Consulting