$12.5M Preacher Smith/The Ridge TIF approved with $2M for turning lane

Land near the Preacher Smith Monument near Deadwood has been cleared to make way for The Ridge Development. Pioneer photo by Jaci Conrad Pearson

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DEADWOOD — Monday, the Deadwood City Commission approved a project plan for and resolution to create Tax Increment Finance District (TIF) #14, a $12.5 million TIF request that grew from an original $10.5 million in order to pave the way for an eventual turning lane into the development, estimated to cost $2 million.

While this is yet another phase in the TIF approval process, Commissioner Sharon Martinisko said for the binding agreement, the developer’s agreement, she will want to see a serious cost-breakdown of the numbers involved in the TIF expenses to justify the costs and eventual expenditures.

“It’s a big number. It’s a scary number. But developers understand that this is an annual appropriation,” said Martinisko. “This is not guaranteed at any time, although we definitely want you to succeed and also, this is not a binding agreement yet. The binding agreement is the developer’s agreement.”

The commission continued the TIF #14 request from its Nov. 1 meeting when a surprise 50% increase in a previously agreed upon $10.5 million, turned into a $15 million project plan request. The commission then asked Tobin Morris, senior VP Colliers Securities, LLC and developers Randy Horner of Bismarck, North Dakota and Larry Cottier of Deadwood, both of TRD, LLC, to sharpen their pencils and come back with a number closer to the $10.5 million original request.

Morris said the reason for the significant increase was the fact that at some point, the Department of Transportation will require a turn lane into the development, which is located by the Preacher Smith Monument, off Highway 85.

Commissioner Gary Todd was the sole dissenting vote on Monday’s approval.

“I guess I have one area that I’m not comfortable with and that is the turning lane,” Todd said. “Number one, we don’t know that it’s going to be required, that’s one. Number two, as far as I know, we don’t have an exact cost on the expenditure. Third, and I guess, my biggest concern, that expenditure is outside of the TIF district. It’s not on the development property. It will never be a taxable asset for the city. That’s why I approve these TIFs is for economic development, I understand. But it’s also that in the future, the city will recoup some of those expenses and I guarantee we’re gonna’ have some of those expenses.”

Todd said on all other TIFs, the expenses are broken down to see what is an appropriate expenditure, as should be the case for the $2 million for the turn lane.

“I just don’t feel we should be spending $2 million outside the TIF district,” Todd said.

Deadwood Public Works Director Bob Nelson, Jr. said in a traditional TIF, money is not supposed to be spent outside of the TIF boundary.

Deadwood Mayor David Ruth, Jr. explained that the $2 million would be in the TIF.

“With tax increment financing, there is an amount that is allowed and that doesn’t mean that they spend that whole amount,” Ruth said. “So if DOT does not require the turning lane, then they would not be getting the $2 million for a turning lane that was never built.”

Morris cited state statute that said municipalities are expected to receive expenditures associated with implementation of the plan.

“The problem we have with TIFs is that we’re trying to memorialize what the future’s going to project, because we can’t go back and change it without basically nullifying the base value of the TIF, so you try to put what you think is going to be in there, but, more importantly, you put in stipulations,” Morris said.

Ruth said city officials are excited about the potential for an addition $160 million worth of taxable assets for the city of Deadwood.

A TIF is used as an economic development tool and can be explained like this: It is a public financing system that uses future increases in property tax to reimburse the costs of public improvements built within a designated TIF boundary. The value of all the properties inside the district is assessed or calculated and the total amount of property tax generated by all those properties is noted — the base amount of property tax revenues. All property revenue above this base amount, for the life of the TIF, is captured by the TIF to refund the costs of the public improvements or project. This amount — the amount over the base — is called the “tax increment.” Over time, property values are presumed to increase in part due to infrastructure improvements brought about by the TIF project itself. When the TIF is retired, the total taxation values revert to the original taxing entities.

The Preacher Smith tract is platted as 679.49 acres. The budget submitted for TIF jurisdiction indicates three phases: phase 1, phase 1a, and phase 1b. The land is proposed to be developed into residential, multi-family and retail/commercial.

The Deadwood City Commission June 21 approved a Memorandum of Understanding (MOU) with TRD, LLC for the Preacher Smith Property, also known as The Ridge development, for a proposed annual appropriation TIF of $10.5 million. The MOU’s estimated project amount of acquiring, developing, financing, and preparing the property for sale or lease is more than $13.9 million, with an estimated $10.5 million of those TIF-eligible costs.

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