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Wednesday, January 30, 2008

A lot of Aberdeen people are getting TIFed off

The Argus Leader today carries a story about recent developments in Aberdeen that promise new industries and new jobs. The prospects, however, are not as bright and glossy as media accounts paint them. Below is an insider’s perspective from Aberdeen City Councilman Clint Rux who joined fellow council members in voting down an application for a tax increment financing (TIF) district that would have subsidized a housing development.

TIF districts have been at the center of economic development projects in Aberdeen. So has workforce development, which requires a supply of labor and adequate housing for the labor force. Therein is a problem. The Governor's Office of Economic Development has issued a profile of Brown County which details the characteristics of the workforce. The profile emphasizes the low wages and absence of labor unions, and that has been the factor on which the area has tried to market itself to potential businesses.

The developments now in progress include:

  • Northern Beef Packers, a locally financed packing plant which says it will employ 200 initially with a potential of reaching 600 employees. Voters approved a TIF district for $8.6 in bonds. While construction is underway, the project has had problems sticking to its announced plans and schedule. It has vacillated on project managers, marketing contracts, and arrangements for disposing of its wastewater. Many community leaders who have supported the project express concern about whether the plant will become operational.

  • Molded Fiberglass Companies, an Ohio-based firm, will manufacture the huge blades that drive wind turbines. It was approved a TIF district at $3.5 million. When it became apparent that the developers miscalculated some infrastructure costs, they asked the city council for an additional $1 million, and were granted TIF bonds for $4.5 million. The plant can employ up to 650 workers.

  • Coventry Health Care came to Aberdeen when Mutual of Omaha sold its employer group insurance branch to Coventry. No TIF is involved. Coventry retained about 70 claim processing jobs and plans to increase its workforce up to 200 jobs.

  • Homes Are Possible,Inc., (HAPI) is a local non-profit organization that puts up low-cost Governor’s Homes, built by penitentiary inmates, and sells them to qualified low-income buyers. It was granted a TIF district for $1.25 million.

  • B&B Contractors has a housing development on the north side of Aberdeen. It applied for a $1.2 million TIF bonding authority but was rejected by a 4-3 vote of the city council. Its homes are in he $140,000 range with no income restrictions. The firm says the TIF rejection will add about $10,000 to the price of its homes.

TIF districts were created by federal law for the purpose of providing incentives to renew blighted areas. A community realizes no real estate tax revenues from TIF district above what the unimproved land was taxed. The taxes on the value of the improved real estate go, instead, to paying off the bonds sold for the TIF district.

Clint Rux was among the four Aberdeen Council members who rejected B&B Contractors application for a TIF district. Some people involved in the development projects were not happy and had snark fits.

Here is Clint Rux’s perspective on the issue:

Aberdeen Needs To Be Progressive, And That Is the Problem.

This TIF thing has seen to make people a little crazy. You have people against it, and people for it. The problem is that at many times there are many different circumstances that result in voting. At least in my case. I will not speak for other council members. The funny thing is that in voting against the TIF I have been labeled as non-progressive. And that actually got me thinking, as well as a little shocked. I have usually thought of myself as progressive. I have worked for more open and representative government, accountability, and more importantly change. In working for all these things I have gone from good blood pressure to pre-hypertension, and my wife swears she saw a gray hair. I am not even 33 years old. I have always taken pride in the fact that I am the poorest council member. That of course was made clear when it was printed in the paper that I could not afford a $140,000 home (I wished they would have left that one out). Lesson learned.

Of course, progressive in the dictionary means: moving forward, proceeding in steps, promoting or favoring political and social reform. Because I voted "NO" on the last TIF someone suggested that if I was not progressive enough, I should remove myself from the council. In reflection I realized that maybe I am too progressive. The current TIF issue probably reflects that more than any other issue. We are talking about what needs to happen in securing a future of growth. The problem is that many in Aberdeen have not had to tackle this issue, and are ill prepared to lead. They are putting past ways of doing things into the current scenarios we now face. They are protecting the interests of individuals, and not the future of this community. Sometimes a vote against something can make people ask, "What the hell do we do now."

The whole problem stems from the need for workforce housing. The problem with that is that many of the people in leadership roles attribute workforce housing to anyone who has a job. Unfortunately the accurate representation of "workforce" is anyone who works for an hourly wage. The people who work on salary, or own a business can be lumped into different groups, usually professional. And that is the big difference, a huge difference. People who work for an hourly wage have different housing needs than a professional. A person who works for an hourly wage wants an affordable, decent place to live. They do not care if they own it, they just want to live in it. A professional is more apt to want to own a home, invest in a financial future. There are different housing needs between these two groups, unique to themselves. The problem is that people in leadership roles are only focusing on housing geared to professionals, and not the every day worker. This is what has been done for years, and needs to change.

A growing community needs to have good places for people of all walks of life to live (that is the progressive philosophy coming out). A dramatic shift in thinking needs to occur in this community, or our growth will stall and fail. We need young people to come to this community, and that raises different issues. This community has not had to face this prospect, we have been an aging community. If we want true success we need to attract young adults. These individuals are more likely to have student loans that reduce their ability to pay for housing. They tend to be more of a credit risk. They have not proved financial stability. They want to be able to have the material things in life, and still enjoy life. More importantly, they have not yet settled down. They are not looking for homes, they are looking for places to rent. That is the shift in thinking that needs to occur, we need to think younger.

There are many other facts that would support the need for rental housing. It usually takes 30 to 60 days to close on a house. Where do those people that just move to town live in the mean time. This of course does not account for any construction. Workers in a beef processing facility on average only stay in a community for two years. These types of individual will never buy a home. Many communities that have seen growth built a large amount of rental units. People need time to get established in a community, having affordable rental housing gives them that time. You can accommodate the needs of a large influx of people buy building rentals. You build an 8-plex and you can house 8-24 people comfortably. You build a 200 unit apartment complex you can house 200-600 people. Unfortunately, we are focusing all our efforts on building houses.

Aberdeen is at a crossroads in a major shift of change. The problem is we need to be thinking differently, progressively. We need to change our thinking from what we have done, to what we need to do. This is proving increasingly difficult because some can not make that leap in thinking that is so desperately needed.

Clint Rux

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Aberdeen, South Dakota, United States