STURGIS, S.D. – The Sturgis City Council has approved a TIF for a developer which could in the coming years bring at least 62 single-family homes, 16 townhomes and 100 multi-family housing units to an area in northwest Sturgis.
The developments – Harvest Meadows Estates and Valley View Subdivision – planned by PIVOT Development Group LLC in the new TIF district – would be situated along Avalanche Road and Alder Place.
Harvest Meadows Estates is a mixed-use development with apartment complexes, townhomes and single-family lots. It is located to the north of Avalanche Road which skirts Interstate 90 just west of the Runnings store in Sturgis.
Valley View Subdivision, located on the west side of Avalanche Road and north of Alder Place, will be designated to create single-family workforce housing.
The City of Sturgis and the developers had entered into an agreement for TIF # 22 in 2022, but delays pushed the start date for the project back. So, the developers and the city agreed to make changes to the proposed project associated with Tax Increment Financing District (TIFD) TIFD # 22. As part of these changes in the development process, the parties agreed the best approach was to dissolve TIFD # 22 and to replace the TIF with the proposed TIFD # 29.
The most notable change from the earlier TIF to the latter that was passed Tuesday was that the city was no longer obligated to provide a $1 million loan to the developers to help with infrastructure. Instead, the developers have taken out a private loan with a bank and have agreed to make improvements to Alder Place and Orchard Lane as part of the plan.
“We are basically vacating TIF #22 and replacing it with a new TIF,” Kyle Trealor with PIVOT Development Group LLC told the Sturgis City Council Tuesday. “It will be the exact same boundaries we had before. We’re updating the project plan. And, we’re ready to get started.”
Some council members noted that TIF #29 will be costing significantly more than TIF #22.
Trealor explained that the larger number is because interest rates have gone up so drastically.
“The original TIF was written with like a 5% interest rate and that just doesn’t exist anymore,” he said. “With the project going fully onto our balance sheet with no money coming from the city funds anymore, we went in and updated the interest rates.”
Trealor said interest rates today are about 9%.
Councilor Jim Thompson said he has been in contact with constituents who are concerned about taking on another TIF with an extended payback period.
“We already have more (TIFs) than any other city our size,” Thompson said. “This may be no money from us, but it also doesn’t provide any income for the city.”
This type of financing is called a Tax INCREMENT Finance District, because the increment or difference between the value or taxes generated prior to TIF creation and the value or taxes generated each year after creation is used to pay the financing payments.
In the case of Harvest Meadows Estates and Valley View Subdivision, financing and interest costs are estimated to be $9,389,851. The developer costs are to be repaid to the developer using tax increment revenue receipts from Tax Increment Financing District #29.
The payback of the financing can be no longer than 20 years according to South Dakota state law.
