The Lake County Commissioners voted Thursday (today) to approve a second tax incremental district (TID) in the county.|
With this TID, the county would agree to support a developer to build two 14-unit town homes on 1.7 acres of bare lot just east of Falcon Plastics, at the intersection of S.W. 8th St. and Union Ave. However, the county would not take out bonds to support the project as they did with the TID for the Dakota Ethanol plant.
In this case, the Lake Area Townhouses, LLC, a proposed new development corporation, will finance the project through private loans; the county would simply agree to allow the amount to count against its bond obligation amount.
"The county would only issue the bonds if necessary," said States Attorney Chris Giles.
If the county were to grant the TID, "there would be no obligation on behalf of the county" because of the structure of the development group, said Richard Benda of Lloyd Companies of Sioux Falls.
A limited liability company (LLC) would take out a loan for the project. This LLC is yet to be formed, but Benda said they plan to have an individual or group own 40 percent; investors would own the other 60 percent.
The need for the project, according to Benda, is something they have found in several South Dakota towns.
"Affordable workforce housing is in demand in many communities," he said, "not just Madison." While there are programs for lower income residents, "the next rung of people are often unable to find housing."
Local housing studies have indicated a need, and Lloyd has built several of these types of properties in Sioux Falls, said Madison Mayor Roy Lindsey, so the company knows building costs.
"Madison does not have the incomes that Sioux Falls does," Lindsay said, so to get the rent down, a TIF (Tax Incremental Financing) District could be used to cover the costs of infrastructure, thereby reducing rents.
Because state law (SDCL 11-9-42) does not allow for a TID to be used for residential structures, the amount of the TID would be $423,645, including the costs to put in the capital improvements (street, water, sewer, etc.), as well as land acquisition, architectural fees, professional fees, administrative fees for the county, etc.
The work must be done within five years of the TID, but they hope to start construction yet this fall and have the units ready for rent by the end of February.
The town homes would range from one-bedrooms with no garage at $610 to 3-bedroom units with garages at up to $1,125. The total cost to build the 28 units is roughly $2.7 million, said Loren Koepsell, CFO with Lloyd Companies.
The loan would be repaid through the taxes on the increased assessed value of the property. The property is currently valued at $24,900; with the improvements, Lloyd Companies estimates the new assessed valuation would be $1.4 million. Repayments would be roughly $38,000 per year over the next 20 years, which would go through the county to the lender, as something of a pass-through fund.
Technically, the property is within the Madison city limits; however, Lindsay said the city is bonded for a water and sewer plant.
Benda said they have been in contact with local subcontractors, and two local banks have made commitments.
"We hope this is a Madison project," Koepsell said.
Others in Madison voiced their support for the project. Lindsay said the city was in support of the county adopting the TID and had passed a resolution stating this.
Dustin Williams, plant manager at Gehl said he supported the project. "We need to encourage development of housing," he said.
Amy Crissinger, associate vice president of enrollment management and marketing at Dakota State University, said the university supports it as well. Julie Gross with Lake Area Improvement Corporation also supported the project.
"We see lots of activity in the community, and we don't see it slowing down," said Gross. "Growth spurs growth."
"There is no risk to the county," Giles said, as the project would be privately financed. Also, the county has the capital to bond $100 million if needed, and this amount is well under that. "Plenty of room under the bond authority to take on more," he said, should another large project come about. The county's first TIF District, for Dakota Ethanol, is $1.13 million.
No one voiced opposition. The commissioners approved the TID unanimously.