Development park hinges on loan from councilor
Deal won't go through without some help from City Hall
June 25. 2013 12:25PM
Creating commercial development in town is priority for the current Dell Rapids City Council, so much so that one of its members has offered to loan a local development group more than a million dollars to make it happen.
The non-profit Dell Rapids Economic Development Corporation (DREDC) has an option to purchase 80 acres of land located southeast of the Centennial Place and Garfield Avenue intersection for $15,000 per acre. But a fast approaching expiration on the purchase option – October 1, 2015 – has city officials and DREDC working to find the needed resources to purchase the land.
The price of each acre goes up by $500 each year after 2015.
Because DREDC lacks the capital or assets to acquire a loan from a traditional banking institution, Councilor Mike Geraets has offered to loan DREDC the $1.2 million needed to buy the 80 acres now owned by the Melvin and Delores Fiegen family.
DREDC would pay back Geraets at a 4 percent annual interest rate with the terms of the loan being renegotiated after five years.
Geraets said he’d rather not risk his own money to facilitate the project, but feels compelled to because commercial development is a major need in Dell Rapids.
“I am doing this as a service,” he said. “We shouldn’t all have to get up and drive to work.”
With an opportunity to address that need sitting before both the City of Dell Rapids and DREDC in the form of the purchase option, Geraets said now is the time to be aggressive in spurring economic development in Dell Rapids.
City Administrator Justin Weiland said city attorneys indicate there are no statutes keeping Geraets, or any alderman, from risking his own money for the project. However, as an alderman, Geraets will have to recuse himself from any future discussions and votes pertaining to the property if the deal goes through.
“(Geraets) has been made aware that if this happens, there is conflict of interest … he will not have the ability to vote on anything that has anything to do with getting sewer there, anything to do with developing that site,” Weiland said.
But Geraets’ loan isn’t the final step in the purchasing process. DREDC won’t buy the land unless the City extends sanitary sewer south to Centennial Place, a task expected to cost about $1.2 million, and helps pay the interest on the loan.
DREDC wants the City to find about $40,000 to $50,000 in next year’s budget to assist with the interest payments.
Without much discussion, the council voted 6-1 to authorize city administration to find within the 2014 budget the means to make DREDC’s interest payments.
Councilor Chad Andrews was the lone nay vote. Councilor Dave Sommerveld was not present.
Right now, there are no City sanitary sewer lines south of the Big Sioux River.
City officials say the lack of sanitary sewer lines in the southern portion of town has cost Dell Rapids economic development in the past, and if the lines aren’t extended soon, it’s going to hurt the local economy again.
Councilor Lee Burggraff, who serves also as the president of the DREDC board of directors, said when Central States Manufacturing was looking to move to the area, Dell Rapids was the company’s first choice.
Ultimately, he said, it was Hartford, not Dell Rapids, that was ready. Today, the Hartford economy has 45 new manufacturing jobs it didn’t two years ago with 40 more planned within the next three years.
Mayor Scott Fiegen said he supports extending all utilities south to the City limits.
“Our city does expand to the south and we provide no sewer service to those people today,” he said. “I’ve always felt that regardless if (this project goes through), those people should have sewer because they live in the city.”
The City’s five-year capital improvement plan calls for extending the sewer south of the river in 2017.
“You can see it in the budget, it’s scheduled to happen, but we’re going to fast track it in order to facilitate industrial development,” Geraets said. “But it’s not just for development. It’s for all the people south of the river.”
The council voted at its last meeting to have engineers put together plans for extending the sewer lines south to Centennial Place. Working with the engineers, city administration will pursue grant funding for the sewer extension from the Department of Environment and Natural Resources.
“The key to getting funding from DENR is you have to provide services to existing properties that do not have sewer service. They don’t grant funding through the state water board for future development,” said Trent Bruce, an engineer with DGR Engineering, the contracted engineers for the City of Dell Rapids. “So the fact that you have parts of your community that do not have sewer plays well to your needs here. That provides you with a foot in the door, if you will, to get the grant funding that you need.”
Heavy on the housing
Weiland said when municipalities invest too much in residential development while ignoring other economic sectors like commercial and industrial development, they often find themselves “upside down” and can become increasingly reliant on residential property taxes.
And that’s exactly where Dell Rapids is headed if the local community doesn’t get serious about bringing in outside businesses, Burggraff said. Right now, he said, many people have no choice but to commute to Sioux Falls if they want a paycheck because jobs aren’t available in Dell Rapids. And when commuters are in Sioux Falls working, they often spend their money there as well, Burggraff said.
“Every citizen stands to gain by industrial development because that’s the only thing that will keep real estate taxes down,” he said. “It should have been done 20 years ago.
Minnehaha County Economic Development Director Nick Fosheim said a diverse tax base helps bolster city coffers, opening the door for better and increased services.
“When you have a residential tax base and that’s the majority, they’re consuming a lot of the services and not maybe putting as much back in in tax revenue,” he said. “It’s important to diversify because a lot of times commercial and industrial business pay more in taxes, but they’re not drawing on those same services that a residential base would.”