Recently, the City Council of Sioux City unanimously approved the sale of city-owned land for a proposed multi-sports complex to be called The Arena. With the exception of benefits to be provided by the city the Taxpayers Research Council explains below, this project will be completely privately funded. The developers are three local residents. The TRC applauds the project that will create a "quality of life" benefit while at the same time transforming idle land to tax revenue-producing property. The city and its staff and project developers are to be commended.
The TRC believes city options for support of The Arena pose a minimum of risk to citizens. The city has agreed to provide either a $500,000 economic development grant or a seven-year, 100 percent tax rebate at the option of the project developers.
We will now explain both options of city support and their impact on the city’s budget.
The first option available to the developers is the $500,000 economic development grant. According to city staff, the city would issue a $500,000 bond and use the proceeds to pay the developers. The bond would be repaid through property tax payments paid by The Arena. It’s important to remember that since the property in question is owned by the city, there is no property tax currently collected from it. By selling this parcel of land to The Arena, it is likely that tax revenue will far outpace the amount of the initial bond. Also worth noting, since the parcel of land is located within an Urban Renewal District, is that the project could be TIF’d. Tax increment financing allows the city to capture the future growth in tax revenue before the other taxing bodies. This ensures quicker return of the initial investment.
Right now, the city-owned parcel provides few benefits for citizens and earns no property tax revenues for the city. So providing a seven-year, 100 percent tax rebate allows the city to support the project without foregoing revenues it already uses. This option credits back nearly all the property taxes otherwise paid during the first seven years. This parcel of land is eligible for the rebate because it lies within an Urban Renewal District. It’s important to note here that while it is called a 100 percent tax rebate, not exactly 100 percent will be rebated. Also worth mentioning is that while under this option the city captures almost no property tax revenue from the development in its first seven years, it will be collected in full after the seven-year rebate period. This means that future property tax revenue will be generated at no upfront cost to the taxpayer.
While it is ultimately the developer’s choice, more times than not the rebate is more beneficial for the local entity - in this case, the city of Sioux City. This is due to the fact that the city would not have to pay issuance costs needed for bonded indebtedness. Instead, the property taxes paid by the project owners would be returned to them by the city each year for the first seven years.
Finally, this type of facility will serve as a center for regional youth athletic competitions that will draw families from around the region into Sioux City year-round. These families will rent hotel rooms, eat in our local restaurants and shop during their down time, all resulting in increases in sales and hotel/motel tax revenue for the community. Additionally, it will help introduce the many other attractions that the Siouxland region has as a means to bring them back to the community in the future. This project should dovetail well into the new emphasis on events and tourism that the City Council is hoping will happen with the reshaping of management at the Tyson Events Center and Orpheum Theatre.
The TRC strongly believes that commending our local officials and government is just as important as questioning and criticizing. This move by the city will benefit the city as a whole at minimal risk to the city and without asking taxpayers to foot the bill. Quality of life attractions such as this proposal are essential in bringing future economic development projects, along with the increased revenue and employment opportunities that come with them, to Sioux City.
Taylor Goodvin is executive director of the Taxpayers Research Council.