Pennington County will "peel off" $971,196 in tax revenues this year to pay for tax increment financing districts in Rapid City and four other Pennington County communities, according to County Auditor Julie Pearson.

"That's the amount of dollars that went into paying off TIFs that did not come into Pennington County to support our budget," Pearson told county commissioners at a special meeting called Tuesday to discuss TIFs.

Pearson outlined the county's revenue losses when tax dollars are peeled off to pay for the improvements supported by a TIF.

The task force studying Rapid City's use of TIFs invited the commissioners to comment about their work. Commissioner Ethan Schmidt is a member of the task force.

The commissioners stopped short of making a formal statement to the task force, but they agreed that letters will be sent to Mayor Alan Hanks and to other mayors of county communities that use TIFs, outlining their concerns about the impact TIFs have on the county.

"We are having some issues with finding financing to just run the county," Commissioner Nancy Trautman said. "And when the money is peeled off to pay the tax increment districts, we don't have that money. We don't have it for several years."

Pearson reminded the commissioners that when the county cut its economic development budget last year, she noted that the diversion of $634,026 in 2007 tax dollars for TIFs were a contribution to economic development.

The use of TIFs throughout Pennington County has grown substantially in recent years, according to Pearson.

Eight years ago, the county diverted $286,048 to cover Rapid City TIFs. Five years later, the county allocated $325,977 of its 2005 taxes payable in 2006 for TIFs in Keystone, Rapid City and Wall. Last year, $634,026 in tax revenue was directed to payments on TIFs in Box Elder, Keystone, Rapid City and Wall.

Commissioner Jim Kjerstad said that although allocations for TIFs will only grow in the future, some of the projects funded by TIFs could probably be paid for through bonding.

Pearson automatically charged taxpayers living within the Rapid City School District $1,305,666 this year to cover tax dollars the school district would lose because of TIFs, abatements and discretionary formula assessments within the Rapid City limits. The majority is for TIFs.

State law requires that levies be adjusted to protect the school district from any revenue loss because of those three categories.

"The people in the Rapid City limits have to reimburse the schools, because they can not lose tax dollars," Person said.

Pearson noted that more than one TIF can be overlapped on an area. Some taxpayers in the Red Rocks subdivision area pay more for TIF reductions than they do in county property taxes, she said.

Schmidt said that after the TIF is paid, there is a large increase in the valuation and taxes paid.

But that doesn't help the county during the intervening years.

"It takes a very long time to recover all those years we didn't have access to that money," Trautman said. "And in the interim, today, we have to run county government.

Trautman said the task force has at least raised an awareness of the county's concerns with TIFs.

"It will help, but it's not going to fix it," she said. "The fix is in the state Legislature."

Contact Andrea Cook at 394-8423 or andrea.cook@rapidcityjournal.com