The “Tax Pie” and the Future of Growth: An Exclusive Deep Dive into TIFs with Toby Morris
- Steve Jurrens
- Feb 24
- 6 min read
Northeast Radio SD News - Watertown, SD - In the world of South Dakota public finance, few names have as much experience as Toby Morris. As the Managing Director at Colliers Securities, Morris has spent over 25 years in the trenches of economic development, helping cities, schools, and the state navigate the complex plumbing of infrastructure funding.
In an exclusive, wide-ranging interview, Morris sat down with news broadcaster Steve Jurrens at Northeast Radio SD to demystify Tax Increment Financing (TIF)—a tool he describes as both the most powerful and the most misunderstood weapon in a city’s growth arsenal.
1. The Basics: What is a TIF, Really?
To understand a TIF, Morris says you have to stop thinking about it as a “handout” and start thinking about it as a reimbursement for infrastructure.
Historically, cities and counties paid for roads, water lines, and sewers that enabled towns to grow. But as public budgets have been compressed by inflation and rising costs, that burden has shifted to developers.
“Really what it is, it’s being able to apply property tax in a particular area to offset infrastructure,” Morris explains. “A TIF reimburses the developer over a period of years for a cost they experienced over a period of months”.
“Lack of infrastructure is our biggest impediment that we have in South Dakota for responsible growth... What a TIF does is as that increment grows—meaning as more valuation is within that area—it offsets the upfront cost that a developer had related to infrastructure.”
2. Debunking the Myths: Schools and Tax Hikes
The two most common fears regarding TIFs are that they take money away from school children and that they cause property taxes to rise for everyone else. According to Morris, both are mathematically incorrect in the state of South Dakota.
The School Funding “Hold Harmless”
“The school’s general fund is held harmless,” Morris asserts. Because South Dakota schools are funded primarily on a per-student basis, a TIF actually helps schools by encouraging housing growth that attracts more students.
“Whether you have 12 kids in third grade or 20 kids in third grade, you still have those fixed costs,” Morris notes. “The schools will make it up on a per-student basis”.
Your Property Taxes
“Are my taxes going to go up? No,” Morris says flatly. TIFs do not impact the tax rate of existing homeowners. In fact, Morris argues that TIFs are the key to eventually lowering taxes.
“In order for taxes really to go down or to stabilize, you need growth,” Morris explains. “Growth increases the valuation... when these TIFs dissolve, say 12 or 15 years later, that valuation goes into the bigger formula. The bigger the valuation, the lower the mill levy. The lower the mill levy, the lower your property taxes are”.
3. The “Smell Test”: Preventing Corporate Welfare
With the rise of social media, TIFs have become more controversial, leading some to label them “corporate welfare.” Morris, who receives two to three calls a week from developers seeking a TIF, says his firm accepts only a fraction of them.
He uses what he calls a “Smell Test” (a personal version of the “But-For” test) to ensure the public isn’t being taken for a ride.
“If you know something’s going to happen and they’re going in regardless to an area that’s already developed, then it doesn’t smell right, it doesn’t go in,” Morris says. He also notes a rising “sense of entitlement” among some developers that he actively pushes back against.
“I’ve never done one where a developer fee is part of a TIF. We keep it highly restricted to just infrastructure.”
4. Solving the Housing Crisis
One of the most critical uses for TIFs in 2026 is workforce housing. In cities like Watertown, the high cost of property taxes can equal a month and a half of rent for a single unit, making “affordable” housing impossible to build.
Under South Dakota law, TIFs for multi-family housing come with strict “guard rails”:
· Rent Limits: Rents must be kept at 80% of the Area Median Income (AMI).
· Price Ceilings: For single-family homes, the price cannot exceed South Dakota housing standards for a first-time homebuyer.
“The TIF can actually help stabilize that rent, keeping it low,” says Morris.
5. Success Stories: From Traxx to Webster
Morris points to Terex in Watertown as a gold standard for industrial TIFs. By helping a major employer expand, the community gained half a million square feet of industrial space and a “phenomenal employer” that generates significant economic spinoffs for local service providers.
He also highlighted the City of Webster, which took a “progressive and aggressive” stance by borrowing money to fund infrastructure for 100 single-family units. “It’s one of the greatest stories... because it’s truly becoming successful,” Morris says, noting they pre-sold 35 lots in a town that hadn’t seen major development in decades.
6. The “Cave People” and the Need for Transparency
Despite the benefits, Morris acknowledges that economic development is often more emotional than technical. He jokingly refers to some critics as “CAVE people” (Citizens Against Virtually Everything), but he takes their concerns seriously through a commitment to total transparency.
“As a registered municipal advisor, my ethics is to always be transparent,” Morris says. He advocates for the “guard rails" recently introduced in the legislature to ensure TIFs are viewed as tax money investments, not handouts.
The Bottom Line
Morris likens a TIF to a long-term investment in the community’s future.
“A TIF is no different than planting a tree. I’m not getting shade tomorrow, next week, or next year, but when the TIF rolls off... the benefits are there.”
For Watertown, a city Morris says has done a “very nice, responsible job with TIFs,” the shade from those trees is just beginning to be felt.
According to the 2025 South Dakota TIF Annual Report, Watertown currently has 8 active TIF districts. Collectively, these projects represent approximately $53 million in anticipated project costs and have generated a current total increment value of over $100 million.
Industrial & Infrastructure Successes
· Mallard Pointe Business Park (TIF #7): Created in 2019 to improve the business park for current and future tenants. This project has an anticipated cost of $7,000,000 and has already generated an incremental value of $22,451,276.
· 1st Avenue North Extension (TIF #5): This long-standing economic TIF (created in 2007) funded the extension of 1st Avenue North. It has been highly successful in increasing property value, growing from a base of $472,835 to a 2025 equalized value of $37,393,920.
· Calvin Industrial Park (TIF #8 & #9): These two districts were created in 2019 to provide infrastructure for industrial growth. Combined, they represent approximately $1.4 million in infrastructure investment.
Housing & Downtown Redevelopment
· Workforce & Affordable Housing (TIF #17): Created in 2021 specifically for affordable single-family homes. It has an anticipated project cost of $5.6 million and aims to provide 72 new homes for the community.
· Downtown Improvements (TIF #10 & #12): Both districts focus on commercial and housing infrastructure to support growth in the downtown area. TIF #12 is a significant $5 million project aimed at creating jobs and encouraging growth.
· Multi-Family Apartment Infrastructure (TIF #15): This 2021 project is the largest recent housing-related TIF in Watertown, with an anticipated project cost of $20,000,000. It has already generated over $14 million in incremental value.
Watertown TIF Summary Table
TIF District | Type | Primary Purpose | Anticipated Cost | Current Increment Value |
Economic | 1st Ave N Extension | $3,832,439 | $36,921,085 | |
Economic | Mallard Pointe Business Park | $7,000,000 | $22,451,276 | |
Economic | Commercial/Housing Infra | $2,968,880 | $5,506,981 | |
Economic | Apartments/Senior Center | $2,070,349 | $5,973,687 | |
Economic | Commercial/Housing Dev | $4,358,406 | $22,016,042 | |
Economic | Apartment Infrastructure | $20,000,000 | $14,076,298 | |
Affordable | 72 Affordable Homes | $5,600,000 | $6,566,596 | |
Economic | Commercial Infrastructure | $2,500,000 | $1,745,817 |
