Next steps for Smithfield project include financing request, land sale

The Sioux Falls City Council will consider a new tax increment financing district for part of Foundation Park next month as Smithfield Foods moves closer to purchasing 200 acres for its new $1.3 billion pork processing plant.

“Without a TIF, this project doesn’t happen,” Mayor Paul TenHaken said.

The TIF largely would fund a dedicated wastewater treatment plant at the new location in northwest Sioux Falls. Smithfield would be able to use up to $90 million of the incremental new property tax revenue generated on the site over the next 10 years — funding about half the cost of the wastewater treatment plant it needs to build.

Smithfield would upfront all project costs and be reimbursed after the project’s completion and only up to the total amount the tax increment generates.

The city supports the approach because it’s preferable for Smithfield to treat its own wastewater rather than running it through the city’s water reclamation plant, director of public works Mark Cotter said.

“They will stay in the wastewater business, and they will have the most advanced treatment plant in the state,” he said.

Smithfield originally preferred not to treat and discharge its own wastewater, said Jeff Eckhoff, the city’s director of planning and development services.

“Mark’s team worked very hard with the Smithfield team to identify (several) different alternatives, and they came to the conclusion that Smithfield would treat their own wastewater,” he said. “So we came together to solve a wastewater treatment question. The TIF will help offset those costs. There may be other eligible costs, but that’s the primary one.”

The plan is to bring the TIF ordinance to the Planning Commission on March 4 and for a City Council vote March 10 and 17.

The Sioux Falls Development Foundation plans to sell the land to Smithfield around the middle of this year, president and CEO Bob Mundt said.

Smithfield would join anchors at Foundation Park such as Amazon, which has a second site under construction, and CJ Schwan’s, which is under construction.

“This project will just solidify the reason they did the park back in 2015,” Mundt said. “We were able to keep what I would consider to be our largest manufacturing employer in the area, keep all those jobs and transition an area (downtown) that people have talked about for decades. And Foundation Park led to that. We’d never have been able to do that had Foundation Park not been there.”

The conversation could include national pushback around foreign ownership of agricultural land and meat production. While 12 percent of Smithfield Foods is publicly traded in the U.S. on the Nasdaq, its parent company is China-based WH Group.

Smithfield CEO Shane Smith was asked about the prospect in a Wall Street Journal article this week covering the project announcement.

“Do I expect to hear some noise? Probably. But do I think it should rise to a level where it’s an issue? I don’t think so,” Smith said in the interview. “Especially, again, if people look at this objectively.”

Site cleanup planned

While Smithfield won’t move operations off its century-old campus next to Falls Park until at least late 2028, city leaders are envisioning what the next steps for the land could look like.

Philanthropist Denny Sanford will donate $50 million to the Sioux Falls Area Community Foundation, which then will provide it to reimburse the Falls Area Development Corporation — a 501(c)3 associated with the Sioux Falls Development Foundation — for the land purchase and to cover a portion of the cost to demolish and remediate the site.

“That corporation, which is essentially us, will clean up the site, demolish it, clean it up, and once it gets a clean bill of health, turn it over  to the Sioux Falls Development Foundation, and we develop a redevelopment plan in conjunction with the city and the residents,” Mundt said.

“The Development Foundation may need to put some extra money in there to get it cleaned up the right way, but we’re going to make money off the sale of our property (at Foundation Park), so we’ll be a partner in doing that.”

Smithfield has until 2030 to fully wind down operations and sell the land. The company has allowed the city and its contractors to do an on-site preliminary survey, Cotter said.

“We did walk through every area,” he said. “Confidence level was of the essence.”

Several areas of the campus are relatively new and won’t need remediation, he said. Those include a 2-year-old wastewater facility, a state-of-the-art stockyards and a distribution center built in the past 15 to 20 years.

“They gave us a good level of comfort,” Cotter said.

While some remediation will be needed, “we’re confident … we’re not going to be taking on an incredibly difficult liability for the taxpayer,” TenHaken said.

TenHaken anticipates designating it an urban renewal district, overseen by an authority that includes representatives of city government, the Sioux Falls Development Foundation and the community at large.

That also would allow for grants to help support redevelopment. City officials anticipate conducting phase one and two environmental studies on the property to allow it to potentially receive federal support.

Sen. John Thune calls the overall announcement “very exciting” and something that will “free up an enormous amount of downtown property, which can be developed and enhanced and add to what has become a very beautiful downtown area. … I’m hopeful as this process moves forward, it will move forward smoothly.”

He didn’t rule out future federal assistance related to remediation or redevelopment.

“A lot of those things were from a past era, but this is one that obviously would probably need some help there,” Thune said.

The entire redevelopment could take at least 50 years, Eckhoff predicts.

“With 120 acres, it’s like you can do anything you want,” he said. “The nice thing is we have some time because of the build and the demolition. We have three to four years to really sit down and bring in some people and do a good master plan, do a lot of community engagement and just talk about how does this work?”

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