Using county zoning and infrastructure to create a new city in SD

Powder House Pass is a development just south of Lead and Deadwood, located in the heart of the Black Hills. On 1,023 acres, the high-density development proposes a combination of residential and commercial options. Photo provided by Amber Vogt.

Powder House Pass is a development just south of Lead and Deadwood, located in the heart of the Black Hills. On 1,023 acres, the high-density development proposes a combination of residential and commercial options. Photo provided by Amber Vogt.

by Amber Vogt, Deadwood, South Dakota

The formation of the Powder House Pass Community Improvement District (CID) will create a new development the size of a small town, located four miles from any infrastructure in rural Lawrence County in the southwestern corner of South Dakota. The CID allows the developer the ability to obtain funds through property taxes and special use taxes to pay for water, sewer and roads for the development. 

The real estate situation in Lawrence County, located in the recreation mecca of the beautiful Black Hills, makes it attractive to developers. The county has not experienced a huge downturn in the housing market, which is composed of many second homes. With over 50 percent of the county being U.S. Forest Service land and much of the private land owned by large mining companies, not much was left for private development until the mining companies began to sell off land to private landholders.

In 2010, mining company Wharf Resources sold 1,023 acres to a private developer, who created Powder House Pass. This land is located along a major highway and near two ski resorts, the Mickelson Trail, which is open year around for mountain biking and snowmobiling, Spearfish Canyon, which is a scenic byway, and the towns of Lead and Deadwood.

The size of this development is expected to be similar to that of nearby towns. According to the 2012 U.S. Census, Lead had a population of 3,124 people with 1,320 acres of land and Deadwood had a population of 1,270 people with 2,451 acres of land. The new development has proposed 1,972 units or 1.9 units per acre over the 1,023 total acres purchased. Mixing residential and commercial, the development’s plans include strategically placed commercial facilities such as offices, shops, restaurants, pubs and a tech park.

The development faces challenges as it is located four miles away from any infrastructure. The nearest town, Lead, has an elevation of one mile above sea level. The Powder House Pass development is at an even higher elevation, and faces a complex task to build infrastructure through rock. The infrastructure will also have to cross the city limits of Lead and Deadwood, as well as South Dakota Department of Transportation (DOT) and federal land managed by the U.S. Forest Service and the Bureau of Land Management.

The developer initially approached Lawrence County for a change of zoning to a Planned Unit Development-Master Planned Community to include but not be limited to: single family residential; multi-family residential; condos; townhomes; apartments; and some industrial and commercial areas. Through 2011 and 2012, the developer tried to obtain a tax increment financing district to help pay for all water and sewer lines. The developer withdrew the application in late 2012, citing an inability to reach an agreement with the Lead-Deadwood Sanitary District, which is responsible for the ownership and maintenance of the sewer system serving the two communities. In 2012, the developer made its way through the approval of a Community Improvement District (CID) and a Planned Unit Development phase.

Powder House Pass is the second ever CID to be created in South Dakota. Passed in 1988, the original CID legislation enabled the development of the Dakota Dunes CID, a 25-year development of 2,000 acres located in the southeast tip of the state. Today the community includes 100 businesses and approximately 2,700 residents. The taxable property value of the Dakota Dunes has increased from $2 million in 1988 to more than $376 million today.
A CID functions similar to a city government, but it cannot levy a local sales tax and cannot operate a police force. Powder House Pass CID falls underneath the jurisdiction of the Lawrence County Sheriff’s Office. The CID creates a governing board for the property, which can direct land uses in the development and levy property taxes and special use taxes to pay for services like water, sewer and road maintenance.

Benefits

To aid the discussion about what this development would do for the county, the developer came up with the list below.

Benefits to the Developer

  • Ability and authority to issue bonds
  • Ability to obtain funding from government sources (with option for long term favorable interest rate loans, not available to the typical developer)
  • Authority to levy tax and special assessments
  • Ability to charge, collect and enforce fees and other user charges
  • Ability to assess and impose ad valorem taxes (for road maintenance, snow removal, weed control, sewer, etc)
  • Ability to centrally manage and control water supply, wastewater treatment facility and district roads

Benefits to the County

  • All costs, along with future maintenance of roads, infrastructure, etc are borne by the developer
  • All risks and future problems/conflicts are borne by the developer
  • Increase in assessed valuations resulting in additional tax revenue
  • Increased population
  • A structured well defined development of high standards with strong, protective covenants

Questions to ask

While the benefits sound great, the county has been struggling to answer a the series of questions below.

  1. How do you tie the infrastructure in an approved CID to a developer?
  2. How do you create a bond?
  3. How do you allow infrastructure to be started under a CID when there are no landowners in the CID besides the developer? What is the guarantee that the developer will not walk away?
  4. What is the liability to the county?
  5. Who would be responsible for maintenance of water/sewer lines in the county, if the CID goes under or if the developer walks away?
The formation of the Powder House Pass Community Improvement District will create a new development, the size of a small town located four miles from any infrastructure. PHOTO: Homestake Pump House used to provide water to the development. Photo by Amber Vogt.

The formation of the Powder House Pass Community Improvement District will create a new development, the size of a small town located four miles from any infrastructure. PHOTO: Homestake Pump House used to provide water to the development. Photo by Amber Vogt.

Proceeding

As a result, the county decided to not allow development to continue until a plan was approved for infrastructure. Whether this would be private wells, individual septic tanks, shared septic tanks or full fledged water and waste water treatment plants was in question.
The county wanted the original plan, which proposed the possibility of city water and sewer through the existing towns. So the developer tried to create agreements with the Lead Deadwood Sanitary District not only for water but also for sewage treatment. Under this idea, a sewer main on the developer’s property would enter into the DOT right-of-way and run until it connects into Lead’s lines that end at the Lead-Deadwood Sanitary District’s sewer facility in Deadwood. Although not able work out a sewer agreement, the developer was able to purchase water for the development from the old Homestake Water Main which happens to be very close to this property.

With the water agreement signed, the developer still has the problem of sewer. The county is not willing to have individual septic tanks located on this property, especially with the sizes of the proposed lots and even more importantly the size of the overall development. The developer’s most recent sewer proposal is a pod-like system of wastewater treatment, where sewer lines would be installed all over the property to each phase of development. The lines would converge into different pods located around the property; the pods would then treat the sewer properly.

As of early 2014, the project is still in the implementation phase with the water mains being installed at the cost of the developer without bonds or other financial assurances to back it. The pod system for the sewer treatment is currently going through approval with the South Dakota Department of Environment and Natural Resources.

So far several lots have been sold in the first phase. It remains to be seen how successful the development will be and what the final impact will be on the county. If interested in how or why a county would take on this type of development, please contact the author via email at avogt@lawrence.sd.us.


Amber Vogt has worked in the Lawrence County Planning and Zoning Office for ten years, serving as Director for the last six. She serves as treasurer on the Western Planning Resources Board.
 


Published in the February/March 2014 Issue

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