Workforce development victim of slowing sales tax

City Hall’s workforce development efforts are being scaled back this year thanks to softening sales tax revenues.

Last year the Community Development Department made a half-million dollars available for a workforce development grant program, which awarded funding to various schools, non-profits and businesses with a plan to address Sioux Falls’ worker shortage. When all was said and done, about $300,000 was used by six different groups, resulting in160 jobs being filled and 215 workers getting advanced job training.

Those results prompted the City Council in its 2016 budget to set aside $350,000 for another round of workforce development grants. But City Hall is scaling back the program to less than one-third of that amount and will use the difference to help balance this year’s budget.

“Sales tax is not growing at the rate that we had projected it to so there are … recommendations for reduced spending,” said Mike Gray, economic development coordinator at City Hall. “Based on all those positives we got out of the 2015 program … we believe that is the route to go with that $100,000 worth of funding.”

When the City Council outlined this year’s expenses, it expected sales tax revenues would grow by 6 percent. But that hasn’t been the case.

Spending slows, leaving Sioux Falls budget shortfall

Through the first five months of 2015, the city saw $22.56 million worth of sales taxes file into its coffers. This year, that number was at $22.37 million, according to the May financial report on the city’s website.

City Finance Director Tracy Turbak said this spring the city was looking for areas to save in order to make up the difference between projections and reality, and the workforce development grant program is among the first casualties.

Councilor Christine Erickson, who serves on the fiscal committee that first learned about the cut last week, said while savings need to be found to ensure the city stays in the black, it’s unfortunate workforce development resources are taking a hit, especially because worker shortage is among the chief economic challenges facing the city.

“It’s a double-edged sword. Our unemployment rate is (2.2) percent, and that’s great, but it also stinks for companies that want to expand because then they look at other communities and we’re losing people,” she said. “There’s clearly a need in our community … and we’re looking at cutting back.”

Gray said the city is just one of several entities addressing workforce development in the area. The Sioux Falls Development Foundation and Forward Sioux Falls in particular have initiatives in play specifically focused creating a stronger workforce.

Councilor Michelle Erpenbach, who chairs the fiscal committee, agreed.

“The other thing that we look at is the amount of work that the development foundation is doing, and Forward Sioux Falls,” she said. “It’s not like there’s going to be a huge gap. And $100,000 is a lot of money. We can do a lot.”

Erpenbach noted the workforce development grant program is only one element of the city’s economic development plan for 2016. Another $150,000 that was set aside for the USD Discovery District in northwest Sioux Falls, expected to bring hundreds, if not thousands, of white collar jobs to Sioux Falls, will still be used to support that project.

“We know we’re going to get a great return on investment on that," she said. "That has not changed."

The Community Development Department is accepting grant applications through Aug. 15 with selections to be announced before September. Application information is available on the city’s website or by contacting Community Development at 367-8180.

The program is available to any business, organization or entity with operations in Sioux Falls. Gray said the intent is to award multiple grants, but if a proposal warrants it, the city could award all $100,000 to a single applicant. The minimum award amount is $2,000, he said.