A boom in wealthy residents is transforming Sioux Falls, one pool at a time.
This article by Patrick Anderson appeared in the Sioux Falls Argus Leader on October 24, 2017.
Robert Stefani watched as workers smoothed a porous concrete mix in a pit that would eventually become a vinyl-lined pool.
A biting autumn wind signaled the end of another season. Stefani’s team has five pools left to install before the ground freezes. Though that number depends on who you ask and what’s actually possible, Stefani said with one of his affable half-smiles.
It’s been a busy season. Busier than any Stefani can remember in his 18 years with Combined Pool and Spa, and usually the workload includes more jobs outside the metro area, he said.
“Every year it’s gone up,” Stefani said. “It really let loose this year.”
The last decade has brought a distinct rise in the number of high-income earners in Sioux Falls, and with it, rising demand for luxury goods and services. But one economic development official worries the gap between the rich and poor is widening, thinning out the middle class.
Want a sign that more Sioux Falls residents are bringing home big paychecks? Just follow demand for in-ground pools.
Pool builders were exceptionally busy in the Sioux Falls market in the three years leading up to the housing market’s 2007 collapse, according to building permits filed with City Hall. Interest cooled during the Great Recession, but city permits show it returned with a vengeance in 2015 and has remained strong.
Bigger homes dot the landscape on the southern, eastern and western outskirts of town. And behind dozens of those arched, peaked and window-laden facades is a handiwork of pool builders.
“It makes it difficult to sell a million-dollar home without putting a swimming pool in it,” said Jeff Carlson, co-owner of Combined Pool and Spa.
Corresponding with the renaissance of backyard pools is a dramatic shift in the yearly salaries of the city’s residents.
Draw a line at $75,000 – thousands of dollars above the metro’s median income – and nearly all the growth in the last decade has happened in the top half of that line, according to U.S. Census Bureau data.
High-end cars and homes are also on the rise. Flat sales tax revenue caught City Hall sideways last year. But Sioux Falls spent nearly $11 million more on eating out at restaurants.
Local salaries are tracked and split into 10 different buckets by the U.S. Census Bureau. The fastest-growing group of earners between 2005 and 2015 were those households bringing in between $150,000 and $199,999 a year, followed immediately by households in the highest category tracked by the Census Bureau: $200,000 a year or higher.
“If you kind of take it at face value and go, ‘OK, this looks like Sioux Falls is creating an awful lot of higher income opportunities,’” said Slater Barr, executive director of the Sioux Falls Development Foundation.
The easiest explanation for the influx of highly paid households and their penchant for taking backyard dips is the city’s demand for healthcare workers.
“The most logical answer is probably medical,” Barr said. “Again, I don’t have any data that ties that back specifically.”
The two hospitals in town are some of the city’s biggest employers. Hundreds of millions of dollars of donations and spending in medicine created thousands of jobs as both Sanford Health and Avera Health expand services and add clinics and specialty care facilities
But there are other industries in Sioux Falls that have also created jobs with higher incomes.
Mark Fiechtner is a general contractor and real estate agent, who lives in a $1.5 million home he built in southern Sioux Falls’ Prairie Hills development.
“In this neighborhood, I could throw a rock and hit a million-dollar home,” Fiechtner said.
Sioux Falls’ growing interest in high-end homes was enough to catch the attention of the Wall Street Journal last year. Yes, it seems like the medical community is contributing to the trend, Fiechtner said. But not all his neighbors are doctors.
“There’s a lot of entrepreneurs, a lot of business owners,” Fiechtner said.
Homes listed and sold in the million-or-above price range continue to become increasingly common in the Sioux Falls housing market.
Developers continue to break ground on luxury subdivisions far removed from the core, with big lots, winding roads and plenty of privacy. There is Prairie Hills to the south, Cherry Lake to the west and Arbor’s Edge to the east.
The city’s real estate market had just eight homes listed at $1 million or higher in 2007. Last year, there were 21 homes listed in that price range.
More wealth means more opportunity for some Sioux Falls residents and businesses. For others, however, questions linger about potential breaks in the path between a low-paying job and the house on the hill.
“What concerns me is I just don’t think we’re getting the job done in creating enough middle class,” said Slater Barr, executive director of the Sioux Falls Development Foundation.
Barr is concerned about what he describes as a resulting “bifurcation” of salaries in the city.
Most of the job opportunities in Sioux Falls are at the high end of the spectrum or at the low-end, working in service and retail jobs.
The local trend reflects what’s happening across the country, Barr said.
“It’s an America that’s being divided into the kind of haves and have-nots,” Barr said.
The four-county metro area has experienced steady job growth in the retail and food service industry, but so far it doesn’t seem to have widened the city’s pay divide.
While the middle class is shrinking, last year marked a steep drop in Sioux Falls’ poverty rate. Long-term, there was also a drop in the percentage of households in the lowest income brackets.
Barr’s organization facilitated the acquisition of a $20 million, 820-acre piece of land in northwestern Sioux Falls for an industrial park. Foundation Park opened in 2015 and went without an anchor tenant until this spring when the Development Foundation announced interest from a local developer in opening a $40 million food distribution warehouse on the site.
Attracting more manufacturers to Sioux Falls could help bridge the gap between the low and high ends of the spectrum when it comes to local salaries, Barr said.
“We’ve got to create a ladder of opportunities for both training, and a ladder of opportunity for jobs for those people to move up.”