Rapid City acknowledges revised TIF policy and approves city loan for youth soccer infrastructure TID 87

The Rapid City Legal and Finance Committee on Jan. 15, 2025 acknowledged a revised draft tax increment financing (TIF) policy and approved City loan funding for Tax Increment District (TID) 87, described in the agenda as the youth soccer field infrastructure project.

TIF planner Mike Dugan presented a draft of the revised TIF policy and described proposed changes, saying, "This is a draft, working copy right now." Dugan summarized key updates: elimination of the separate TIF committee so applications would be reviewed by the Planning Commission and City Council; formal inclusion of a process for written comments from county and school district officials to be attached to staff reports; a provision to allow a portion of TIF proceeds to be used to purchase land to incentivize infill development; and revised fees and loan terms.

Dugan outlined fee and loan changes included in the draft: raising the application fee from $2,500 to $5,000 for requests up to $10 million in capital improvements and charging 0.1% of costs above $10 million (not to exceed $15,000); increasing the city's imputed administration fee from $20,000 to $25,000; and setting the maximum TIF loan interest rate to the Wall Street Journal prime rate plus 0.75 (the draft replaces a prior fixed 9% rate). He also said the draft includes a clearer definition and length of affordability for housing projects (rental projects must remain affordable for at least 10 years or until the TIF expires, whichever is longer).

Councilmember Bill Evans asked about a county administration fee of $15,000 referenced in the draft. Dugan and Director Vicki Fisher explained that Pennington County passed a resolution to impose an imputed county administration fee to cover county work (for example, establishing certified base valuation and administering disbursements) and that the county requires its fee to be paid earlier in the TIF timeline; both staff said these administrative fees are TIF-eligible expenditures. Fisher said, "That increment that's getting captured and tracked is done so by director of equalization. It's a lot of extra work for their team for the disbursement of that additional funds and ensuring that the city is still getting their portion and the school is still getting their portion." Evans described the $15,000 figure as "not an insignificant figure."

Dugan also proposed language to incentivize infill development by making eligible the difference in land cost between peripheral land and more expensive in-fill parcels. In response to a council question, staff agreed to add a clear definition of "infill" to the policy text so applicants and staff have measurable qualifying criteria.

After discussion, the committee moved to "acknowledge" the draft policy. Committee member Bieberdorf moved to acknowledge; Bill Evans seconded. The chair called the question and announced the motion carried.

Separately, the committee considered a staff recommendation to approve City of Rapid City loan funding for TID 87, the youth soccer field infrastructure project. Mike Dugan described the project as a two-phase construction to extend sewer mains north of Seager Drive to the Dakota Soccer Field Complex and west of North Elkfield Road, eliminate pump tanks, and provide sanitary sewer for anticipated future development. Dugan summarized the figures: a total project cost (including financing and contingency) of approximately $6,200,000; a city financing loan amount described in his presentation as $3,068,000 with a fixed 7% interest rate; an estimated 19-year amortization with repayment estimated through 2041; estimated interest income to the city of about $2,026,000 over the life of the loan; and an estimated construction completion date of October 2026.

The agenda motion to approve the loan was read as "consideration to approve City of Rapid City loan funding for TIF number 87 in the amount of $3,000,068.68." Mike Dugan—s presentation used a city financing figure of $3,068,000 when describing principal and amortization. The committee discussed financing rationale; staff said the city can act as the financing source for smaller TIDs where internal cash-flow and investment-maturity timing allow and that city financing typically offers a lower rate than private banks. Councilmember Kevin Maher asked how the city decides when to finance internally versus using banks; staff replied it depends on available city funds and scale of the project.

Councilmember Pat Roseland asked whether property owners along the sewer extension route would be able to connect to the system. Staff said property owners within 400 feet of new sewer mains would have the option to connect at their expense; private water systems remain an option. Roseland also asked about road work on North Elkfield/Elkville Road; staff said road improvements are a separate project and would not necessarily be part of the sewer TIF work, though regional partners including the Metropolitan Planning Organization are reviewing potential funding for roadway reconstruction.

The committee voted to approve the city loan for TID 87. Councilmember Bill Evans moved to approve; Roseland seconded. The chair announced, "All in favor? All opposed?" and stated the motion carried.

Staff said city finance staff will monitor draws, require invoicing and lien waivers, and track monthly expenditures; the city will capture imputed administration fees from the TIF increment when cash flow allows. Dugan and other staff noted the draft TIF policy would return to the City Council for formal ordinance action if no substantive changes are requested following the acknowledgment.