Commission forwards downtown TIF for mixed-use project amid contested public comment over parking and developer commitments

The Rapid City Planning Commission on April 10 voted to create a downtown tax increment financing (TIF) district on a city-owned parking lot and recommended adoption of a project plan for a two-phase, mixed-use development that includes a tap room/brew pub, office space, and market-rate apartments.

Staff described phase 1 as a three-story, roughly 13,000-square-foot building with a ground-floor tap room and brew pub, about 4,000 square feet of office space on the second floor and three market-rate apartments on the third floor. Phase 2 would add a four- to five-story mixed-use building with additional office space and several floors of market-rate apartments with underground parking. The project site is about 0.64 acres; staff presented total construction costs for both phases of around $12–13 million and a TIF-funded grant request of about $1.4 million (plus financing and administrative fees).

"This is proposed to be classified as an economic district so there would be no additional increase to the Rapid City Area School District residents," staff said while explaining the statutory structure and the ability to structure the TIF as a grant under SDCL 11-9-15.

Public comment and commissioner discussion focused heavily on three topics: (1) the pending sale of the city-owned parking lot and whether the developer has executed the purchase agreement, (2) the loss of existing permit parking for nearby businesses and how the city would relocate affected permit-holders, and (3) whether a publicly funded grant (the TIF loan assigned as a grant) is an appropriate subsidy for a private mixed-use project that includes a brew pub and market-rate housing.

Doris Lauing, representing the South Dakota Stockgrowers, said she and her tenants were relocated before a sale took place and asked why the city and applicant had not executed the purchase agreement as represented in previous discussions. "We were told to park on the streets. We bought parking passes for that... I would like to see a copy of the purchase agreement, and I want to know why it was not executed as of January 25," Lauing told commissioners during public comment.

Todd Gagne, the applicant, responded that the purchase and closing were contingent on the TIF being resolved and that multiple LLCs tied to the ownership group would be used for the acquisition and development. "Ultimately, it's dependent on this TIF. Right? So I think we are hoping to get the TIF done before purchase," he said.

Commissioners debated whether the project would be commercially viable without the TIF. Staff presented pro forma summaries showing the sponsor’s projected net income and said the TIF gap reduced monthly debt service by roughly $10,000 and made the project financially feasible in the applicant’s model. Staff said the project would generate incremental assessed value and estimated a conservative incremental tax-generation figure and a 14-year amortization payoff horizon (payoff projected in 2039 under staff estimates).

The Planning Commission voted to create the district (motion carried 5–3) and later recommended approval of the project plan to City Council (motion carried 6–2). Commissioners who opposed the project plan cited precedent concerns about using significant discretionary grant-like TIFs for private downtown developments, uncertainty about tenant commitments and whether the project meets the city’s internal guidelines for grant-sized TIF awards. Commissioners in favor cited the project as infill redevelopment of surface parking into a mixed-use building, including publicly accessible green space and underground parking, that fits the city’s stated Innovation District goals.

What’s next: The creations of the district and the project plan were recommended to City Council. City staff said the TIF grant would not be used to buy the land; the developer would be responsible for the lot purchase. Staff also said the city could administer the TIF loan and assign incremental receipts to repay a city-administered loan if the council chose that route. City Council will consider final approval and the possible loan/grant structure at a future meeting.

Commissioners and speakers asked the city to provide additional documentation to City Council, including a copy of the purchase agreement or statements clarifying timing of transfer, a clearer breakdown of project revenues and costs and specifics about how permit-holders displaced from the parking lot were relocated.