Planning commission approves TIF overlay for Homestead area to fund fire station, park and possible street work

The Rapid City Planning Commission on April 10 voted to create a tax increment financing district overlaying the existing Homestead (TID 83) area and approved a project plan that would use increment revenue to fund a new fire substation with limited police office space, a city park and potential improvements to Homestead Street.

Finance staff presented the proposal as an overlay to TID 83, which staff said is ahead of original development projections and estimated to pay off in 2027. "Today we're going to discuss, a new proposed tax increment financing district that would overlay the current, Homestead Street ex extension district, TIF 83," Finance staff member Mike Dugan told the commission during his presentation.

The proposal allocates approximately $7,000,000 toward construction of a fire department substation that includes a small amount of office space for the Rapid City Police Department, and $2,000,000 toward a new city park. Staff said remaining eligible project costs, including potential Homestead Street improvements and financing and administration costs, bring the total eligible project cost to about $27,000,000 with financing costs below $17,000,000. If Homestead improvements are not needed, staff said those funds would not be used and the district would pay off sooner.

Why it matters: the overlay uses incremental property-tax growth inside the district to repay the city’s up-front costs, shifting repayment to future increases in assessed value within the TIF boundary rather than to the general fund. Staff said the plan is structured so the Rapid City Area School District will be made whole; however, properties inside the Rapid City Area School District —including parcels in Mead County such as Blackhawk and Somerset— would see the additional TIF levy until the underlying TIF dissolves.

Commission discussion focused on transportation, drainage and long-term park maintenance. Public Works staff and commissioners described a concurrent South Dakota Department of Transportation corridor study on Elkvale/Homestead that could recommend larger improvements outside the TIF boundary; staff said if DOT recommendations require work outside the district, the TIF funds dedicated to a local traffic study or intersection fixes might not be used. Todd from Public Works said the DOT corridor study is just starting and that city staff would coordinate with DOT as the study progresses.

Commissioners and city staff also discussed park maintenance. Commissioner Eric Hiekis and others asked whether the Parks Department could maintain the proposed park long term; finance director Ainsley and parks staff said they had met with park design staff and did not expect maintenance to be a problem and noted recent city hires to expand parks maintenance capacity.

Two separate motions cleared the Planning Commission and will be forwarded to the City Council: (1) a motion to create the TIF district boundary and (2) a motion to adopt the project plan components. Both motions passed at the Planning Commission meeting; staff noted the project plan consideration will be forwarded to council as part of the statutory process.

Commissioners asked whether the city is prepared to finance the facilities in the short term if the anticipated increment grows more slowly than projected. Ainsley said the city has the financial capacity to build the facilities without relying immediately on the full projected increment, though the city would likely forgo some anticipated interest income in a prolonged downturn.

What’s next: The Planning Commission recommended both the district creation and the project plan to City Council for final action. City Council will receive the resolutions and supporting project documents for its consideration. If council approves, the city will proceed with the financing structure described in the plan and coordinate with DOT and developers on any required right-of-way or corridor improvements.

The Planning Commission approved the district creation and project plan at the meeting and moved on to other agenda items.