RAPID CITY - One complaint thrown out by tax increment financing critics is Rapid City hands them out like Halloween candy.

But the approval process is more complicated and detailed.

An applicant must provide a detailed written request that provides a full description of the project, the cost, a financing plan including sources of funds and loan terms, the anticipated incremental increase in value and the time frame involved.

After submitting a formal request, the application is reviewed by the city's TIF committee, made up of city council members and city staff, for compliance with TIF criteria.

If recommended for approval, the application goes to the city planning commission for a public hearing. If approved there, it then goes to city council for another hearing.

After a project makes it through the review process and the tax increment district is created, the applicant has five years to make all expenditures. The entity responsible for the project must certify expenditures and demonstrate the money was spent on eligible expenses.

The city is willing to listen to any reasonable proposal, according to growth management director Marcia Elkins.

"If somebody has a good project that's going to create economic development in our community, address public infrastructure needs, bring new jobs to Rapid City, increase the general economic vitality of the community, I think the council takes a really serious look at all those applications," Elkins said.

Elkins said TIF is not "free money." Property owners continue to pay taxes within the district.

One of the things the council considers when reviewing TIFs is new economic growth and the trade-off between sales-tax dollars and property-tax dollars.

Some critics have questioned why the city doesn't draw a TIF around residential neighborhoods and make improvements, but the difficulty with residential TIFs is that they tend to not spin off the sales tax dollars needed to pay for the increase in services from residential development.

Another problem is creating enough new property value to generate the increment used to pay off the loan that was secured at the beginning of the project for the improvements.

Someone still must put money upfront for the project and be responsible for making payments until the TIF is paid off. If there is a shortfall in the increment, it is the applicant's responsibility, not the city's, to pay the loan.

After the TIF is paid off, the district is dissolved, and taxing entities receive the full amount of new property taxes.

Contact Scott Aust at 394-8415 or scott.aust@rapidcityjournal.com