Construction on Presidents Plaza will not begin this fall as planned, project head Hani Shafai said Tuesday.
Instead of breaking ground in September, Shafai told the Rapid City Council's Public Works Committee the new target date is March 2013 — and that will depend on financing. If construction begins then, the 15-story downtown building could be completed in March 2015.
Presidents Plaza, a project that has been in the works for years, is estimated to cost between $41 million and $49 million and would offer retail and office space, a 100-room hotel, a conference center, a restaurant and condominiums. The project — slated for Sixth and St. Joseph streets — also would include 500 parking spaces.
The developers encountered a roadblock acquiring New Market Tax Credits, a crucial financing component for the project. Shafai, president of Dream Design International and partner in Presidents Plaza LLC, said Tuesday they still expect to secure those credits.
"We're very confident that we will get New Market Tax Credits because there are an abundance of New Market Tax Credits available in the market," he said. "There's no reason to panic, and that won't change, but it will take a few months to get to that point."
The U.S. Department of Treasury offers the 39 percent corporate income tax credit to developers investing in qualified projects in low-income communities.
Shafai said those credits are needed for the Presidents Plaza to be built as it is now proposed.
"Without those New Market Tax Credits, it would be not be feasible to build the project as it is today. Without the New Market Tax Credits, the project would have to be re-sized," he said.
Such a redesign would take additional time and delay construction until June, Shafai said.
A developer can acquire New Market Tax Credits if a proposed project meets certain requirements. Shafai assured the committee that Presidents Plaza meets those requirements.
Shafai said he would know by December if he has the funding, but he wanted to delay the start of construction until spring instead of trying to work through the winter.
Mayor Sam Kooiker pressed Shafai to commit to a firm construction start date whether he secures New Market Tax Credit financing or not. Shafai said he couldn't do that.
"I would not really be able to commit to a date other than to say we plan to start construction in March," he said.
Kooiker mentioned previous commitments Shafai had made concerning the plaza project.
"We were assured financing was available. Now, what I'm hearing is the New Market Tax Credits, if they don't come through, will require a redesign of the project and a delay," Kooiker said, adding that he was still optimistic and excited about the project. "There was proof of financing submitted and commitments made."
Shafai sought to reassure the committee of his commitment to Presidents Plaza and said that investors have already spent $1 million in design costs for the project.
Presidents Plaza went through several layers of scrutiny in recent months, including a rejection by the state Historic Preservation Commission, before the city council approved it June 18. The city requested some external design changes to match the look and character of downtown that forced internal structural changes, further delaying the project.
Public Works Committee members said they understood Shafai's difficulties, and they continue to support the project.
"Being a complicated project for a town this size, we need to give you a little leeway, a little time to get your ducks in a row," Ward 4 Alderman John Roberts said.
"As a developer, I can tell you things just don't go the way you want them to all the time," Ward 3 Alderman Chad Lewis said.