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The Rapid City Planning Commission will consider approving plans on Thursday for a new tax increment financing district that would help pay for a private student housing development near the South Dakota School of Mines & Technology.

Developers Hani Shafai and Pat Hall, operating as Technology Housing, LLC, have purchase agreements for the eight properties on the south side of the 300 block of St. Joseph Street. They intend to redevelop what they call a blighted stretch of commercial and residential property into housing that would support the School of Mines' growth plans.

They propose using $1.65 million in tax increment financing, not including interest, to pay for some of the costs associated with the $17 million project. The TIF would cover the cost of acquiring the land, demolishing the existing structures and rebuilding the alley adjacent to the project site.

Technology Housing would fund the rest of the costs associated with building two seven-story apartment buildings that would house a total of 336 people.

City staff has recommended that the commission approve both a resolution to create Tax Increment District No. 72 and the associated project plan.

"The redevelopment of blighted property will enhance the ability for new development to occur and increase the community's economic vitality and expand the city's property tax base," city staff wrote.

The value of the undeveloped property after the current structures are demolished is estimated at $421,000; the value of the project after redevelopment is estimated at $13.4 million.

The project has the support of School of Mines president Robert Wharton, who said it will redevelop a blighted property, improve safety and security near the campus, provide affordable and attractive housing for Mines students, and be a catalyst for economic development in the zone between Mines and downtown Rapid City.

City Fire Chief Mike Maltaverne said the new development would be safer from a fire-protection standpoint than the run-down apartments now on the property.

"It would be to the community's benefit for us to encourage and support such redevelopment projects, especially those that will have all current construction and fire protection features such as detection and fire sprinkler protection," he wrote in a letter to the city.

The only letter of opposition the commission has received came from Fred Weishaupl, a longtime critic of the city's use of tax increment financing.

"There is absolutely no sane or legitimate reason(s) for the taxpayers of Rapid City and Pennington County to pay for a developer to purchase the property," he wrote.

On Jan. 24, the city TIF Review Committee voted 4-1 in favor of creating the new TIF district. The opposing vote came from Lyndell Petersen, the committee's representative from the Pennington County Commission.

In October, the Rapid City Council was split 5-5 over whether to allow Shafai to include the land acquisition and demolition costs in his TIF application, with Mayor Sam Kooiker breaking the tie in favor of the developer.

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Under state law, land acquisition and demolition are eligible for tax increment financing, but Rapid City does not permit them without prior approval of the city council.

If approved Thursday by the planning commission, the matter would go to the city's Legal & Finance Committee for a recommendation before moving to the full city council for a public hearing and vote.

Separately, the planning commission on Thursday will also weigh a request from Shafai's engineering and design firm, Dream Design International, for approval of an initial residential development plan for the project. In the first phase, Shafai plans a parking lot and a seven-story, 48-unit apartment building, with the first floor reserved for commercial uses that would serve the student residents.

City staff is recommending approval of the initial plan, with several stipulations. The city is also recommending allowing several exceptions to rules about yard setbacks and open-space requirements.

A final residential development plan would also have to be approved before the project can proceed.

The planning commission on Jan. 26 approved a rezoning request changing the property's use from a general commercial district to a high-density residential district.

Contact Barbara Soderlin at 394-8417 or barbara.soderlin@rapidcityjournal.com.

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