What the City Said About TIFs in Rapid City
TL;DR (Too Long; Didn’t Read):
There’s been a lot of noise around Tax Increment Financing lately. So the City of Rapid City did something useful: they walked through how taxes actually work here and why TIFs exist in the first place.
Rapid City runs on sales tax
Rapid City funds police, fire, roads, parks, snow removal, and basic services primarily through sales tax, not property tax.
Roughly 40% of the City’s general fund comes from sales tax, while property tax makes up closer to 24%. That’s very different from many other cities, where property tax carries more of the load.
That means when sales tax grows, the City can keep services running without pushing property taxes higher. When it doesn’t, the pressure shows up somewhere else.
Sales tax isn’t keeping up
The City showed that once you adjust for inflation, sales tax growth hasn’t kept pace with population growth or rising infrastructure costs.
Roads, water, sewer, storm drainage, and public safety all cost more than they did a decade ago. If sales tax doesn’t grow to match that reality, the options narrow quickly:
cut services, or
rely more heavily on property taxes
That’s the backdrop for why growth matters.
So what is a TIF, really?
A Tax Increment Financing district captures new property tax value created by a project, not existing tax dollars.
Here’s how it works:
A base property value is set.
The City, County, and schools keep receiving taxes on that base value as usual.
As development happens and value increases, that new value (the increment) is used to reimburse eligible public costs like roads, utilities, and infrastructure.
Developers pay upfront.
The City does not write a check at the beginning. Costs are reimbursed only after work is completed, invoiced, and certified.
What if a project fails?
This is one of the biggest misconceptions.
In South Dakota, if a TIF doesn’t generate enough revenue:
the developer and their bank are responsible
taxpayers are not
That risk structure is different from some other states and is why national TIF horror stories don’t translate cleanly to South Dakota.
Do schools lose funding?
No.
For economic development and affordable housing TIFs, schools are made whole through a state funding formula during the life of the district. This was emphasized repeatedly by the City because it keeps getting misstated in public conversations.
Why this matters right now
The City explained that many projects hinge on expensive infrastructure. Roads, sewer, drainage, and utilities can be the difference between a project moving forward or never happening at all.
When projects don’t happen:
land stays underdeveloped
housing supply doesn’t grow
sales tax doesn’t increase
long-term tax pressure stays concentrated on existing residents
TIFs are one of the only tools South Dakota gives cities to break that cycle.
Watch the full presentation
The full City presentation explains this in much more detail, directly from the people responsible for managing Rapid City’s finances.
