City eyes asking developer to return grant funds

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RAPID CITY, S.D. (KOTA TV) -- Rapid City's community development managers want a developer to pay back a six figure grant because he hasn't made enough progress on an affordable housing project.

They're scheduled to take the issue to the city's Legal and Finance Committee on Wednesday.

Developer Kent Hagg approached the city a few years ago with an ambitious idea for a 128-acre project north of the Rushmore Mall that included more than 500 units of affordable housing, a critical need in the city.

"No one was stepping up to do affordable housing and it is a lot more difficult to do -- to make it cash flow -- and it takes a lot more planning," said the city's Community Development Department Manager Barbara Garcia.

So the city decided to do something it had never done before and it gave a grant to Hagg's Freeland Ranch project for preliminary design and engineering work.

"This was the first time we decided to take that risk with the funds," said Garcia.

But more than two years after granting Hagg $120,000, the city is considering asking for the money back. The reason? Federal grant guidelines stipulate that actual affordable housing units be completed by July 2020 and no earth has yet moved on the project.

"We don't feel it's reality to finish an apartment building even a small one in the time frame we have left," said Garcia. "And so we think it would be better to pull the funds back. That does not preclude Mr. Hagg from re-applying for next year."

Hagg said there's still time. He points to a small piece of his original plan on which he can build quickly. The one-acre plot has road frontage and ready access to utilities, Hagg said.

"I have no question that we can meet those time frames without a problem simply because this is a smaller area it already has everything to it, access and utilities, that will allow us to build adequate structures to comply with the grant," he said.

He added that the lack of earth moving at the site belies the progress being made.

"The bottom line is that in the past two years we have done many many things to move this project ahead," he said. "Before anybody sees any dirt move there's a lot of engineering studies, a lot of soil samples, all those types of things that have to happen before you even know where to move the dirt. So a lot of that has been done."

And he says the original goals remain in place.

"We think it's a great project. We think it's an opportunity to break the ice on creating affordable housing in Rapid City," he said. "That's still our belief."

The full city council could take up the issue next week.