March 18, 2022

The city of Sioux Falls and Village River Group, which at one point planned to co-develop a parking ramp downtown that would have included a hotel, have agreed to a $500,000 settlement after the project never materialized.

The city terminated the development agreement in 2019 after what officials said involved multiple defaults on the part of the developers.

“It’s time to move forward,” Mayor Paul TenHaken said in announcing the settlement Friday.

After the city and its team determined “it was necessary to call for termination of that development agreement,” TenHaken said, Village River Group brought litigation.

That led to years of negotiating a settlement, held up in part by the pandemic and its impacts on the hospitality industry, TenHaken said.

The settlement “will allow a clean and final end to the development agreement and a path forward for the city to immediately proceed,” he continued.

That includes allowing the city to make aesthetic improvements to the Mall Avenue parking ramp at 110 S. Mall Ave. as well as ultimately finding a development partner to bring more commercial development to the site.

The $500,000 reimburses Village River Group for a portion of the “hard costs” it incurred at the site as well as the $150,000 developer fee that had been paid to the city.

The original concept from Village River Group

“The bottom line here is that development is difficult and risky and so is litigation. I had an obligation to consider those risks,” TenHaken said.

That included weighing the cost of ongoing litigation and the holdup it would create on the city moving forward with another project while taking advantage of “the growing market for development downtown,” he said.

There is an argument to be made that the city came out ahead in the deal, City Attorney Stacy Kooistra said.

For instance, some improvements that were made — including allowing for up to a 15-story building — ultimately will benefit the city, along with other private investments that were made during the course of the work, he said.

“When you do the value analysis, the $500,000 is really only one component of that,” he said.

What’s next

While the city plans to find a development partner for the site, process “is very important,” TenHaken said.

The process used previously that led to selecting Village River Group “is not a process that my administration will follow in the future, and in fact we haven’t used that process during my time in office,” he added, pointing instead to the negotiated sale approach the city has used to sell two parcels of former rail yard land and a surface parking lot.

Whatever process is used will include clearly defined expectations for a future development and developer, he added.

No timeline has been determined for when such a plan could move forward, and no conversations have been had with developers about the site, he said.

“The city at this point is focused more on doing things right than doing things quickly,” TenHaken said.

“We’re going to see what opportunities come up. We’re not committing to any timeline to get that done.”