Austin Goss-SDBA
The state of South Dakota will pay approximately $200 million more in office rental costs over the next 30 years under two leases with a Rapid City-based developer.
The contracts, signed during former Gov. Kristi Noem’s administration, have drawn scrutiny due to the long-term nature of the agreements and the substantial increase in rental costs for state office spaces in Sioux Falls and Rapid City.
Hani Shafai’s company, Dream Design International, was awarded the contracts to build and lease the state’s new office buildings. The Sioux Falls One Stop, a 284,000-square-foot facility, opened in late 2023. It consolidates several state agencies under one roof and is located in far eastern Sioux Falls, a site that was touted for its “accessibility.”
Before the state moved into the One Stop, it leased 19 separate office buildings in Sioux Falls, costing $2.06 million annually. With the new lease, the state’s annual rent for the Sioux Falls One Stop will rise to a new total of $7.64 million — a 270% increase. Similarly, the Rapid City One Stop, which opened in 2022, saw a 177% jump in rental payments compared to what the state was paying for office spaces in the city prior to it.
Rep. Al Novstrup slammed the decision.
“There was a $200 million decision made without a legislative vote – that’s what happened,” he said. He added, “It’s a poor business decision to rent a property for 30 years. Reasonable people would not disagree.”
Supporters of the One Stop project, including officials from the Bureau of Human Resources and Administration (BHRA), defend the lease agreements they signed, arguing that centralizing services under one roof improves customer service and enhances working conditions for state employees.
“Because one-time dollars needed to be prioritized to other needs like building the prisons, owning this building would have required bonding,” BHRA Commissioner Darrin Seeley explained. “And the cost of bonding plus insurance and maintenance on the building would have cost $31.6 million more than the lease over a 30-year period.”
However, lawmakers still question the lack of legislative oversight in such a significant financial decision.
“This does not look good for the state of South Dakota,” Rep. Julie Auch of Yankton County said. “We need to know where all that money is going, and it makes you wonder if there are any other areas where money is being misspent.”
Shafai defended his company’s involvement, insisting that political contributions he has made previously to both state legislative and federal candidates — including Noem — were not a factor in the contract awards.
“I’ve never called a governor or a representative for personal uses where I say, ‘Hey, can you do me a favor?’” he stated. He also emphasized his broad political contributions across partisan lines. “I’m also writing checks to other South Dakota politicians… I’m interested in a state that’s given me the opportunity to be successful.”
Despite the defense, some lawmakers remain unconvinced. The Legislature’s Joint Committee on Appropriations has created a subcommittee to review the One Stop projects and the state’s authority to enter into such lengthy contracts.
“We’re taking the right steps now to understand how we arrived here,” said one anonymous subcommittee member.
Joe Sneve of The Dakota Scout contributed to this report.