Decades in the making, new interchange construction has begun

By Jodi Schwan

A new interstate interchange so long in the making that even those most intricately involved can’t remember exactly when the concept began officially broke ground last week.

The interchange at 85th Street and Interstate 29 will be the first new interchange in Sioux Falls since the one at Marion Road and Interstate 90 opened in 2010 — and the vision for it began even before that.

The official kickoff for the new diverging diamond-style interchange was last Tuesday. 

“I have been looking forward to this groundbreaking since the day I took office,” said Mayor Paul TenHaken, who won his first mayoral election in 2018.

“A collaboration like this takes time, but the transformational result of this project is well worth it. I can’t say enough about the partners involved in this effort that helped make it a reality.”

The interchange is unique, if not unprecedented nationwide, in that private landowners advanced millions of dollars to move the project to a point where federal approval for construction and subsequent appropriations could be gained.

“There have been partners who have stuck together over 10 years to get to this point,” said Mark Cotter, Sioux Falls Public Works director.

“It’s remarkable a group of owners could stick together that long.”

Led by Commissioner Jim Schmidt, Lincoln County kicked off the effort, Cotter added.

“He was bold to be the first one to say ‘we’ll put up the first $15 million,’ and he figured it out and put a TIF in place at the county level,” Cotter said.

A $30 million congressional directed-spending appropriation and a $4 million contribution from landowners with property in the area rounded out most of the funding. The $54 million project was bid within $400,000 of its estimate recently by Sioux Falls-based T&R Contracting Inc., which also is working on the Cliff Avenue and Interstate 229 project as well as the east-side intersection of Arrowhead and Veterans parkways and the next two miles of South Veterans Parkway between Cliff and Sycamore avenues.

“The state will have some contribution, and our role so far has been to be the facilitator. We bought all the right of way, and we’re going to put forward the (required) match, so all-in we’re at about $11 million so far,” Cotter said. “We’ve (also) been building out the (surrounding) arterial streets for the last 10 years. It’s significant — probably north of $25 million.”

The city of Sioux Falls also split the cost of a project with the city of Tea on Sundowner Avenue close to where Orthopedic Institute opened its new medical center.

“So the last link to build is this new, modern, very transformational interchange,” Cotter said. “This is not normal. The last new interchange the city of Sioux Falls built … was over 15 years ago, and so when you’re driving right now between the Tea exit you can’t get off the interstate until you get to 41st Street, so the demand to distribute the traffic and build a new, modern interchange here is critical to support all the growth and development.”

The city initially submitted an interchange justification report in 2009. The Federal Highway Administration responded that the arterial street network in the area hadn’t been built out yet — most roads were gravel — “so it becomes a little bit about what comes first, the arterial street network or the interchange, and based on who you talk to, they have different opinions,” Cotter said.

The city then chipped away at multiple major road projects, including widening 69th Street, building a bridge on Solberg Avenue in partnership with the state, improving Tallgrass Avenue from 69th to 85th streets and improving 85th from Tallgrass to Louise avenues.

Three quadrants surrounding the new interchange will be in the Sioux Falls city limits; the southwest quadrant is in the city of Tea.

The interchange “is a once-in-a-generation project with a future economic and social impact that is beyond measurable,” Tea city administrator Justin Weiland said.

The completion of the interchange will allow for building out the northern portion of Tea’s Bakker Landing development as the area surrounding the Orthopedic Institute “has been slow to develop with interested parties waiting in the wings, making certain the interchange project became a reality,” he said.

The southern side of the development is almost 90 percent built-out, with a new Culver’s breaking ground last week.

Tea’s nonresidential building permits year to date are about even with last year at $11.6 million. Residential is behind at $13.8 million but reflects multifamily construction that happened in 2024 and hasn’t repeated this year.

Undeveloped properties to the west of Bakker Landing and the anticipated redevelopment and conversion of existing properties currently in Lincoln County also will see benefits from the interchange, Weiland added.

“The social impact is this new direct connection and access to Sioux Falls,” he said. “This is really the first urban-to-urban connection in our region that will alter and change our traffic patterns in ways that we can’t yet predict.”

“The project is a testament to a group of developers having a vision and not letting that vision go … as well as public champions like Mark Cotter that continually rallied the troops to keep the project alive,” Weiland said.

“The combination of these two factors is why the project is breaking ground today. Tea is proud to be an early supporter as we knew the investment in our future would pay off in dividends.”

From the landowners’ perspective, “we made a commitment to each other,” said Kent Cutler, who is part of an investment group that owns about 140 buildable acres south of 85th Street and east of the interstate.

“We got together and signed a joint venture agreement and had a really honorable group of landlords who met all their obligations to each other in a timely manner.”

His group’s property isn’t yet annexed into Sioux Falls, “and I have let some people around town, developers, know that we’d be willing to listen if they had interest in acquiring our whole tract, and if that doesn’t come together, we’ll probably develop it.”

Other owners in the area include RMB Associates; Sundowner Investments Group, led by Dan Lemme; the Benson family; Lloyd Cos.; and Sanford Health.

Cotter said he expects that “close to the interchange would be traditional commercial (development), and then as you drive along 85th Street and look south toward Tea, they’ve done a substantial amount of higher-end residential development,” he said. “I think you’re going to see some really good, progressive, high-density development we would see near an interchange.”