authorize municipalities to establish a local funding mechanism for capital improvement projects.

26.800.21 101st Legislative Session 1245

2026 South Dakota Legislature
House Bill 1245
ENROLLED

AN ACT

ENTITLED An Act to authorize municipalities to establish a local funding mechanism
for capital improvement projects.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
Section 1. That a NEW SECTION be added to chapter 9-12:
A municipality shall appoint a capital improvement board for purposes of approving
or rejecting ordinances pursuant to section 4 of this Act.
A capital improvement board consists of the following five members, appointed by
the mayor of the municipality and approved by the governing body:
(1) One member of the governing body of the municipality; and
(2) Four residents of the municipality, excluding any member of the governing body of
the municipality.
Section 2. That a NEW SECTION be added to chapter 9-12:
The term of each member appointed pursuant to section 1 of this Act is three years.
In the case of a vacancy, a new member may be appointed for the remainder of the term,
in accordance with section 1 of this Act.
Each term begins on the January first or July first following the appointment,
whichever occurs first.
Section 3. That a NEW SECTION be added to chapter 10-52:
In addition to any other tax imposed by a municipality under this chapter, a
municipality may impose a gross receipts tax, subject to the provisions of sections 4, 5,
8, and 9 of this Act.
The rate of tax authorized by this section may not exceed one percent and must
conform in all respects to the state tax under chapters 10-45 and 10-46, with the
exception of the tax rate.
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Section 4. That a NEW SECTION be added to chapter 10-52:
To impose a tax pursuant to section 3 of this Act, the governing body of a
municipality shall specify in the ordinance the purpose of, and the minimum amount to be
generated from, the tax. The governing body shall submit the ordinance to the capital
improvement board of the municipality, established pursuant to section 1 of this Act.
If the capital improvement board, by a majority vote, approves the ordinance, the
governing body must submit the question of the imposition of the tax to the voters of the
municipality at the next regular or special election of the municipality.
Section 5. That a NEW SECTION be added to chapter 10-52:
To the extent applicable, the administration and notification of an election for the
imposition of a tax pursuant to section 3 of this Act must adhere to the provisions of §§ 6-
8B-4 and 6-8B-5 governing a bond election.
The tax may only be imposed if it is supported by at least sixty percent of the
voters of the municipality voting on the question.
Section 6. That a NEW SECTION be added to chapter 10-52:
All moneys collected from the tax imposed pursuant to section 3 of this Act and
distributed to a municipality must be deposited into a special capital outlay fund of the
municipality to be used only for purposes set forth in section 7 of this Act.
Section 7. That a NEW SECTION be added to chapter 10-52:
The governing body of a municipality may expend moneys in the special capital
outlay fund only for the following purposes:
(1) Acquisition or lease, by the municipality, of real property, a plant asset, or
equipment; or
(2) Construction, repair, or renovation of real property owned solely by the
municipality or jointly by the municipality with one or more political subdivisions of
this state.
After the completion of a project using moneys in the special capital outlay fund,
the municipality may transfer ownership of the real property, plant, or equipment to a
county in which the municipality is at least partially situated or to a school district in which
the municipality is at least partially situated.
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Section 8. That a NEW SECTION be added to chapter 10-52:
Subject to the notification requirements provided in § 10-52-9, an ordinance
enacted pursuant to sections 3 to 5, inclusive, of this Act, and any tax rate affected
thereby, remain effective until the last day of a calendar quarter that is at least ninety
days after notification by the municipality to the secretary of revenue, and occurring on
the earlier of:
(1) Sixty months after the enactment of the ordinance; or
(2) June thirtieth or December thirty-first of the year in which the municipality collects
the minimum amount of money specified in the ordinance, pursuant to section 4
of this Act.
Section 9. That a NEW SECTION be added to chapter 10-52:
A municipality may not impose a tax pursuant to section 3 of this Act if the
municipality has, in the most recent twenty -four months, collected moneys from a tax
imposed pursuant to section 3 of this Act.
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HB1245 ENROLLED
An Act to authorize municipalities to establish a local funding mechanism for capital
improvement projects.

I certify that the attached Act originated in
the:

House as Bill No. 1245

Chief Clerk of the House

Speaker of the House

Attest:

Chief Clerk of the House

President of the Senate

Attest:

Secretary of the Senate

House Bill No. 1245
File No. ____
Chapter No. ______

Received at this Executive Office
this _____ day of _____________,

2026 at ____________M.

By
for the Governor

The attached Act is hereby
approved this ________ day of
______________, A.D., 2026

Governor

STATE OF SOUTH DAKOTA,
ss.
Office of the Secretary of State

Filed ____________, 2026
at _________ o'clock __M.

Secretary of State

By
Asst. Secretary of State