update provisions related to tax increment financing districts.

26.345.37 101st Legislative Session 1319

2026 South Dakota Legislature
House Bill 1319

Introduced by: Representative Weisgram

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An Act to update provisions related to tax increment financing districts. 1
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA: 2
Section 1. That § 10-6-137 be AMENDED: 3
10-6-137. Any Following the construction of any structure classified pursuant to 4
this section, must, following construction, be valued valuation of the structure for taxation 5
purposes must occur in the usual manner. The board of county commissioners of the 6
county in which the structure is located , may adopt a discretionary formula for assessed 7
value to be used for tax purposes. Except as otherwise provided in § 10-6-137.1, the 8
formula may include, for any or all of the five tax years following construction, all, any 9
portion, or none of the assessed value for tax purposes. Any formula adopted must be 10
equally applied to specifically classified properties pursuant to this section may not be 11
used for any property within a tax increment finance district. 12
The board of county commissioners of the county in which the structure is located 13
may, if requested by the owner of the structure, fully assess the structure without 14
application of the formula. In waiving the formula for the structure of one owner, the 15
board of county commissioners is not prohibited from applying the formula for subsequent 16
new structures. The assessed value during any of the five years may not be less than the 17
assessed value of the property in the year preceding the first year of the tax years 18
following construction. 19
Any structure that is partially constructed on the assessment date may be valued 20
for tax purposes, pursuant to this section, and the value may not be less than the assessed 21
value of the property in the year preceding the beginning of construction. The period that 22
the property is valued for tax purposes under this section may include the years when the 23
property is partially constructed. 24
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Following the five -year period under this section, the property must be assessed 1
at the same percentage as all other property for tax purposes, except as otherwise 2
provided in § 10-6-137.1. 3
Any of the following types of real property may be specifically classified for the 4
purpose of taxation pursuant to this section: 5
(1) Any new industrial or commercial structure, or any addition , to or renovation, or 6
reconstruction to of an existing structure, located within a designated urban 7
renewal area as defined in § 11-8-4, if the new structure, addition, renovation, or 8
reconstruction has a full and true value of thirty thousand dollars or more; 9
(2) Any new industrial structure, including a power generation facility, or an addition 10
to an existing structure facility, if the new structure facility or addition has a full 11
and true value of thirty thousand dollars or more; 12
(3) Any new nonresidential agricultural structure, or any addition to an existing 13
structure, if the new structure or addition has a full and true value of ten thousand 14
dollars or more; 15
(4) Any new commercial structure, or any addition to or renovation or reconstruction 16
of an existing structure, except a commercial residential structure as described in 17
subdivision (5), if the new structure or, addition, renovation, or reconstruction has 18
a full and true value of thirty thousand dollars or more; 19
(5) Any new commercial residential structure, or addition to an existing structure, 20
containing four or more units, if the new structure or addition has a full and true 21
value of thirty thousand dollars or more; 22
(6) Any new affordable housing structure containing four or more units, with a monthly 23
rental rate of the units at or below the annually calculated rent for the state's sixty 24
percent area median income being used by the South Dakota Housing Development 25
Authority for a minimum of ten years following the date of first occupancy, if the 26
structure has a full and true value of thirty thousand dollars or more; 27
(7) Any new residential structure, or addition to or renovation of an existing structure, 28
located within a redevelopment neighborhood established pursuant to § 10-6-141, 29
if the new structure, addition, or renovation has a full and true value of five 30
thousand dollars or more. The structure must be, provided the structure is located 31
in an area defined and designated as a redevelopment neighborhood based on 32
conditions provided set forth in § 11-7-2 or 11-7-3; or 33
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(8) Any commercial, industrial, or nonresidential agricultural property that increases 1
more than ten thousand dollars in full and true value, as a result of reconstruction 2
or renovation of the structure. 3
Section 2. That § 10-12-44 be AMENDED: 4
10-12-44. The county auditor having jurisdiction over a school district shall raise 5
additional revenue, for the general fund and special education fund, from real property 6
taxes, to compensate for a tax abatement, a tax increment financing district, or a 7
discretionary formula in accordance with the following: 8
(1) For tax increment financing districts created pursuant to chapter 11-9, the county 9
auditor shall impose an additional tax levy, for an amount not to exceed an amount 10
equal to the sum of the levies in §§ 10-12-42 and 13-37-16 multiplied by the tax 11
increment value, as defined in § 11-9-1 total value of the tax increment financing 12
district less the tax increment base as determined pursuant to § 11-9-19; 13
(2) For property subject to § 10-6-137, 10-6-137.1, or 10-6-144, the county auditor 14
shall impose an additional tax levy, for an amount not to exceed the amount of 15
taxes that were not collected, due to the reduction in value based on the maximum 16
levies, pursuant to §§ 10-12-42 and 13-37-16; and 17
(3) For abated taxes, the county auditor shall impose an additional tax levy, for an 18
amount not to exceed the amount of the school district's portion of the taxes that 19
were abated, pursuant to chapter 10-18, during the previous tax year. 20
The levies in this section are not subject to the referendum provision of § 10-12-21
43, and these levies must maintain the same proportion to each other, as represented in 22
the mathematical relationship at the maximum levies pursuant to § 10-12-42. 23
Section 3. That § 11-9-1 be AMENDED: 24
11-9-1. Terms used in this chapter mean: 25
(1) "Department," the Department of Revenue; 26
(2) "District," a tax increment financing district in a contiguous geographic area within 27
a political subdivision, which is defined and created by resolution of the governing 28
body, provided that parcels that are not otherwise adjacent are not contiguous 29
based solely on the existence of an easement, right -of-way, transportation 30
corridor, or waterway connecting the parcels, unless the parcels are: 31
(a) Separated only by the easement, right -of-way, transportation corridor, or 32
waterway; and 33
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(b) Located directly opposite one another; 1
(3) "Governing body," the board of trustees, the board of commissioners, the board of 2
county commissioners, or the common council of a municipality a board of 3
commissioners, board of trustees, common council, or other authoritative body by 4
which a political subdivision is controlled; 5
(4) "Grant," the transfer of money or property to a transferee for a governmental 6
purpose that, which is not a related party to or an agent of the political subdivision; 7
(5) "Planning commission," a planning commission created under chapters chapter 11-8
2 or 11-6, a planning committee of a governing body of a political subdivision that 9
does not have a planning commission, or the governing body of a political 10
subdivision that does not have a planning commission or planning committee; 11
(6) "Political subdivision," a municipality, as defined in § 11-6-1, or county of this 12
state; 13
(7) "Project plan," the properly an approved plan for the development or 14
redevelopment of a tax increment financing district, including all properly approved 15
amendments to the plan; 16
(8) "Tax increment financing district," a contiguous geographic area within a political 17
subdivision defined and created by resolution of the governing body; 18
(9)(8) "Taxable property," all real and personal taxable property located in a tax 19
increment financing district; and 20
(10)(9) "Tax increment valuation," the total value of the tax increment financing district 21
minus the tax increment base as determined pursuant to § 11-9-19. 22
Section 4. That § 11-9-4 be AMENDED: 23
11-9-4. The If a planning commission shall recommends the creation of a district, 24
the commission must designate the proposed district's boundaries of a district that the 25
planning commission recommends be created. The planning commission shall and submit 26
the recommendation to the governing body. The boundaries of a district may not split a 27
whole unit of property that is being used for a single purpose. 28
Section 5. That § 11-9-5 be AMENDED: 29
11-9-5. To establish a district, the a governing body must adopt a resolution that: 30
(1) Describes the boundaries of a the district with sufficient definiteness to identify 31
with ordinary and reasonable certainty the territory included. The boundaries may 32
not split a whole unit of property that is being used for a single purpose; 33
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(2) Creates the district on as of a given date; 1
(3) Contains the required findings set forth in § 11-9-8; 2
(4) Includes a finding that the assessed value of the taxable property in the district 3
plus the tax increment base of all other existing districts does not exceed ten 4
percent of the total assessed value of all taxable property in the political 5
subdivision; and 6
(4)(5) Demonstrates that the district has been reviewed by all affected taxing jurisdictions 7
at a public meeting held pursuant to chapter 1-25, provided that the affected taxing 8
jurisdictions may provide input but do not have authority to approve or reject the 9
district; and 10
(6) Assigns a name to the district for identification purposes. 11
The first district created in each political subdivision must be known as "Tax 12
Increment Financing District Number One, City (or Town, or County) of __________." 13
Each subsequently created district must be assigned the next consecutive number. 14
Section 6. That § 11-9-6 be AMENDED: 15
11-9-6. Subject to any agreement with bondholders, a district may overlap with 16
one or more existing districts if the boundaries of the districts are not identical Unless 17
otherwise authorized by a joint resolution among the affected political subdivisions, a 18
district established after July 1, 2026, may not overlap with any other existing district . 19
Section 7. That § 11-9-14 be AMENDED: 20
11-9-14. For the purposes of this chapter, the term "project costs" are any 21
expenditures made or estimated to be made, or monetary obligations incurred or 22
estimated to be incurred, by a political subdivision that are listed in a project plan as 23
grants or costs of public works or improvements within a district, plus any incidental costs 24
diminished by any income, special assessments, or other revenues, other than tax 25
increments, received, or reasonably expected to be received, by the political subdivision 26
in connection with the implementation of the planAny administrative fees assessed by the 27
governing body for the management and oversight of a district must be reasonable and 28
directly related to the actual time and expenses incurred by the employees of the 29
governing body. 30
Section 8. That § 11-9-15 be AMENDED: 31
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11-9-15. For the purposes of this chapter, the term "project costs" means mean: 1
(1) Capital costs, including the actualThe following capital costs: 2
(a) Actual costs of the construction of public works or improvements, buildings, 3
structures, and permanent fixtures; the demolition 4
(b) Demolition, alteration, remodeling, repair, or reconstruction of existing 5
buildings, structures, and permanent fixtures; the acquisition 6
(c) Acquisition of equipment; the clearing 7
(d) Clearing, over-excavation, and grading of land, including use of engineered 8
fill and soil compaction; and the 9
(e) The amount of interest payable on tax increment bonds issued pursuant to 10
this chapter until the positive tax increments to be received from the 11
district, as estimated by the project plan, are sufficient to pay the principal 12
of and interest on the tax increment bonds when due; 13
(2) Financing costs, including allThe following financing costs: 14
(a) All interest paid to holders of evidences of indebtedness issued to pay for 15
project costs, any; 16
(b) Any premium paid over the principal amount thereof because of the 17
evidences of indebtedness due to the redemption of obligations prior to 18
maturity, and a; and 19
(c) A reserve for the payment of principal and interest on obligations in an 20
amount determined by the governing body to be reasonably required for 21
the marketability of obligations; 22
(3) Real property assembly costs, including calculated as the actual cost of the 23
acquisition by a political subdivision of real or personal property within a district, 24
less any proceeds to be received by the political subdivision from the sale, lease, 25
or other disposition of property pursuant to a project plan; 26
(4) Professional service costs , including those costs incurred for architectural, 27
planning, engineering, and legal advice and services; 28
(5) Imputed administrative costs, including reasonable charges for the time spent by 29
a municipal or county employee in connection with the implementation of a project 30
planAdministrative fees pursuant to § 11-9-14; 31
(6) Relocation costs; 32
(7) Organizational costs, including the costs of conducting for: 33
(a) Conducting environmental impact and other studies and the costs of 34
informing; and 35
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(b) Informing the public of the creation of a district and the implementation of 1
a project plans; and plan; 2
(8) Payments and grants made , at the discretion of the governing body, that which 3
are found to be necessary or convenient to the creation of a district, the 4
implementation of a project plans, or to stimulate and develop plan, or the 5
stimulation and development of the general economic welfare and prosperity of the 6
state. No, except that a payment or grant may not be used for any residential 7
structure pursuant to § 11-9-42; and 8
(9) Any incidental costs diminished by any income, special assessment, or other 9
revenue, other than a tax increment, received, or reasonably expected to be 10
received, by the political subdivision in connection with the implementation of the 11
project plan. 12
Section 9. That § 11-9-46 be AMENDED: 13
11-9-46. The existence of a district shall terminate A district terminates when: 14
(1) Positive tax increments are no longer allocable to a the district under pursuant to 15
§ 11-9-25; or 16
(2) The governing body, by resolution, dissolves the district , after payment or 17
provision for payment of all project costs, grants, and all tax increment bonds of 18
the district. 19
Within thirty days after the termination of a district, the governing body shall 20
provide to the department a notice, which must include the name of the district and copies 21
of the resolution of dissolution and the district's final financial statement. The final financial 22
statement must account for the distribution of any remaining funds pursuant to § 11-9-23
45. 24
Section 10. That a NEW SECTION be added to chapter 11-9: 25
For any district established after July 1, 2026, a governing body may not approve 26
a project plan unless an independent fiscal feasibility review has been completed and 27
submitted to all political subdivisions. 28
The review must be conducted by a third person who is a municipal advisor 29
registered with the Municipal Securities Rulemaking Board and the United States Securities 30
and Exchange Commission pursuant to section 15B of the Securities Exchange Act of 1934, 31
15 U.S.C. §§ 78a to 78qq, inclusive (January 1, 2026), a licensed certified public 32
accountant with demonstrated experience in municipal finance and tax increment 33
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financing, or another independent third -party reviewer, including a nonprofit or research 1
organization, attorney, or economic development professional, approved by the governing 2
body. 3
The person conducting the review must be independent of any developer, obligated 4
person, and private entity receiving financial assistance or reimbursement under the 5
project plan. If the review is conducted: 6
(1) By a municipal advisor, the advisor must: 7
(a) Act in the capacity of municipal advisor to the governing body and may not 8
act on behalf of any developer, underwriter, or other private party; and 9
(b) Acknowledge in writing that the advisor owes a fiduciary duty to the 10
governing body with respect to any advice provided in the review; 11
(2) By a certified public accountant, the accountant: 12
(a) Must perform the review in accordance with applicable professional 13
standards; 14
(b) May not prepare, or have prepared, any development feasibility analysis, 15
financial projection, or valuation study for the developer or any affiliated 16
entity relating to the district; and 17
(c) Must acknowledge in writing that the review is conducted for the benefit of 18
the governing body; or 19
(3) By an independent third -party reviewer, the reviewer must have demonstrated 20
experience in public finance, economic development, or fiscal impact analysis. 21
Section 11. That a NEW SECTION be added to chapter 11-9: 22
A fiscal feasibility review required pursuant to section 10 of this Act: 23
(1) Must contain: 24
(a) A description of the project plan, proposed district boundaries, and 25
estimated project costs; 26
(b) An analysis of the tax increment base and the projected tax increment 27
valuation for the anticipated duration of the district; 28
(c) An evaluation of whether the projected tax increment revenue is sufficient 29
to pay the project costs and any other obligation proposed to be paid from 30
the revenue; 31
(d) An analysis of the timing of projected revenue relative to anticipated 32
expenditures or debt service requirements; 33
(e) A discussion of material financial risks to the feasibility of the project plan; 34
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(f) A statement identifying material assumptions, limitations, and reliance on 1
information from other third persons; and 2
(g) A conclusion stating whether, based on the assumptions and analyses 3
described in the report, the project plan is reasonably feasible from a 4
financing standpoint; 5
(2) Is advisory in nature and does not constitute a guarantee of project completion, 6
revenue, or valuation; 7
(3) Does not relieve the governing body of the responsibility to evaluate the project 8
plan; and 9
(4) Must be completed and made available to the governing body and the public at 10
least fourteen days prior to the governing body's consideration of the resolution 11
establishing the district. 12