HB 1319

 26.345.37  101st Legislative Session  1319
                                          2026 South Dakota Legislature
                                                  House Bill 1319
 Introduced by: Representative Weisgram
1 An Act to update provisions related to tax increment financing districts.
2 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
3 Section 1. That § 10-6-137 be AMENDED:
410-6-137. Any Following the construction of any structure classified pursuant to
5    this section, must, following construction, be valued valuation of the structure for taxation
6    purposes must occur in the usual manner. The board of county commissioners of the
7    county in which the structure is located, may adopt a discretionary formula for assessed
8    value to be used for tax purposes. Except as otherwise provided in § 10-6-137.1, the
9    formula may include, for any or all of the five tax years following construction, all, any
10    portion, or none of the assessed value for tax purposes. Any formula adopted must be
11    equally applied to specifically classified properties pursuant to this section may not be
12    used for any property within a tax increment finance district.
13The board of county commissioners of the county in which the structure is located
14    may, if requested by the owner of the structure, fully assess the structure without
15    application of the formula. In waiving the formula for the structure of one owner, the
16    board of county commissioners is not prohibited from applying the formula for subsequent
17    new structures. The assessed value during any of the five years may not be less than the
18    assessed value of the property in the year preceding the first year of the tax years
19    following construction.
20Any structure that is partially constructed on the assessment date may be valued
21    for tax purposes, pursuant to this section, and the value may not be less than the assessed
22    value of the property in the year preceding the beginning of construction. The period that
23    the property is valued for tax purposes under this section may include the years when the
24    property is partially constructed.
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1Following the five-year period under this section, the property must be assessed
2    at the same percentage as all other property for tax purposes, except as otherwise
3    provided in § 10-6-137.1.
4Any of the following types of real property may be specifically classified for the
5    purpose of taxation pursuant to this section:
6    (1)      Any new industrial or commercial structure, or any addition, to or renovation, or
7reconstruction to of an existing structure, located within a designated urban
8renewal area as defined in § 11-8-4, if the new structure, addition, renovation, or
9reconstruction has a full and true value of thirty thousand dollars or more;
10    (2)      Any new industrial structure, including a power generation facility, or an addition
11to an existing structure facility, if the new structure facility or addition has a full
12and true value of thirty thousand dollars or more;
13    (3)      Any new nonresidential agricultural structure, or any addition to an existing
14structure, if the new structure or addition has a full and true value of ten thousand
15dollars or more;
16    (4)      Any new commercial structure, or any addition to or renovation or reconstruction
17of an existing structure, except a commercial residential structure as described in
18subdivision (5), if the new structure or, addition, renovation, or reconstruction has
19a full and true value of thirty thousand dollars or more;
20    (5)      Any new commercial residential structure, or addition to an existing structure,
21containing four or more units, if the new structure or addition has a full and true
22value of thirty thousand dollars or more;
23    (6)      Any new affordable housing structure containing four or more units, with a monthly
24rental rate of the units at or below the annually calculated rent for the state's sixty
25percent area median income being used by the South Dakota Housing Development
26Authority for a minimum of ten years following the date of first occupancy, if the
27structure has a full and true value of thirty thousand dollars or more;
28    (7)      Any new residential structure, or addition to or renovation of an existing structure,
29located within a redevelopment neighborhood established pursuant to § 10-6-141,
30if the new structure, addition, or renovation has a full and true value of five
31thousand dollars or more. The structure must be, provided the structure is located
32in an area defined and designated as a redevelopment neighborhood based on
33conditions provided set forth in § 11-7-2 or 11-7-3; or
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1    (8)      Any commercial, industrial, or nonresidential agricultural property that increases
2more than ten thousand dollars in full and true value, as a result of reconstruction
3or renovation of the structure.
4 Section 2. That § 10-12-44 be AMENDED:
510-12-44. The county auditor having jurisdiction over a school district shall raise
6    additional revenue, for the general fund and special education fund, from real property
7    taxes, to compensate for a tax abatement, a tax increment financing district, or a
8    discretionary formula in accordance with the following:
9    (1)      For tax increment financing districts created pursuant to chapter 11-9, the county
10auditor shall impose an additional tax levy, for an amount not to exceed an amount
11equal to the sum of the levies in §§ 10-12-42 and 13-37-16 multiplied by the tax
12increment value, as defined in § 11-9-1 total value of the tax increment financing
13district less the tax increment base as determined pursuant to § 11-9-19;
14    (2)      For property subject to § 10-6-137, 10-6-137.1, or 10-6-144, the county auditor
15shall impose an additional tax levy, for an amount not to exceed the amount of
16taxes that were not collected, due to the reduction in value based on the maximum
17levies, pursuant to §§ 10-12-42 and 13-37-16; and
18    (3)      For abated taxes, the county auditor shall impose an additional tax levy, for an
19amount not to exceed the amount of the school district's portion of the taxes that
20were abated, pursuant to chapter 10-18, during the previous tax year.
21The levies in this section are not subject to the referendum provision of § 10-12-
22    43, and these levies must maintain the same proportion to each other, as represented in
23    the mathematical relationship at the maximum levies pursuant to § 10-12-42.
24 Section 3. That § 11-9-1 be AMENDED:
2511-9-1. Terms used in this chapter mean:
26    (1)      "Department," the Department of Revenue;
27    (2)      "District," a tax increment financing district in a contiguous geographic area within
28a political subdivision, which is defined and created by resolution of the governing
29body, provided that parcels that are not otherwise adjacent are not contiguous
30based solely on the existence of an easement, right-of-way, transportation
31corridor, or waterway connecting the parcels, unless the parcels are:
32(a)    Separated only by the easement, right-of-way, transportation corridor, or
33waterway; and
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1(b)      Located directly opposite one another;
2    (3)      "Governing body," the board of trustees, the board of commissioners, the board of
3county commissioners, or the common council of a municipality a board of
4commissioners, board of trustees, common council, or other authoritative body by
5which a political subdivision is controlled;
6    (4)      "Grant," the transfer of money or property to a transferee for a governmental
7purpose that, which is not a related party to or an agent of the political subdivision;
8    (5)      "Planning commission," a planning commission created under chapters chapter 11-
92 or 11-6, a planning committee of a governing body of a political subdivision that
10does not have a planning commission, or the governing body of a political
11subdivision that does not have a planning commission or planning committee;
12    (6)      "Political subdivision," a municipality, as defined in § 11-6-1, or county of this
13state;
14    (7)      "Project    plan,"   the   properly   an   approved   plan   for   the   development  or
15redevelopment of a tax increment financing district, including all properly approved
16amendments to the plan;
17    (8)      "Tax increment financing district," a contiguous geographic area within a political
18subdivision defined and created by resolution of the governing body;
19    (9)(8) "Taxable property," all real and personal taxable property located in a tax
20increment financing district; and
21    (10)(9)        "Tax increment valuation," the total value of the tax increment financing district
22minus the tax increment base as determined pursuant to § 11-9-19.
23 Section 4. That § 11-9-4 be AMENDED:
2411-9-4. The If a planning commission shall recommends the creation of a district,
25    the commission must designate the proposed district's boundaries of a district that the
26    planning commission recommends be created. The planning commission shall and submit
27    the recommendation to the governing body. The boundaries of a district may not split a
28    whole unit of property that is being used for a single purpose.
29 Section 5. That § 11-9-5 be AMENDED:
3011-9-5. To establish a district, the a governing body must adopt a resolution that:
31    (1)      Describes the boundaries of a the district with sufficient definiteness to identify
32with ordinary and reasonable certainty the territory included. The boundaries may
33not split a whole unit of property that is being used for a single purpose;
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1    (2)      Creates the district on as of a given date;
2    (3)      Contains the required findings set forth in § 11-9-8;
3    (4)      Includes a finding that the assessed value of the taxable property in the district
4plus the tax increment base of all other existing districts does not exceed ten
5percent of the total assessed value of all taxable property in the political
6subdivision; and
7    (4)(5) Demonstrates that the district has been reviewed by all affected taxing jurisdictions
8at a public meeting held pursuant to chapter 1-25, provided that the affected taxing
9jurisdictions may provide input but do not have authority to approve or reject the
10district; and
11    (6)      Assigns a name to the district for identification purposes.
12The first district created in each political subdivision must be known as "Tax
13    Increment Financing District Number One, City (or Town, or County) of __________."
14    Each subsequently created district must be assigned the next consecutive number.
15 Section 6. That § 11-9-6 be AMENDED:
1611-9-6. Subject to any agreement with bondholders, a district may overlap with
17    one or more existing districts if the boundaries of the districts are not identicalUnless
18    otherwise authorized by a joint resolution among the affected political subdivisions, a
19    district established after July 1, 2026, may not overlap with any other existing district.
20 Section 7. That § 11-9-14 be AMENDED:
2111-9-14. For the purposes of this chapter, the term "project costs" are any
22    expenditures made or estimated to be made, or monetary obligations incurred or
23    estimated to be incurred, by a political subdivision that are listed in a project plan as
24    grants or costs of public works or improvements within a district, plus any incidental costs
25    diminished by any income, special assessments, or other revenues, other than tax
26    increments, received, or reasonably expected to be received, by the political subdivision
27    in connection with the implementation of the planAny administrative fees assessed by the
28    governing body for the management and oversight of a district must be reasonable and
29    directly related to the actual time and expenses incurred by the employees of the
30    governing body.
31 Section 8. That § 11-9-15 be AMENDED:
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111-9-15. For the purposes of this chapter, the term "project costs" means mean:
2    (1)      Capital costs, including the actualThe following capital costs:
3(a)    Actual costs of the construction of public works or improvements, buildings,
4structures, and permanent fixtures; the demolition
5(b)    Demolition, alteration, remodeling, repair, or reconstruction of existing
6buildings, structures, and permanent fixtures; the acquisition
7(c)    Acquisition of equipment; the clearing
8(d)    Clearing, over-excavation, and grading of land, including use of engineered
9fill and soil compaction; and the
10(e)    The amount of interest payable on tax increment bonds issued pursuant to
11this chapter until the positive tax increments to be received from the
12district, as estimated by the project plan, are sufficient to pay the principal
13of and interest on the tax increment bonds when due;
14     (2)     Financing costs, including allThe following financing costs:
15(a)    All interest paid to holders of evidences of indebtedness issued to pay for
16project costs, any;
17(b)    Any premium paid over the principal amount thereof because of the
18evidences of indebtedness due to the redemption of obligations prior to
19maturity, and a; and
20(c)    A reserve for the payment of principal and interest on obligations in an
21amount determined by the governing body to be reasonably required for
22the marketability of obligations;
23     (3)     Real property assembly costs, including calculated as the actual cost of the
24acquisition by a political subdivision of real or personal property within a district,
25less any proceeds to be received by the political subdivision from the sale, lease,
26or other disposition of property pursuant to a project plan;
27     (4)     Professional service costs, including those costs incurred for architectural,
28planning, engineering, and legal advice and services;
29     (5)     Imputed administrative costs, including reasonable charges for the time spent by
30a municipal or county employee in connection with the implementation of a project
31planAdministrative fees pursuant to § 11-9-14;
32     (6)     Relocation costs;
33     (7)     Organizational costs, including the costs of conducting for:
34(a)    Conducting environmental impact and other studies and the costs of
35informing; and
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1(b)     Informing the public of the creation of a district and the implementation of
2a project plans; and plan;
3     (8)     Payments and grants made, at the discretion of the governing body, that which
4are found to be necessary or convenient to the creation of a district, the
5implementation of a project plans, or to stimulate and develop plan, or the
6stimulation and development of the general economic welfare and prosperity of the
7state. No, except that a payment or grant may not be used for any residential
8structure pursuant to § 11-9-42; and
9     (9)     Any incidental costs diminished by any income, special assessment, or other
10revenue, other than a tax increment, received, or reasonably expected to be
11received, by the political subdivision in connection with the implementation of the
12project plan.
13 Section 9. That § 11-9-46 be AMENDED:
1411-9-46. The existence of a district shall terminate A district terminates when:
15    (1)      Positive tax increments are no longer allocable to a the district under pursuant to
16§ 11-9-25; or
17    (2)      The governing body, by resolution, dissolves the district, after payment or
18provision for payment of all project costs, grants, and all tax increment bonds of
19the district.
20Within thirty days after the termination of a district, the governing body shall
21    provide to the department a notice, which must include the name of the district and copies
22    of the resolution of dissolution and the district's final financial statement. The final financial
23    statement must account for the distribution of any remaining funds pursuant to § 11-9-
24    45.
25 Section 10. That a NEW SECTION be added to chapter 11-9:
26For any district established after July 1, 2026, a governing body may not approve
27    a project plan unless an independent fiscal feasibility review has been completed and
28    submitted to all political subdivisions.
29The review must be conducted by a third person who is a municipal advisor
30    registered with the Municipal Securities Rulemaking Board and the United States Securities
31    and Exchange Commission pursuant to section 15B of the Securities Exchange Act of 1934,
32    15 U.S.C. §§ 78a to 78qq, inclusive (January 1, 2026), a licensed certified public
33    accountant with demonstrated experience in municipal finance and tax increment
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1    financing, or another independent third-party reviewer, including a nonprofit or research
2    organization, attorney, or economic development professional, approved by the governing
3    body.
4The person conducting the review must be independent of any developer, obligated
5    person, and private entity receiving financial assistance or reimbursement under the
6    project plan. If the review is conducted:
7    (1)      By a municipal advisor, the advisor must:
8(a)    Act in the capacity of municipal advisor to the governing body and may not
9act on behalf of any developer, underwriter, or other private party; and
10(b)    Acknowledge in writing that the advisor owes a fiduciary duty to the
11governing body with respect to any advice provided in the review;
12    (2)      By a certified public accountant, the accountant:
13(a)    Must perform the review in accordance with applicable professional
14standards;
15(b)    May not prepare, or have prepared, any development feasibility analysis,
16financial projection, or valuation study for the developer or any affiliated
17entity relating to the district; and
18(c)    Must acknowledge in writing that the review is conducted for the benefit of
19the governing body; or
20    (3)      By an independent third-party reviewer, the reviewer must have demonstrated
21experience in public finance, economic development, or fiscal impact analysis.
22 Section 11. That a NEW SECTION be added to chapter 11-9:
23A fiscal feasibility review required pursuant to section 10 of this Act:
24    (1)      Must contain:
25(a)    A description of the project plan, proposed district boundaries, and
26estimated project costs;
27(b)    An analysis of the tax increment base and the projected tax increment
28valuation for the anticipated duration of the district;
29(c)    An evaluation of whether the projected tax increment revenue is sufficient
30to pay the project costs and any other obligation proposed to be paid from
31the revenue;
32(d)    An analysis of the timing of projected revenue relative to anticipated
33expenditures or debt service requirements;
34(e)    A discussion of material financial risks to the feasibility of the project plan;
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1(f)    A statement identifying material assumptions, limitations, and reliance on
2information from other third persons; and
3(g)    A conclusion stating whether, based on the assumptions and analyses
4described in the report, the project plan is reasonably feasible from a
5financing standpoint;
6    (2)      Is advisory in nature and does not constitute a guarantee of project completion,
7revenue, or valuation;
8    (3)      Does not relieve the governing body of the responsibility to evaluate the project
9plan; and
10    (4)      Must be completed and made available to the governing body and the public at
11least fourteen days prior to the governing body's consideration of the resolution
12establishing the district.
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