HB 1245: authorize municipalities to establish a local funding mechanism for capital improvement projects. - South Dakota

House Engrossed → Enrolled · 6 edits · Mar 9, 2026

MODERATE

This bill authorizes South Dakota municipalities to create a local gross receipts tax to fund capital improvement projects, such as buying equipment or renovating buildings. The bill establishes a five-member board to review and approve these tax ordinances before they are submitted to voters. It sets strict limits on the tax rate (maximum 1%), requires a 60% voter approval threshold, and mandates that funds be used exclusively for specific capital projects.

Scope change

The bill introduces a new funding mechanism applicable to all municipalities in South Dakota, allowing them to levy a gross receipts tax for capital projects if approved by a local board and voters.

FISCAL

Municipalities are authorized to impose a gross receipts tax with a maximum rate of one percent to fund capital improvements.

REQUIREMENT

A five-member capital improvement board must be appointed to review and approve tax ordinances before they can be submitted to voters.

The tax cannot be imposed if the municipality has collected similar funds from this specific tax in the previous 24 months.

The tax measure requires approval by at least sixty percent of the voters in the municipality.

ADDED

Tax ordinances must specify a minimum revenue target and remain effective for up to six years or until the target is met.

ELIGIBILITY

Funds collected from the tax must be deposited into a special capital outlay fund and can only be used for acquiring assets, construction, or repair of municipal property.

House Local Government Engrossed → House Engrossed · 6 edits · Feb 10, 2026

MODERATE

This bill establishes a new local funding mechanism allowing municipalities to create a capital improvement board and levy a gross receipts tax to finance specific infrastructure projects. The changes introduce a new five-member board to approve tax ordinances, set a maximum tax rate of one percent, and require voter approval via a sixty percent threshold. Funds collected must be restricted to capital outlays like property acquisition or construction and can only be used once every twenty-four months.

Scope change

The bill expands municipal financial authority by creating a new statutory process for local capital improvement funding that did not previously exist in this specific form.

DEFINITION

Creates a new five-member capital improvement board consisting of one governing body member and four residents to approve tax ordinances.

REQUIREMENT

Authorizes municipalities to impose a gross receipts tax capped at one percent, subject to state tax conformity rules.

Prohibits municipalities from imposing this tax if they have collected funds from it within the preceding twenty-four months.

ELIGIBILITY

Requires a minimum sixty percent voter approval threshold to implement the tax.

FISCAL

Mandates that all tax revenue be deposited into a special capital outlay fund restricted to specific infrastructure purposes.

TIMELINE

Limits tax collection to a maximum of sixty months or until the minimum revenue target is met, whichever comes first.

Introduced → House Local Government Engrossed · 6 edits · Feb 5, 2026

MODERATE

This bill introduces a new local funding mechanism allowing South Dakota municipalities to establish a capital improvement board and levy a gross receipts tax to finance specific infrastructure projects. The changes add new sections to existing state codes to define the board's composition, set tax rates, and outline strict rules for voter approval and fund usage.

Scope change

The bill expands municipal authority by creating a new legal framework for local capital improvement funding that did not previously exist in this specific form.

SCOPE

Establishes a new Capital Improvement Board consisting of one governing body member and four resident appointees to review and approve tax ordinances.

FISCAL

Authorizes municipalities to impose a gross receipts tax of up to one percent on sales of tangible personal property, services, and electronically transferred products.

REQUIREMENT

Requires a two-step approval process where the Capital Improvement Board must approve the tax ordinance before it is submitted to voters for a majority vote.

Mandates that collected tax funds be deposited into a special capital outlay fund restricted solely for acquiring, constructing, repairing, or renovating municipal real property, plant assets, or equipment.

TIMELINE

Sets a maximum duration of sixty months for any tax ordinance and includes a sunset provision if the minimum revenue target is met.

ELIGIBILITY

Prohibits municipalities from imposing this tax if they have collected funds from a similar tax in the preceding twenty-four months.

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

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