Meade County Commissioners have what seems like a good transportation idea: they'd like to build a bypass east of Sturgis to connect state Highways 34 and 79 straight south to Interstate 90:

Proposed East Sturgis Bypass (annotations mine; map from Google; click to embiggen!)

Proposed East Sturgis Bypass (annotations mine; map from Google; click to embiggen!) 

This east bypass would run from the Elkview Campground near Exit 37 straight north to the Buffalo Chip entrance. The project would cut a couple miles of new road from the south end of 131st Avenue to the north end of Cardinal Place. Both of those roads appear to be gravel (I invite updates from local travelers!), so I assume the project would also include paving those existing roads.

The new road would nicely entriangle Sturgis. Folks coming from Rapid City to visit the Chip and Bear Butte would not have to drive through downtown Sturgis traffic, which on normal days may cut just a few miles and minutes from the trip but which during the Rally could shorten through-time by at least half an hour. Commissioners also say that the Fort Meade VA Hospital needs this road as a second emergency access route.

The Meade County Commission hasn't poured asphalt yet, but they are taking names: Pleasant Valley Parkway, Fort Meade Expressway, Ronald Reagan Road, Todd Beamer Road, Oren Hindman Road.... Residents will get to vote online over the Christmas break, and the commission will adopt the new name at its January 14th meeting.

But the commissioners may not get to build their road, due to their choice of funding mechanism: tax increment financing. To bring in the two million dollars needed to build this bypass, the Meade County Commission has drawn up a gargantuan serpentine TIF district: 

Proposed Meade County TIF 2014TIF districts usually are neighborhood scale. TIF districts usually encompass the immediate area where improvements will be built. Build new streets or sewer or other public improvements, and property values on adjoining lots should rise, as developers build homes and businesses to take advantage of the new infrastructure. Those increased property values provide the tax increment that pays off the financing that built the improvements.

The proposed bypass would lie in one township at the southwest corner of the TIF district. The TIF district paying for it spans 24 townships (total land area over 600 square miles), including 11 entire townships to the immediate north and east of Sturgis. East of those townships, the TIF district abandons Highway 34 and bends north, east, and back southeast to take in land on the proposed route of the Keystone XL pipeline.

That northernmost jut is the real moneymaker: it appears to encompass KXL pumping station #17 near Opal (according to the map TransCanada submitted to the PUC). Commission Chairman Alan Aker says the TIF District captures enough taxable land value to pay off the road project in 20 years even if Keystone XL does not come to fruition, but the pipeline and especially Pumping Station #17 would help Meade County pay off the TIF much faster.

The TIF would prevent the Meade County School District from cashing in right away on any added tax value from the pipeline, the pumping station or other development in the expansive district. Locking that future value into the new connector road could deprive the school district of $1.6 million over the next five years. The Meade County school board doesn't like that idea:

Superintendent Don Kirkegaard says the board is not opposed to the road, nor to TIF’s in general, but this particular TIF seems nothing more than a shift in taxes.

“I did a five-year estimate and I believe the district would lose about $1.6-million in future revenue based on projections. It really is a 2-mile road and we’re shifting the taxing structure for over 300 sections of land to pay for the road. It seems like the school is the only player in the new revenue source and the district just can’t support this particular map.”

Kirkeggard says typically, a TIF is designed to be a small area of property to help with the infrastructure in that small area. But in this one, he says it’s more of a “rob Peter to pay Paul” situation.

“The rezoning of the how we are going to use those taxes has nothing to do with the project. It’s just a way, as I say, “rob Peter to pay Paul,” and in this case, we’re Peter. So, we can’t support this particular map. It has both short term and long term impacts to the district. We’re strapped for cash, just like the county is, and we don’t think this is equitable for the school district” [Gary Matthews, "Meade 46-1 School Board Opposes County's New 131st Avenue TIF Map," KBHB Radio, 2014.12.10].

The Meade County Commission doesn't appreciate the school board's resistance. They may face broader public opposition. Under the banner of Meade County Taxpayers for Responsible Government, TIF opponents are petitioning to subject the county's funding plan to a public vote. They have until early January (January 7, by my calculation) to gather at least 762 signatures.


The GOP spin machine is trying really hard to scare Republicans away from investing $100 million in South Dakota roads by calling "the single largest tax increase in state history." Pat Powers tries to lower expectations and deter support by claiming the proposal from the interim Highway Needs and Financing Committee is dead on arrival.

Powers had better get in line with his corporate overlords, who are lining up behind road investment. For the past year, a variety of industry lobbying groups have been building a "Roads Are Vital" campaign to make taxes sound fun. Who's on the team supporting a ten-cent gasoline tax hike? The Chamber of Commerce, the general contractors, the truckers association, the cement and asphalt groups (yes, there is a Dakota Asphalt Pavement Association—they initiate new members by tarring and feathering), county commissioners, co-ops, Big Ag, engineers, AAA, the auto-dealers....

The Roads Are Vital Coalition is out tweeting and marketing its pitch, saying, among other things, that the current dip in gasoline prices presents the perfect opportunity to raise the gasoline tax. And while they don't have Governor Daugaard full-throatedly singing their song, they don't have him killing the roads proposal, which he could do with a word if he wanted.

Dead on arrival? I don't think so. The Roads Are Vital Coalition poses a powerful, big money threat to Republicans' commitment to their campaign-trail slogans. Add to that pressure the glaring reality of our crumbling roads and bridges, and we just might see the 2015 Legislature fill some potholes.


On the bright side, the State of South Dakota is willing to fight big money... when it means keeping money in state coffers.

Bob Mercer noted Tuesday (and Governor Daugaard in his budget address did not) that the state could face up to $30 million in liability in a pending court case. (Our governors do like sweeping such potential legal liabilities under the rug.) According to Mercer, Citibank is taking South Dakota to court to get a refund on as much as $30 million that it may have overpaid in bank franchise tax from 1999 to 2002. A federal audit in 2012 found that Citibank overpaid federal income tax during that period, which means we calculated their bank franchise tax too high as well.

But the Department of Revenue won't pay, claiming a three-year statute of limitations. The South Dakota Supreme Court will hear arguments on the validity of that position on January 14.

Mercer points out that the state's sticklerism on the statute of limitations seems to arise only when dollars are flowing out of state coffers, not in:

In 2007, Citibank paid the state treasury an additional $4 million in state taxes after an IRS audit found Citibank didn’t report its income fully for the period of 1993-1998. The state Department of Revenue accepted the $4 million long after the three-year limitation in state law.

In September 2009, Citibank filed its state tax return for 2008. In September 2012, Citibank requested a $900,000 refund. The state Department of Revenue hasn’t acted yet on that refund request because the IRS hasn’t completed an audit for that period. We are now in 2014 and outside the three-year limitation [Bob Mercer, "Is Citibank Owed $30 Million, $4 Million or $0?" Pure Pierre Politics, 2014.12.02].

I'm perfectly fine with taxing Citibank far more than our current state laws do. But even the Citibank plutocrats deserve consistently applied tax rules. If taxpayers pay too much, they should cough it up. If the state taxes too much, the state should cough it back. If we're going to set a deadline for the coughing, that deadline should apply no matter which way the money is flowing.

Map of proposed Dakota Access pipeline route through South Dakota; see full route map at

Map of proposed Dakota Access pipeline route through South Dakota (click to embiggen; see full route map at

Larry Pressler's pipeline plan is already rolling. The Dakota Access oil pipeline would ship Bakken oil from North Dakota to Patokia, Illinois, refineries. Thirty inches wide and moving 450,000 barrels per day, Dakota Access would match the first Keystone pipeline in size, destructive power, and, if our Legislature had the good sense to pass a pipeline tax, $200 million in budget-boosting potential.

Dakota Access, which is one of the heads of energy hydra Energy Transfer Partners, paid Strategic Economics Group of Iowa to write up an economic impact statement for its pipeline. SEG itemizes benefits for South Dakota:

Construction stage (2015-2016):

  • Estimated impact on production and sales: $835.8 Million
  • Estimated impact on labor income: $302.8 Million
  • Estimated number of additional job-years of employment: 7,100
  • Estimated increase in state sales, use, gross receipts and lodging taxes: $35.6 Million
  • Estimated increase in local sales, use, gross receipts and lodging taxes: $2.9 Million

Operations and maintenance stage (annually beginning in 2017):

  • Estimated increase in production and sales: $4.2 Million
  • Estimated increase in labor income: $1.9 Million
  • Estimated increase in full-time jobs: 31
  • Estimated increase in state sales, use, gross receipts and lodging taxes: $135,000
  • Estimated increase in local sales, use, gross receipts and lodging taxes: $62,000
  • Estimated increase in local property taxes: about $13 Million [Strategic Economics Group, "South Dakota Economic & Fiscal Impact Fact Sheet," November 2014]

Iowa State University economist David Swenson, who has not been paid by Dakota Access, is skeptical of this economic impact analysis:

“It’s not worthless, but it’s an industry-sponsored promotion piece designed to get the public to support it,” Swenson said. “Policymaker beware.”

...Swenson said the study uses a deceptive calculation for jobs, called job years. If one job existed for two years, it would be counted as two job years, he said. He said for the $1 billion economic output, a similar duplication by years is used, and he disputed using gross transactions as a measure of economic output [B.A. Morelli, "ISU Economist Doubts Study Touting Economic Benefits of Pipeline," Cedar Rapids Gazette, 2014.11.13].

Orland organic impresario Charlie Johnson won't be swayed by economic abstractions. Dakota Access will cut through 160 acres that he farms organically. If our state's embrace of the Keystone pipeline and Mike Rounds's Big-Oil lies are any indication, Johnson won't get any sympathy from state courts or regulators.

But maybe Johnson can divert Dakota Access by getting creative and copyrighting his land as a work of art, as Alberta artist Peter von Tisenhausen did:

Tiesenhausen made the decision after years of legal battles with oil and gas companies that wanted access to the deposits of natural gas that sit just beneath his 800-acre plot of land. Under federal law, Alberta landowners have the rights only to the surface of their land. The riches that lie beneath are generally owned by the government, which can grant oil and gas producers access so long as the companies agree to compensate landowners. This compensation is usually for lost harvests and inconvenience, but, Tiesenhausen reasoned, what if instead of a field of crops these companies were destroying the life’s work of an acclaimed visual artist? Wouldn’t the compensation have to be exponentially higher?

...In 2003, he presented his copyright argument before the Alberta Energy and Utilities Board, which told him that copyright law was beyond its jurisdiction and he would need to pursue that in the courts. So far that hasn’t been necessary. The oil and gas companies have since backed off, even paying for an expensive rerouting of pipelines, and have yet to bother testing his copyright [Amy Fung, "An Alberta Sculptor Fights Oil Companies to Exhibit Art on His Own Land," 2010.04.22].

Ah, so that's why Dennis Daugaard doesn't want kids majoring in liberal arts.

I invite the legal scholars in our audience to determine whether the land-copyright argument would transfer from Canadian to American law. Lawyer Monica Goyal notes that von Tisenhausen's argument hasn't faced court scrutiny yet; his willingness to lawyer up and press up has simply deterred the pipeliners eying his land from pushing the issue.

But Charlie, we know an artist or two around Lake County who like to work big. Perhaps a few acres of artistic ingenuity could keep that black snake from burrowing through your land. Start an art-protest-pipeline-barrier demo project, and perhaps Dakota Rural Action could collaborate with Christo to come up with a creative state-spanning installation that would keep Big Oil from trampling our property rights.


Governor Dennis Daugaard deserves all the guff we can give him for reneging on his no-new-taxes promise to consider a gasoline-tax increase. Acknowledging that we don't spend enough on our roads and bridges is an important repudiation of the Republican sloganeering that would have us believe that public goods grow on free-market trees. Roads don't just happen; communities build them with taxes.

But Governor Daugaard deserves credit for screwing up the courage to focus on transportation at a time when Congress appears incapable of getting anything done. The lame-duck session is ticking away with zero accomplishments. Congress stages a cynical political ploy to express its support for one private pipeline that won't help any American drive to work, then goes home for Thanksgiving. But both parties ignore the Highway Trust Fund, which we urgently need to replenish in order to rebuild our crumbling roads and bridges:

Ray LaHood: That's the pot of money that over 50 years helped us create the best interstate system in the world, which is now falling apart.

Steve Kroft: Why? How did it get this way?

Ray LaHood: It's falling apart because we haven't made the investments. We haven't got the money. The last time we raised the gas tax, which is how we built the interstate system, was 1993.

Steve Kroft: What has the resistance been?

Ray LaHood: Politicians in Washington don't have the political courage to say, "This is what we have to do." That's what it takes.

Steve Kroft: They don't want to spend the money? They don't want to raise the taxes?

Ray LaHood: That's right. They don't want to spend the money. They don't want to raise the taxes. They don't really have a vision of America the way that other Congresses have had a vision of America [Steve Kroft, "Falling Apart: America's Neglected Infrastructure," CBS: 60 Minutes, 2014.11.23.

In at least suggesting that he'll set aside his election-year slogans and seek more tax revenue to maintain our roads, Governor Daugaard is showing a little more leadership and vision than our Congressional delegation. Let's hope our Legislature can follow the Governor's (and more importantly, Senator Mike Vehle's) lead, drop the campaign trail baloney, educate the voters as to the proper role of government, and fill some potholes.


The Legislature's Ag Land Assessment Task Force gets me to notice a tiny portion of our agricultural land assessment rules that show South Dakota thinking like Earl Butz, telling farmers to get big or get out... of agricultural land classification.

The evaluation of ag land is currently a contorted potential income tax, but the important part here is that ag land is taxed much less per acre than residential land. SDCL 10-6-31.1 says that land must meet two of these three criteria to be taxed at the lower agricultural rate (farmers, legislators, let me know if I'm boiling them down correctly):

  1. A third of the gross family income must come from agricultural activities on the land;
  2. The principal use of the land is agriculture;
  3. The land in question is at least 20 acres (although counties can increase that minimum up to 160 acres).

The interim committee is considering rewording that statute to make the principal-use criterion mandatory and requiring the land additionally meet either the one-third-income or minimum-size requirement.

I understand that some of the angst over ag land assessment comes from Pennington County, where evidently some Black Hills residents have kept taxes on their scenic parcels low by harvesting a little timber and calling themselves tree farmers.

But consider this situation: suppose the Governor gets serious about rural development in his second term and retools Dakota Roots to recruit young families to take up small-scale farming. We encourage young couples to buy small farms, less than ten acres, to grow real food for local sale and consumption. These young farm couples dig in for some local-level garden farming, but at least one member of the family maintains professional employment teaching, lawyering, doctoring, carpenting, what-have-you to ensure some income stability.

Under either version, current or amended, of our tax rules, those intrepid young small farmers get hit with an extra tax burden. It seems odd to tax farmers more just because they have chosen to work on a smaller scale. It seems contradictory for our income-tax-averse Republican Legislature to impose a higher tax rate on farmers based on their income.

Our property tax code should be able to distinguish between farmers engaged in real farming and Black Hills retirees tricking the county by chopping a few trees. But if we can't write a law to recognize that difference, we shouldn't punish small farmers who choose to sell their goods to their neighbors at the farmers' market instead of Smithfield, ADM, and Bel Brands.

We could avoid all this land-evaluation rigamarole if we just replaced our antiquated property tax with an income tax. Short of that, we could write a tax code that encourages young people to get into farming without feeling like they have to commit to the Big-Ag cycle of corporate serfdom and debt.

Related: The Legislature may be inching toward turning the agricultural land assessment into something even closer to an income tax. At their Tuesday meeting, the ag land assessment task force voted unanimously to commission SDSU economists to study the impacts of assessing ag land on actual use instead of ideal use. (Hey, isn't that Rep. Charlie Hoffman's good idea?)


Now that we have some Democratic balls rolling, let's tell Judge Srtska he's wrong.

Last week, retired judge Bill Srtska apparently floated an argument on Facebook that Initiated Measure, the indexed minimum wage increase that South Dakota voters wrote into law, may be unconstitutional. Judge Srtska writes that the automatic annual cost-of-living adjustment may constitute an "unlawful delegation" of legislative power. Srtska apparently sees no constitutional problem with our establishing $8.50 as the minimum wage on January 1, 2015, but once we start letting inflation and math set subsequent minima, "All South Dakotans would be bound by the new wage floor although that rate was never passed by the legislature."

May it please the court: His Honor misreads the law. Initiated Measure 18 goes no further than a number of other statutes through which the Legislature has enacted provisions that operate automatically, without subsequent legislative action.

Consider sunset clauses. South Dakota has passed laws with sunset clauses, providing for repeal of laws without the consent of the sitting Legislature at the time of repeal. One law passed in 2013 imposes a sunset in 2046. That law binds numerous South Dakotans not even born yet to a decision made by likely no one in their Legislature.

For an even stronger parallel, consider the agriculture productivity tax, the Rube-Goldberg income tax we impose on farmers and ranchers. The Legislature does not establish land values. It used its legislative power to hire SDSU economists to cook up a new productivity value each year. That action is as legislative, as mathematical, and as automatic as the cost-of-living increase in the minimum wage. I have not heard anyone suggest that the Legislature fire the SDSU economists and calculate the productivity formula themselves each year (I'm not sure our legislators are that good with math to start with).

The new, indexed South Dakota minimum wage is as constitutional as several other South Dakota laws now on the books. If anyone wants to challenge its constitutionality, they'd better be prepared to unravel a host of other state laws. Judge Srtska, are you sure you want to pull that thread?


KELO puts the cart before the horse with this strange headline:

Improved Roads Could Mean More Taxes

Brief review of causality, Mr. Schaffhauser: We pay taxes. Government uses those taxes to improve roads. If we pay more taxes, we can fix more roads. So more taxes mean improved roads.

We can also consider the inverse with some broader context: South Dakota Republicans pride themselves on not raising taxes. Not raising taxes means less money available to government to keep up with road repairs. Not keeping up with road repairs means are roads deteriorate. So electing Republicans could mean crappier roads. Drive around your county for empirical proof.

Republican Senator Mike Vehle (R-20/Mitchell) continues to try to see around his party's fiscal short-sightedness, but it's tough. He figures the bill for catching up with years of neglect of our road and bridge repair needs is $400 million to $500 million. Yet he's only been able to lead his interim Highway Needs and Financing Committee to approve raising maybe a quarter of that revenue:

"What we're trying to do is say we recognize the need. We're not going to be able to fill it all, but we do realize we have to do something," Vehle said.

The committee passed a list of recommendations that would raise close to $100 million for roads and bridges. Some of it would come from proposed license fee increases. Other revenue sources would come from new or increased taxes on products related to driving, such as vehicles and fuel.

"What we tried to do was, everyone felt a little bit of pain. We aren't just going to make one area pay for it all," Vehle said [Erich Schaffhauser, "Improved Roads Could Mean More Taxes,", 2014.11.09].

We Democrats don't support raising taxes just for the sake of raising taxes. We support raising taxes only when important public projects need the money... just like Republican Senator Vehle does. But Republican prejudices and pigheadedness prevent South Dakota from raising the money it needs to meet basic public needs.


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