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Sioux Falls Lessons for Billings: Sales Tax and Infrastructure?

Billings, Montana, wants to be better. It wants to be like Sioux Falls. Billings economic development boss Steve Arveschoug and other interested Billingsians visited our eastern Queen City last month to divine our "secret sauce". What do they think makes Sioux Falls grow?

“You take a bucket of the energy and vision of their mayor (Mike Huether); a bushel of private service leadership; three shovelsful of expertise from city planning, the chamber and economic development — and sprinkle it with a sales tax,” Arveschoug said [Mike Ferguson, "Business Leaders Look to Cook up Billings Version of Sioux Falls' Success," Billings Gazette, 2014.06.15].

What?! Taxes are a useful ingredient for economic growth?

Over and over during their presentations, Sioux Falls leaders emphasized the importance of the city’s share of state sales tax revenue — 2 cents on every dollar spent — in building and updating infrastructure. In many examples, private investment has followed public spending. The two-cent local share of sales tax revenue adds about $100 million to city coffers each year, half of which is typically spent on infrastructure to help support growth [Ferguson, 2014.06.15].

Montana does not have a general sales tax, but it does tax certain items. It does have resort and local option sales taxes, but only for towns with population under 5,500. The largest sources of state revenue are income and severance taxes. Large local governments like Billings thus don't have the same revenue-generating power as Sioux Falls.

But notice that Billings's economic development chief thinks Sioux Falls invests its money most wisely not in handouts to specific businesses, but in infrastructure that directly benefits everyone:

“It is very clear to me that communities have to provide infrastructure if they want to attract new businesses and help existing businesses grow,” [Arveschoug] said. It’s important that the investments are made strategically, he said — such areas as convention centers, recreational facilities, trails, civic plazas and downtown redevelopment. “Sioux Falls has 1,350 acres of commercial space infrastructure ready to go. If you want to consider coming to Sioux Falls, they had somewhere to take you,” he said. “That’s a strong platform for them, and I’d like to see us develop that concept, that ability to develop.” In Wyoming, he said, the legislature can appropriate $25 million or more to communities to help build infrastructure to attract and retain businesses [Ferguson, 2014.06.15].

Give one company a big grant or tax kickback, and when they go belly up, that money's gone, and you have to come up with a new incentive package for the next big fish. Build a good park or downtown plaza that makes Company X say, "Oooo! We want to move to your town!" and if Company X doesn't make it, that same park or plaza will be there to incentivize Companies Y, Z, A, and B.

I'm not sure I'm all that thrilled about a regressive tax to make Billings more like Sioux Falls. And the first infrastructure Billings needs is not a park but a big scrubber to get rid of the refinery smell we get every time we zoom by on I-90. But we should note with pride that our neighbors will come to Sioux Falls to figure out how to do economic development right.


  1. larry kurtz 2014.06.16

    Montana blew it: two Democratic governors destroyed Billings' and Montana's budding cannabis industry. Colorado has so much money right now she can't spend it fast enough.

  2. Joan Brown 2014.06.16

    I'm all for not having a sales tax. In fact I know a woman that was raised in Montana, but ended up in SD because of marriage and she always says Montana was so much better off with an income tax, instead of a sales tax on everything. In Sioux Falls more money could be spent on necessities than entertainment venues. I noticed there wasn't any mention of the difficulties the city is having funding and serving the people that need access to Paratransit.

  3. Douglas Wiken 2014.06.16

    SD cities mostly piss away the money they get from sales tax because a lot of it is paid for by non-residents. They view it as manna from the sky.

    The amusement venues in Sioux Falls are a huge waste of tax dollars. The facilities benefit a handful of bars and restaurants at the expense of people hard-pressed just to buy groceries. The money that comes into those facilities for expensive entertainment mostly flies out of South Dakota with the next plane leaving after the event. The piddling 2% the cities get and the benefits real or imaginary of that tax money is wiped out by the exit of money to "big-time" celebrity entertainment. Much of the money spent on such entertainment is gone from SD forever.

    The money is not circulated again and again in the community. SD college and university econ departments are loath to investigate the anti-economy impacts of such building projects and related entertaining. They are in the rah-rah business and not the nah-nah reality.

  4. Deb Geelsdottir 2014.06.16

    "In many examples, private investment has followed public spending."


    That happens all the time. The Green Line rail just opened Saturday in St. Paul. It runs on University Avenue, a low-income, sketchy area of St. Paul. Building the tracks began 2 years ago. Building all along the street took off simultaneously. The entrepreneurs figured that the train riders will want to eat, drink, shop, etc. They also thought people might want to live along the route. Walk out the door, onto the train.

    Turns out they were right about all that. Apartments, restaurants, shops, bars. People. And it's just getting started.

    "Build it and they will come."

    Republican Lousy for Labor mantra is not effective. As I said before, "Duh."

  5. Deb Geelsdottir 2014.06.16

    This is a MinnPost article about the effect of the new Green Line on development. It's fair and accurate, with pros and cons.

  6. Jerry 2014.06.16

    When I go to the VA in Minneapolis, we always ride the train from the VA to go downtown. We have seen the new system that will connect St. Paul but did not know when it would be finished. So now it is done! Good deal, next time we are in town, we will use it to go to St. Paul as it is a pain to drive there.

  7. Deb Geelsdottir 2014.06.16

    Jerry, want to get in touch when you're here?

  8. Jerry 2014.06.16

    Perhaps Deb, we like the downtown and try to head to Ike's, for one place, for a meal when there. If and when we are heading your way, I will contact Cory to make contact with you to see if it would work.

  9. Deb Geelsdottir 2014.06.16


    (First, "deal" was the entire comment, but that wasn't acceptable. I was admonished to "say something useful", because my one word was " too short.")

  10. Stan Gibilisco 2014.06.16

    Billings today, more towns tomorrow, and the whole state the day after.

  11. mike from iowa 2014.06.17

    Little town closest to me has an 8 cent local option tax and the next one up the line which is a larger town has a 7 cent LO tax. Sutherland,iowa only has about 700 residents. No tax on food or prescription drugs.

  12. larry kurtz 2014.06.17

    Billings heard testimony on a non-discrimination ordinance: has SooFoo stopped flooding long enough to consider such action?

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