County Zoning

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County zoning is an issue that is attracting some attention this session.  Governor Noem brought in a bill to make some changes to how counties implement the zoning process; however, it is being met with controversy because of fears of losing local control.  Business and industry groups, as well as the Association of County Commissioners support the bill, SB 157, but what does it do?

State law sets out the basic purpose of planning and zoning.  Title 11 of our codified laws gives each county commission and city commission the authority to develop comprehensive zoning plans and regulations to govern development of the territory under its jurisdiction.  Currently, about two-thirds of South Dakota counties use some form of zoning.

The purpose of  county zoning is to protect and guide the “physical, social, economic, and environmental development of the county, to protect the tax base, to encourage a distribution of population or mode of land utilization that will facilitate the economical and adequate provisions of transportation, roads, water supply, drainage, sanitation, education, recreation, or other public requirements, to lessen governmental expenditure, and to conserve and develop natural resources.”

Before adopting a zoning plan and associated regulations, there must be a public hearing, giving citizens an opportunity to weigh in on the proposed plan.  In addition, plans are subject to referendum, giving citizens an opportunity to vote on the plan before it is adopted.  This means that citizens residing in a county or municipality have the ultimate voice in directing the land use policies in their county or municipality.

Concerns that SB 157 will lead to loss of local control are unfounded.  Nothing in this bill tells a county what type of land use it can regulate or how that land use is to be regulated.

The bill makes three basic changes to how counties implement the zoning process.

The first is to require any person appealing a zoning decision to have a direct interest in the outcome of the decision.  This is to prevent costly and lengthy appeals from people who don’t even live in the county.  The language in SB 157 is based on SD Supreme Court decisions that describe an affected party.

The second is to clarify that if a project meets all the criteria set out in the zoning ordinance, it should be allowed to proceed.  Once a county has a zoning ordinance in place, then the county needs to follow the ordinance.

The third is to give project developers and county commissions a process for making a decision based on facts, hearing any appeals in a timely fashion, and allowing good projects to move forward without undue interference.

All of this depends on a county having a good zoning ordinance that protects the health and welfare of its citizens, yet provides a clear path forward for projects that will benefit the county and state.

School Capital Outlay Funding

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Nearly half of all sales taxes paid in South Dakota, plus over half of all property taxes, are used to help fund education in the state.  One area where the Legislature is still trying to find good answers deals with school capital outlay funding.  With nearly 150 school districts in the state, one size does not fit all.  This year, a number of bills have been introduced to address how school districts can fund capital outlay purposes.

Current law limits the capital outlay levy to $3 per $1,000 of taxable valuation.  School districts are further restricted by a statute that limits a school district to $2,800 per student, starting with taxes payable in 2021.  The $2,800 amount was set four years ago when the education funding formula was revised.  It was slightly more than two times the statewide per-student average at the time and is, arguably, an arbitrary number.

Current law also limits annual tax increases to three percent or inflation, whichever is less.  In effect, there is a three-part test which limits capital outlay taxes.  The smallest number rules.

While the three-part formula might work for most school districts, there are some school districts where the capital outlay formula doesn’t work.  For example, the Agar-Blunt-Onida school district has a relatively large tax base and few students.  At the other end of the spectrum, the Tea school district has a relatively small tax base and large number of students.

SB 170 would increase the per-student cap to $3,000.    Schools could go above that cap by doing a tax opt-out, which is referable to the voters.  The opt-out amount could not be used to augment the school’s general fund, under the provision that allows up to 45% of capital outlay revenue to be transferred.  The bill would also allow the capital outlay levy to increase to $3.50 for schools that are limited to revenue of $1,000 or less per student and have a capital outlay balance of $400,000 or less as of June 30, 2019.

HB 1198 repeals the $2,800 per student cap and repeals the provision that limits the growth of capital outlay taxes.  The only limitation would be $3.00 per $1,000 of valuation.  SB 67, which has been killed, would have allowed sparse school districts to collect the maximum allowable under any of the tests.  SB 94 sets the minimum capital outlay levy at $2.75 per $1,000 of taxable valuation or $3,800 per student.

Comprehensive data about school capital outlay certificates can be found on the Department of Education website at https://doe.sd.gov/legislature/2020.aspx