BLOGS

Governor candidates not eager to loosen local tax limits

David Montgomery
dmontgome@argusleader.com

South Dakota's county and township roads are in bad condition and getting worse. A survey of local county officials found 10 to 20 percent of roads rated as failing, and state experts say current maintenance isn't enough to maintain even this dismal state.

One culprit, some county officials say, are strict limits on counties' ability to increase taxes.

"We're kind of unlimited in expenses and limited in revenue," said Dick Kelly, a Minnehaha County Commissioner. "It's hard to run a business that way."

Local property taxes can only go up by a maximum of 3 percent per year -- often not enough to keep up with ordinary expenses, let alone catch up to a shortfall. Local government can opt-out of the tax freeze, but it takes a two-thirds majority to approve it and voters can refer the tax hike to a vote.

Several counties and townships say these limitations have stymied efforts to fix defective roads and bridges. Instead of imposing costs on the whole state through methods such as an increase in the gas tax, some lawmakers and local officials propose, the state should loosen these restrictions to make it easier for local governments to raise revenue and fix their own roads.

None of the three candidates for governor endorse this plan, though two said they're open to it after trying other options.

Gov. Dennis Daugaard, a Republican, said the state's limitations on local government taxing are reasonable.

"I know it's harder for local governments to raise revenue, and they feel like they've got a good case to make," Daugaard said. "But at the same time if they do have a good case to make, I feel like local governments should be able to make it to the citizens. I don't have any plans to loosen up any referral opportunity that citizens have to move a tax increase to the ballot."

State Rep. Susan Wismer, the Democratic nominee, said local governments should get more flexibility. But she's not eager to let local governments raise property taxes more.

"We have to give locals the tools to deal with responsibilities we give them, and we're not doing that," Wismer said, but added that "property taxes are a concern."

Independent candidate Mike Myers agreed.

"There has to be some limitation," Myers said. "(But) I believe we should continue to provide... discretion at the local level."

Each candidate has their own preferred solutions or directions.

Wismer said the state should make things more flexible for counties without loosening tax limits. For example, she backed a proposal to let counties create special road districts so to fine-tune road taxes. In some places, Wismer said, rural residents support tax increases to fix rural roads -- but are denied by residents of cities in the county who don't see the need.

She also supported exploring "revenue-sharing mechanism(s) between the state and the locals." Wismer is also open to increase the state's gas tax, currently 22 cents per gallon.

Myers said one of his favorite policies, legalized industrial hemp, could solve road funding problems by providing a "billion-dollar industry" local governments could tax.

Daugaard kept his preferred policies close to his belt. But he's emphasized several times on the campaign trail that he's not ruling out supporting an increase in the gas tax.

"I guess what I'd like to see is a solution that addresses both state and local roads," Daugaard said. "Also a solution that is not just short-term in nature, but longer term, that won't cause this problem to resurrect again in the future. I like solving things with some permanence if we can."

State Sen. Mike Vehle, R-Mitchell, is chairing a task force studying South Dakota's road funding needs. He said loosening local limitations is one of many options that will be considered.

"That's something we could consider just like all the other thought processes," he said. "That one has come up before and has been discussed and has been defeated. Now that people are learning what some of the conditions of some of our rural roads are, they may change in that thought process."

Vehle's task force will meet on Nov. 6 to consider possible bills for next year's Legislature about highway funding.

South Dakota road funding sources, FY 2013

  • Federal funding: $275.5 million
  • State motor fuel tax (22 cents per gallon): $131.2 million
  • Vehicle license fees: $96.5 million
  • Local property taxes: $81.6 million (estimate)
  • Vehicle excise tax (3 percent): $73.6 million
  • County wheel taxes (46 of 66 counties): $11.9 million