South Dakota Republican Gov. Larry Rhoden signed three bills earlier this week that he said align with his “open for opportunity” economic development policy framework. The legislation includes shifting some gambling tax revenue from the state to a Black Hills city, permitting more cigar bars across the state, and allowing cities to temporarily increase their sales tax rate.

“I am committed to keeping our communities strong and South Dakota Open for Opportunity — and that is exactly what these bills do,” Rhoden said in a news release.

All three bills will become law on July 1.

Deadwood gambling revenue

Senate Bill 102 revises the distribution of Deadwood gambling tax revenues, shifting some revenue away from the state and to the city of Deadwood — the only place in the state, other than tribal land, where full casino-style gambling is allowed.

A majority of the revenue is distributed among the Deadwood historic preservation fund, state tourism fund, state Gaming Commission, state general fund, Lawrence County, statewide historical grant fund, and state gambling addiction program. Deadwood’s share from that portion of the money is capped at $6.8 million.

After that money is distributed, 70% of the remaining money goes to the state general fund and 30% is split among local governments in Lawrence County and historic preservation efforts in Deadwood.

The new law will remove Deadwood’s $6.8 million cap from the first part of the formula and change the distribution of the remaining money, providing 71% to Deadwood historic preservation, 25% to the state general fund, and the rest to other Lawrence County cities and the Lead-Deadwood School District.

Had the bill been in effect last year, Deadwood’s $7.13 million revenue share would have risen to $7.29 million.

Deadwood-area leaders worked with the Rhoden administration to change the formula, saying that the increase in funds will help support infrastructure improvements throughout the city. Sen. Randy Deibert, R-Spearfish, said Lawrence County lawmakers have been working to rewrite the formula for more than a decade.

Rhoden said the change will help ensure that Deadwood “can continue to grow, thrive and support” South Dakota’s economy.

Cigar bars, new city sales tax option

House Bill 1215 allows counties and cities to issue licenses for cigar bars. In 2010, South Dakota voters upheld a ban on smoking inside public buildings and places of employment, such as restaurants, casinos and bars. Lawmakers expanded the ban to e-cigarettes and other vaping products in 2019.

The ban allowed the three cigar bars operating at the time in Sioux Falls, Rapid City and Deadwood to continue if they met certain requirements, including for ventilation systems.

The new law allows cities and counties to issue licenses for more cigar bars. Opponents said the legislation erodes the statewide smoking ban and raised concerns about a lack of limitations on how many cigar bar licenses could be approved.

House Bill 1245 allows cities to implement a temporary sales tax up to 1% — in addition to existing city and state sales taxes — to pay for major projects. The increased sales tax rate would need to be cleared with at least a 60% vote of the public. 

The tax would automatically sunset once the identified amount for the project is raised or after five years, whichever is earlier, and municipalities would have to wait two years before they propose implementing the tax again.

The news release from Rhoden’s office said the sales tax strategy will “encourage local communities to plan responsibly and remain Open for Opportunity.”