Week 4 – Session 2026

Pictured with Nick Fosness from District 1.  Representing Brown, Day, Marshall, and Roberts Counties.

We just wrapped up our only five-day week today. The workload of the legislature has increased immensely with the introduction of another 162 pieces of legislation, bringing the total to 620. In my six sessions, this is the largest bill load I have seen. In this week’s column, I want to comment on bills that focus on economic development and the confusing messaging we are sending to the business community.

HB 1005 provided a sales and use tax exemption for data centers purchasing computer hardware and related equipment used exclusively for the maintenance and operation of a data center. To be eligible for the tax exemption, the legislation detailed that a data center must have a written agreement of a rate schedule with an electric utility that avoids shifting costs to other customers. Additionally, the facility's water usage must comply with the consumption guidelines of local water providers.

For some background, Applied Digital announced in 2025 that they would pursue investing in and building a 420-megawatt AI data center in rural Deuel County (near Toronto, SD)—similar to a center they are currently building in Ellendale, ND—if our state offered tax incentives similar to North Dakota's. That is why HB 1005 was introduced, complete with tax incentives and guidelines for responsible electricity and water use written into the legislation.

On Wednesday, the bill was heard and garnered robust proponent and opponent testimonies. These contrasted the benefits of a large data center—creating hundreds of high-paying jobs, generating millions in property and sales tax revenues, and spurring business and infrastructure upgrades—with claims that our state should not use tax incentives to lure large tech companies.

Ultimately, the bill was defeated by the House State Affairs Committee, ensuring that data centers will not have the same tax benefits North Dakota offers. Consequently, I am pessimistic that any large data center will choose our state for its location. Now, contrast that with the significant tax incentives and loans used to attract food industry investments for a new frozen food facility in Sioux Falls and a cheese factory expansion in Brookings. Seemingly, we can give incentives to companies wanting to locate or expand in our larger cities, yet a very large investment in a rural community receives no such favor. While a large data center is not a frozen food company or a cheese factory—so I am not comparing apples to apples—the distinction remains that we (the State of SD) give mixed messages to businesses, and our population centers get the incentives. For a long time, I have been convinced that our smaller and medium-sized cities are at a crossroads. I am extremely disappointed that our Governor’s Office of Economic Development sat on the sidelines and didn’t fight for the data center incentives that would have brought economic vitality and revenue to a rural community.

HB 1319 is legislation that I introduced this week in conjunction with the SD Municipal League and the Economic Development Professionals Association to strengthen and reform the economic development tool that cities and counties use called TIFs (Tax Increment Financing). A TIF is a public financing tool authorized by state law that allows cities and counties to fund infrastructure improvements by capturing new property tax revenue generated within a designated district. Pierre and Fort Pierre have used TIF districts to encourage economic development and support infrastructure for new businesses and housing projects.

We are seeing legislation this year from other SD legislators to severely limit the breadth and use of a TIF. Consequently, we (myself, the Municipal League, and the EDPA) thought it proactive to provide reforms to the program that make it more viable and usable. When I was a City Councilman, I remember first being introduced to this program and not readily understanding it, which made me skeptical of the economics. As I became comfortable with the concept and appropriate applications of a TIF, it was clear that a good project for the city could become feasible where conventional financing methods would make the project unaffordable. Hopefully, we can get HB 1319 through the legislature this session and defeat the bills that would cripple the effectiveness of a TIF.

In closing, incentivizing economic development has risks, but doing nothing in a highly competitive market ensures stagnation, fewer opportunities, and flat revenues. All would agree that growth at all costs is not the answer; yet research, learning from others, knowing our capacities and strengths, and taking a calculated risk is what business success is all about. It’s time we look at ourselves in the mirror and evaluate if we are really open for opportunities. South Dakota was rated the number one state for business by CNBC in 2013; our latest rating is 35th. Let’s get going and turn this ship around.

Thank you for the texts and emails this week. See you soon.

— mw