Sioux Falls warns of multi‑year capital reductions after 2024 sales‑tax growth misses target

Sioux Falls Finance Director Sean Pritchard told the City Council on Jan. 28 that the city closed 2024 with 1.5% sales‑tax growth, well under the 4% used to build the current capital program, leaving a gap that will ripple through the 2026–2029 capital outlook.

Pritchard said the shortfall left the 2024 capital plan roughly $5 million short of expectations. Interest and investment earnings produced an offsetting, one‑time benefit — about $4.7 million above budget — but Pritchard cautioned that investment income is volatile and not a reliable recurring revenue source. “We had about $4,700,000 of interest or investment earnings in excess of what we had budgeted,” he said, noting the city cannot count on similar gains in future years.

Why it matters: Sioux Falls relies heavily on sales and use taxes for capital projects. The council-approved capital program and bonding plans assume multi-year sales‑tax growth; missing that assumption forces staff and council to consider deferring, reprioritizing or cutting projects. Pritchard said current estimates show reductions of roughly $3.5 million to $4 million per year in available capital revenue across 2026–2029, or about $15 million cumulatively, similar to the reductions taken last year.

ARPA and project spending: Pritchard reviewed federal American Rescue Plan Act (ARPA) allocations to date. The city received $25,400,000 in ARPA funds. About $6,000,000 was used for community services outside direct city operations and, according to Pritchard, those programs have been fully expended as of the end of 2024 (he said “totaling about $5,600,000”). Roughly $19.9 million supported infrastructure: a $1.5 million allocation for Benson…