SIOUX FALLS, S.D. (KELO) — What does it mean to be the largest city in a growing state?
It means that the jobs, development, sales tax and wages in the city will be big drivers in the state’s economy.
A 2023 fiscal report for the city of Sioux Falls illustrates some of that impact. The report was presented this week to the city council.
The city of Sioux Falls made about about 23.3% of the state’s 919,318 population in 2023
When the metropolitan statistical area (MSA) of the counties of McCook, Minnehaha, Lincoln and Turner are included the population grow to 297,247 which is more than 32%.
The four-county metro area is considered in a lot of data because Sioux Falls is located in Minnehaha and Lincoln Counties and because there are commuters from those counties and McCook, and Turner counties as well. Growth in each county as well as the communities has been linked to jobs, the desire to be near to amenities in the city of Sioux Falls as well as desire to live outside of the Sioux Falls city limits.
The four county area makes up the MSA but Sioux Falls is a regional draw beyond those counties, said Shawn Pritchett, the city’s financial director. Visitors are drawn to retail opportunities and others such as medical care, Pritchett said.
The nonprofit Dakota Institute reported in January that sales and use tax on retail trade made up 51% of the state’s sales tax revenue in 2023.
Retail taxable sales make up a large chunk of taxable sales in Sioux Falls. In just one category, retail taxable sales from department stores and general merchandise stores increased by 6% to $6.2 million that month from December of 2022 to December 2023.
The city’s status as a regional draw and its economy are important to the state, Pritchett said.
The city accounts for about 27.9% of per penny taxable sales in the state, according to the latest city financial report.
Sales tax creates revenue for the city and the state. The state’s fiscal year 2024 general fund budget includes about $1.4 billion in revenue from state and use tax. That accounts for about 64% of all state general fund revenue. The state’s FY2025 general fund budget includes about $1.4 billion in revenue from state and use tax for 58% of all state revenue.
In a sense, “As Sioux Falls goes, the state goes,” the city’s finance director Shawn Pritchett said of the two economies.
Jobs and wages can increase population and spending.
The state’s workforce was listed at 481,500 in March of 2024.
The city report said “the annual average resident labor force of the Sioux Falls MSA increased by 2,768 or 1.7 percent from 163,101 in 2022 to 165,869 in 2023.”
That is about 37% of the state’s work force. Subtract 165,869 from 481,500 and there are 315,631 members of the workforce spread across the rest of the state.
The South Dakota economy has been adding jobs over the past several years and Sioux Falls slightly out-paced the state in growth in 2023. The state added 9,700 nonfarm workers in 2023 for a 2.1% gain in added jobs, according to the South Dakota Department of Labor and Regulation.
In 2023, the number of jobs in the Sioux Falls MSA increased by 4,700, according to the city report. The DLR listed the growth at 4,500 nonfarm workers for a 2.7% gain.
The DLR said in July of 2023 that increases in state worker wages are helping to increase growth in the state. The data shared in 2023 is from 2022 and is the most recent available.
The DLR said that average salary in the state was $54,053 per year in 2022. That is a 5.5% increase. The wage is connected to reemployment assistance and workers’ compensation benefits.
The average salary for the Sioux Falls MSA increased to $60,569 in 2022.
Agriculture is still considered the state’s top industry but it is not a large factor in the Sioux Falls economy.
Sioux Falls may not have as big of agriculture economy as other parts of the state, Pritchett said. But that can be an advantage, he said.
“Sioux Falls has a diverse and robust economy,” said Pritchett said. “That makes it more resilient to fluctuations (in U.S. economy or downturns).”
Still, as the state considers its future sales tax revenue so does the city of Sioux Falls.
Federal spending authority is state government’s largest source of money to spend and it was set at more than $3.2 billion in the state’s fiscal year 2025 budget. The FY 2025 state budget includes about $1.4 billion in sales and use tax revenue in the general fund.
In February, a state official said he was cautiously optimistic about sales tax revenue growth in the state. In December, Gov. Kristi Noem urged the Legislature to be cautious about spending during the current economy.
The state’s Legislative Research Council (LRC) and Bureau of Finance Management (BFM) shared their sales tax revenue forecasts with the Legislature on Feb. 13. A Feb. 13 KELOLAND News story said the BFM forecast a 4.2% growth in sales tax revenue for FY2025 and a LRC forecasat of 2.3% growth for FY2025. Both amounts were around $1.5 billion.
The city of Sioux Falls’ projections for sales tax revenue in 2023 were down to 3% from a projected 5%. So far in 2024, the revenue is pacing at 4%.
The revenue has a direct impact on capital improvement plans in the city.
“If we take a brief look forward, the 2023 results of 3% put us a couple (percentage points) behind for meeting the 2024 budget as we budgeted for 5% growth in the capital plan for 2023,” the city’s assistant financial director Tom Huber said a Tuesday (April 16) city council meeting.
“The net result is to make the budget for the 2024 capital program, we need 7% growth in sales tax,” Huber said.