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Interest rate amended from zero to 2% in bill allowing airport loans from housing fund

PIERRE — The South Dakota Senate approved a bill Monday that would allow a state housing infrastructure fund to be used for large airport project loans, but at 2% interest instead of the previously proposed 0%.

The Senate also approved a bill that would loosen the terms of housing infrastructure loans from the fund. Both are now headed to a House committee.

The bills seek to alter the Housing Infrastructure Financing Program, which legislators and former Gov. Kristi Noem created in 2023. It was originally a $200 million fund, made up of state and federal dollars.

The program can award funds to help cover up to a third of a housing developer’s qualifying costs. That includes things like roads, water and sewer lines, and sidewalks. The fund has supported 85 projects across the state, helping create 7,421 single-family housing lots and 5,754 apartment or other multi-family units.

[Legislative committee endorses use of housing infrastructure fund for airport loans]

One-half of the fund was sent out as grants. The other half, for loans, had about $65 million remaining as of late last year.

In October, Gov. Larry Rhoden suggested moving the $65 million from the housing infrastructure fund to the state’s Revolving Economic Development and Initiative Fund, or the REDI Fund, which offers low-interest loans to startup firms, businesses that are expanding or relocating, and local economic development corporations.

He also proposed using $30 million of that transferred money to offer interest-free loans of up to $15 million each for expansion projects at the Sioux Falls and Rapid City airports.

The state Senate backed an amended version of the legislation proposed by Sen. Casey Crabtree, R-Madison. His plan would allow the housing infrastructure fund to make loans for airports in areas with populations of more than 125,000. The loans would be limited to $15 million per recipient at 2% interest over a 20-year payback period.

When it was approved by a Senate committee, the bill had a 0% interest rate. Crabtree said after negotiations with other lawmakers, the interest rate rose to 2% to mimic the interest rate in the state’s housing fund.

“Two-percent money in today’s market is pretty good,” he said. “I asked some of my fellow businessmen or even a few of our ag folks if they’re getting 2% loans to do any of their projects. ‘Probably not’ is going to be the answer.”

Some lawmakers worried about moving funding from the housing bucket to finance airport infrastructure.

“We have a very serious situation regarding property tax,” said Sen. Tamara Grove, R-Lower Brule. “I think that it would be better spent on South Dakotans, putting money in their hands, so they can keep their homes.”

The state Senate approved the bill on a 22-11 vote.

The second bill expands the definition of “public infrastructure” for housing projects to include “necessary site work.” The bill would increase the maximum amount of a loan from one-third to one-half of the project’s size.

“These funds are being used,” Crabtree said. “They’re making a difference in all of your communities, across all of our districts.”

The Senate passed the bill on a 20-13 vote.

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