Tribes still face uphill slog for housing infrastructure funding after passage of rules

South Dakota’s tribes may lose out on a quarter of a $200 million pool of workforce housing infrastructure money before lawmakers can pass a bill giving them access to the funds.

The Legislature’s Rules Review Committee voted 5-1 Tuesday to give final approval to the rules for the program. But a wrinkle in the law that created it will force tribes that hope to use the money this year and at least part of the next to partner with non-tribal cities or counties.

Such partnerships are a workaround for tribes to the latest problem in long-stalled efforts to pass along infrastructure funding to developers. Those efforts date to 2021, when legislators first approved the funding that Tuesday’s vote finally makes available to developers across the state.

Last month, South Dakota Housing Development Authority Interim Director Chas Olson said in a public hearing that any infrastructure paid for through the program must be handed off to a “political subdivision of the state” after a developer builds it.

Tribes and tribal entities are eligible for the funding under program rules, but are not political subdivisions of South Dakota.

The workaround of city-tribal partnerships won’t work for everyone, according to Sen. Red Dawn Foster, D-Pine Ridge, who cast the lone “no” vote against the rules on Tuesday in Pierre. 

Nearly all the land in Oglala Lakota County is tribal, she said.

“What political subdivision could they partner with in that county?” Foster asked Olson.

Olson told Foster that he doesn’t have a great answer for counties in such a predicament.

“Until we have a potential fix to the law or amendment to the law to allow the tribes and tribal entities to be long-term owners and maintainers of the infrastructure, I think the workaround is kind of what we’re stuck with for now,” Olson said.

The burden of that workaround could be more significant for the $50 million portion of the funding that came from the federal government. 

The $200 million on offer is split in two, with $150 million in state money to help developers cover the cost of streets, street lights, curbs, sidewalks, wastewater and stormwater projects. The $50 million in federal money is more restrictive. It can only be used for wastewater and stormwater, must be awarded by the end of 2024, and must be spent by the end of 2026.

Foster wanted to know if that tight timeline could put the federal money out of reach for the state’s tribal citizens, since the next opportunity to amend the housing infrastructure law won’t come until the beginning of the next legislative session in January.

Last fall, before the Housing Development Authority shelved its plans to award funding over legal concerns with the original program setup, former director Lorraine Polak said there were enough applications from developers to award all $50 million in federal funds.

“Do you think any will be left once the statute has been changed to include tribes?” Foster said Tuesday.

Olson called that “a hard question to answer,” but pointed to the larger pool of state funding as “low-hanging fruit” that will remain available after 2024. 

Olson couldn’t say for certain if the time limits and legal hurdles would put the federal dollars out of reach.

“I would hope that for the tribes’ sake and other entities, that there will be some leftover, but there’s really no way to determine that until we start getting the applications,” Olson said.

Sen. Jim Mehlhaff, R-Pierre, wondered about the state funding, as well. He asked Olson if tribes have a realistic shot at access to the state dollars “on day one” in 2023.

“It’s really going to come down to what kind of cooperation and collaboration you can get between the tribes and the political subdivisions,” Olson said.

Rep. Jon Hansen, R-Dell Rapids, told Olson he’d like to see the authority prioritize applications from developers who put “a lot of time and money and resources” into their applications in 2022.

“My encouragement would be to try to make the new application process as consistent with that old application process as possible, to honor those people’s investments in both time and money,” Hansen said.

Olson said that while applicants will need a few additional forms of documentation and an adjustment of their cost estimates, “there’s not going to be a big departure from our original application.”

Hansen, like each committee member except Foster, voted to support the program rules.

Foster said she supports the program as an answer to what she described as a housing crisis in South Dakota, but said the restrictions for tribes are a blow against tribal sovereignty, particularly in her home county.

“I do hope other tribes find a workaround and are able to apply for this because it is that needed,” Foster said.