HB1206 was introduced by the South Dakota Legislature, which would amend SDCL 10-45D-2 in order to cut the tourism promotion tax from 1.5 percent to 1 percent, or by a half-penny.
This issue has been debated twice in the South Dakota Legislature — once in 2011 and again in 2013 when it was made permanent. On Tuesday morning, the housing taxation committee killed the bill.
“We did an amendment to the bill that added a half cent tax instead of deleting the half cent and it missed passing by one vote! After that we killed the bill,” said Rep. Tim Goodwin. “It was a great committee and pro/opponent discussion/testimony. Thank you to all District 30 folks for traveling to Pierre to let their voices be heard! We live in a great state.”
Of the $4.2 million the half-penny tax promotion is expected to generate in the 2018 fiscal year, 63 percent (or $2.65 million) goes to marketing programs for tourism in South Dakota which brings $10.5 million in tax revenue from visitors.
The South Dakota Arts Council receives 22 percent (or $924,000), the State Historical Society’s Archaeological Research Center receives 9 percent (or $378,000) and the State Historical Society’s Cultural Heritage Center Museum receives 6 percent (or $252,000).
South Dakota as a whole, and especially towns like Custer and Hill City, are reliant on tourism. Tourism brought 14 million people to South Dakota in 2017. Those visitors spent $3.88 billion in South Dakota and $2.6 billion of that was able to go to South Dakota’s economic output.
Tourism also helps the job market, with over 53,900 jobs attributed directly to the tourism industry in 2017, which is 8.9 percent of all jobs in the state. In addition, South Dakota households would see an increase of $871 in taxes if the tourism industry did not exist.
If the bill would have passed, the Department of Tourism’s marketing budget would have been cut, putting a stop to the progress the department has made. Passage of the bill would also have eliminated the $10.5 million in tax revenue to the state, ceased the existence of the South Dakota Arts Council, created a complete shutdown of operations at the South Dakota Archaeology Research Center and stopped all collecting, programming and ability to curate temporary exhibits at the Cultural Heritage Museum.
“With tourism as the second largest industry in the state (and in the face of rising competition from neighboring states) we are very concerned about the negative impact the loss of this funding would have had on cooperative marketing programs, tax revenue from visitor spending, jobs and the lost market share and visitation to neighboring states,” said Janet Wetovick-Bily, director of the Hill City Chamber of Commerce.
Hill City had close to 17,000 visitors last year, which includes foot traffic, calls and website information requests.
Office manager and events coordinator for the Custer Area Chamber of Commerce, Dolsee Davenport, said that after speaking with the city, the impact of losing a half-penny would result in over $10,000 in losses within the city limits of Custer, and that 100 percent of the money from the promotion tax to the Department of Tourism is used to fund cooperative marketing programs.
“The Custer BID Board is one of many entities across the state that receives funding through those programs. That money is then spent on marketing to potential visitors to Custer. Our community desperately needs this funding source in order to compete with, not only larger towns in the Black Hills, but with towns all across the country,” Davenport said.
“The less marketing Custer does, the fewer people who will visit, which in turn means a decrease in overall sales tax dollars. As South Dakota Tourism said, ‘A loss of funding to tourism directly translates into a loss of tax revenues, and therefore a loss of funding for city and state government services.’ HB 1206 would have a negative impact on not only tourism-related businesses ,but to the city of Custer as a whole,” she added.
Because folks from District 30 were alerted to the bill and used their voices to speak against it, HB1206 was killed and towns like Custer and Hill City will continue to thrive off of the half-penny promotion tax.