Jan. 25, 2026

Forget whether tax increment financing as proposed was an appropriate way to fund Rapid City’s proposed Libertyland USA development.

Set aside, for now, if South Dakota and by extension its municipalities ought to exempt qualifying data centers from a big chunk of the sales tax they typically would pay.

First, let’s talk about Buc-ee’s.

It’s a Texas-based mega gas station and convenience store chain with a massive following. Fans rave online about the food, themed merchandise is even sold through Walmart, and the company has become known for the exceptional cleanliness of its bathrooms.

Essentially, Buc-ee’s has plenty of options when it comes to expansion plans.

So this week, when I saw the chain had committed to a store in Gretna, Nebraska, the “why” caught my attention.

Gretna, with a population approaching 10,000 people, is home to one of Nebraska’s Good Life Districts. Created a few years ago by the state’s Legislature, Good Life Districts are designated areas designed to attract tourism and economic development. These districts are allowed to use half of the state’s typical share of sales tax — 2.75 percent — to offset qualifying project costs such as constructing public streets and utilities. In Gretna, the incentive applies until 2054.

“And that incentive is actually what caught the attention of the Buc-ee’s enterprise. Without it, I’m not convinced that they would have looked at Nebraska,” Gretna city administrator Paula Dennison said in a news report.

This Buc-ee’s isn’t a typical convenience store. It’s proposed to be 74,000 square feet, located on 43 acres southeast of Interstate 80 and Highway 31. Stores that size rarely locate in communities that size.

“Buc-ee’s checks all the boxes the Good Life legislation was designed for; it generates significant tax revenue, increases our state’s tourism and creates hundreds of good-paying local jobs,” Gretna Mayor Mike Evans said in a news release.

Not surprisingly, Good Life Districts also drew controversy in Nebraska. The Gretna one in particular has seen starts, stops and all kinds of potential concepts floated, plus there have been issues around the correct way to structure the state program and what kind of guardrails to put around it. It has not been the smoothest ride, but at least they’re attempting a different way to attract the sort of larger-scale developments that can move the needle for a community and by extension the state.

When you offer an incentive to a business to locate in your state or community, it’s always a bit of a roll of the dice.

You generally are giving up some immediate revenue — in South Dakota, it’s usually property tax — for the prospect of greater revenue in the future and broader-based business activity. There are unique hurdles that come with redeveloping old, industrial downtown areas, for example. By allowing a portion of property tax paid to directly offset those costs, the idea is that the development will become a catalyst that could create additional growth: new residents, office workers, retail sales tax, etc.

The classic contrarian view is that private development would occur without incentives and that public dollars shouldn’t benefit a private business.

As in politics, I think the majority of people would take a moderate approach to offering economic development incentives. I also think they want the place they’ve chosen to live to attract the business activity necessary for steady, well-managed growth.

Economic development can’t become the enemy in this state, and a series of moves underway will say a lot about where we stand.

Rapid City voters last week made a clear statement about the guardrails they believe should exist around tax increment financing. Without delving too deep, Rapid City also historically has used tax increment financing to fund growth in ways that fundamentally are different from Sioux Falls.

Sioux Falls generally has taken what I would call a conservative approach with structuring TIFs, focusing on some of the most basic qualifying costs allowed under state law: things like site preparation, infrastructure and parking. I can point to numerous downtown redevelopment projects that would not exist at the scale they do or exist at all without this economic development tool. They have done what they were intended to do: driven additional economic activity well beyond the increment in property tax growth they were able to use to support their projects.

But it’s important not to miss the message from Rapid City’s voters, either. If we push the boundaries of TIF too much, as might have happened there, we risk turning off the public to the entire concept. One proposed bill before the South Dakota Legislature as written would put significantly more restrictions on the use of TIF to the point I can see it discouraging most developers from bringing any project of significance forward.

The Legislature also will consider a bill to exempt equipment in qualifying data centers from sales tax for up to 50 years. This one definitely feels like a roll of the dice. Many states are offering this incentive or a version of it, including our neighboring states. There’s a case to be made for leveling the competitive playing field. But it’s also giving up significant revenue at a time when public pushback to data centers might be a bigger hurdle for developers to overcome. States that can present appropriately zoned land and access to power ultimately could find themselves not needing to offer additional incentives. Regardless, I would think hard before offering a 50-year incentive to an emerging and rapidly evolving industry not knowing what I might give up.

But here’s the underlaying risk that goes beyond any one piece of legislation or public vote: South Dakota has promoted itself for decades as a business-friendly state. That’s about more than a tax and regulatory climate. It’s also about the culture of how we view new business growth. We cannot become known as the state that says no to new ideas, no to big ideas and no to being a partner in ways that allow both public and private sectors to succeed in a competitive landscape.

South Dakota and Sioux Falls have built their economies over time because they were willing to make some big bets: to change a law that attracted the financial services industry, to give more than 300 acres to the U.S. Geological Survey to establish EROS, to put together an unconventional funding plan that built Foundation Park.

Economic development incentives aren’t giveaways. They’re more like investments. Like any investment, some pay off big and some underperform. They don’t all make sense, which is why you don’t take every opportunity that’s offered. But imagine what your own financial portfolio would look like if you quit investing. Or if you had an appetite for only the most conservative of investments. Your assets would be stagnant.

The same threat exists for states and communities. We need smarter, more strategic approaches when it comes to economic development and leaders who can tell the story of why it matters.