Legislature passes measure to rein in executive branch lease contracts

March 5, 2025:

The South Dakota House voted unanimously Wednesday (March 5, 2025) to send Senate Bill 145 to Gov. Larry Rhoden’s desk. It would require legislative approval for lease contracts that are either 15 years or longer, exceed $5 million in total rent payments over the lease term, or cost more than $50,000 per month.

It comes in response to the “One Stop” shops establish in both Rapid City and Sioux Falls under former Gov. Kristi Noem’s administration. Those leases added up to over $9 million a year in rent over a 30 year lease contract, much to the frustration of many lawmakers, including Rep. Marty Overweg of New Holland.

The measure is one of several transparency measures being carried by Senate President Pro Tempore Chris Karr.

Story courtesy of the South Dakota Broadcasters Association.

February 13, 2025:

Members of the South Dakota House of Representatives debated a 30-year state office lease agreement during Thursday’s (Feb. 13, 2025) floor session, highlighting tensions between government spending and operational efficiency.

Representative Julie Auch, R-Yankton, challenged the lease for the state’s One-Stop centers in Sioux Falls and Rapid City.

The One Stop centers consolidate state services in one building and replace facilities spread throughout Sioux Falls and Rapid City.

The Sioux Falls location, a 284,000-square-foot building (1501 S. Highline Drive), saw annual rent increase from $2.06 million to $7.64 million — a 270% jump. The lease rate is $26.92 per square foot, with planned inflationary increases every five years.

A companion Rapid City facility, a 100,000-square-foot building, experienced similar cost escalations with a 177% increase in office expenses.

Representative Jack Kolbeck, R-Sioux Falls, defended the procurement process.

The Bureau of Administration conducted a public request for proposal in 2022, receiving multiple vendor responses.

Representative Bethany Soye, R-Sioux Falls, warned about potential legislative power erosion.

The proposed bill would have required legislative approval for leases exceeding 15 years or $20 million. The measure failed, with 31 votes in favor and 37 opposed. There is a similar bill pending in the South Dakota Senate.

The leases, awarded to Dream Design International — owned by Rapid City developer Hani Shafa — were originally negotiated during former Governor Kristi Noem’s administration. Shafai has denied political influence, though he acknowledges making campaign contributions.

State officials argue the One-Stop centers will improve government services and potentially save $31.6 million over 30 years.

The Joint Committee on Appropriations has formed a subcommittee to investigate the projects further.

Story courtesy of the South Dakota Broadcasters Association.

February 10, 2025:

The South Dakota House State Affairs Committee has advanced (Feb. 10, 2025) a bill that would require certain state leases costing over $20 million or lasting more than 15 years to get legislative approval.

House Bill 1205 was introduced by Rep. Julie Auch after concerns arose about two leases for ‘One Stop’ centers in Rapid City and Sioux Falls. The One Stop centers are designed to streamline government services by housing multiple state agencies under one roof. They cost $10 million annually.

Auch pointed out that the state spent $12 million on new office furniture for the Minnehaha County location and noted that rent increased by 270% compared to the old arrangement.

The bill was amended to also retroactively apply to 25 existing state leases that exceed these thresholds.

Bureau of Human Resources and Administration Commissioner Darin Seeley, the only opposition that spoke during the hearing, argued that larger leases help the state avoid maintenance costs and future complications with ownership. He emphasized that the state has been transparent, presenting lease details to the Legislature in 2023 and 2024.

If signed into law, HB 1205 would require legislative approval for all new state leases exceeding the proposed thresholds as well as bringing an end to the state’s current leases exceeding those limits.

South Dakota state government is currently signed on to around 180 leases.

Story courtesy of the South Dakota Broadcasters Association.

April 14, 2023:

The State of South Dakota has selected Dream Design International as the development partner for the Sioux Falls One Stop. Dream Design has teamed up with CO-OP Architecture and McGough Construction for the project, combining their years of experience and dedication toward excellence.

Dream Design has a track record of delivering quality projects and was previously selected as the development partner for the Rapid City One Stop, which was successfully completed in August 2022.

“We gained invaluable experience from our work on the Rapid City One Stop,” said Mike Stanley, Director of Planning at Dream Design International. “With this knowledge, we are well-equipped to design and construct the Sioux Falls One Stop to fit the needs of the Sioux Falls region.”

The Sioux Falls One Stop will be a state-of-the-art building, combining 12 state agencies previously located throughout Sioux Falls into one location, including the Department of Health, the Department of Labor and Regulation, and the Department of Social Services. Like the Rapid City One Stop, the Sioux Falls One Stop will be leased to the state.

The Sioux Falls One Stop will be strategically located in the Dawley Farm Village development, which is situated on the east side of town along Veterans Parkway, E Arrowhead Parkway, and E 26th Street. This location was selected because it complements the state’s services with other amenities available in the area. Additionally, the building’s location near several bus stops makes it easily accessible to residents who rely on public transportation.

“We are thrilled to continue our partnership with the State of South Dakota and bring a quality building to serve the Sioux Falls community for generations to come,” said Hani Shafai, President of Dream Design International.

The design phase of the project is currently underway with collaborated efforts between agency leadership and the Dream Design team. Construction is projected to begin this fall.