Proposed '26 Budget Balances Today’s Needs, Investments for the Future
Published on July 24, 2025
Mayor Paul TenHaken presented the proposed 2026 budget and highlights from the 2026–2030 capital program today during a special meeting with the Sioux Falls City Council. The total proposed budget for 2026 is $775.9 million, which, when accounting for inflation and despite another year of strong resident population growth, represents a decrease over the previous year’s budget.
The City’s annual budget is divided into three categories of expenses: general services (operations and capital), utility services (operations and capital), and internal service. For 2026, in the general services category, operations expenses are $297.6 million and capital expenses are $130.2 million, about 55 percent of the City’s total budget. In the utility services category, operations and capital expenses total $199.3 million, or 26 percent of total budget expenses. The internal service category is $148.8 million, or 19 percent of the total budget.
Operations expenses in both the general services and utility services categories pay for the day-to-day expenses of running City services, like police, fire, parks, recreation, libraries, and others, and the operational costs to provide utility services, like water, wastewater, landfill, and electricity. Capital expenses are planned through the City’s five-year capital program, which is $1.1 billion for 2026 through 2030, and include critical investments in public safety, highways and streets, utility infrastructure, and quality of life. Within the capital program, there are about $229 million worth of planned investments in projects and equipment alone for 2026. Internal service expenses cover benefits and insurance for employees, building maintenance, fleet maintenance, and Citywide technology and cybersecurity.
The 2026 proposed budget reflects a $6 million reduction in operational expenses from the general services operations category within the general fund of the budget due to a permanent revenue reduction from property taxes that will result in City service changes, as announced last week. The changes are necessary due to Senate Bill 216, which was passed by the South Dakota State Legislature earlier this year. The bill caps property tax growth for municipalities, counties, and school districts, resulting in a permanent revenue reduction from property taxes for the City. Property tax revenue only goes to the City’s general fund. As a result, the City needs to reduce its operating expenses by $8 to $10 million over the next three years, with $6 million of those savings reflected in the 2026 budget.
“Every budget is a One Team effort, and that was especially true this year as we navigated some challenges that limit the City’s ability to keep pace with the historic growth we are experiencing,” said Mayor Paul TenHaken. “This proposed budget reflects a deliberate balance between addressing today’s needs and continuing to make foundational and transformational investments for the future. Despite our current challenges, we remain committed to leading the City with financial stewardship, innovative service delivery, and maintaining a high quality of life for our community.”
Almost 65 percent of the operating and capital funds, which impact the public most directly, support public safety and infrastructure throughout the city in 2026. The City will construct Fire Station 13 to serve the north side of the community in 2026, and with it will hire 15 additional firefighters for Sioux Falls Fire Rescue to maintain service levels and response times. For the Sioux Falls Police Department, the City will acquire land for an eastside report-to-work station, modeling after the success of the westside report-to-work station, and the budget will include funding for six new police officers and one forensic specialist. Two additional Metro Communications operator positions are also included in the budget. The total public safety budget for 2026 is $117 million.
The water and water reclamation utilities make up the largest share of budget expenses at $169 million. Major infrastructure investments for these utilities include the construction of sewer basins on the west and southeast sides of Sioux Falls, and the third connection to the Lewis and Clark Regional Water System, which will support the community’s long-term water needs. On the transportation side, $120 million is budgeted for highways and streets. Significant transportation projects in 2026 include: the reconstruction of the Cliff Avenue and I-229 interchange, expansion of South Veterans Parkway, updates to Minnesota Avenue, a railroad overpass on Marion Road near Foundation Park, and the preservation of approximately 700 blocks of roadways across the city to maintain our Pavement Index Score of 70, which is above the national average.
In addition to the 24 public safety employee requests, the City’s utility teams will be requesting four additional employees for a total of 28 new full-time employee requests in 2026. The City’s utility services are self-funded, meaning their customer fees support their operations, not taxes. The new utility positions include support for the landfill, water, and water reclamation teams.
The City will also continue its investments in kids and families and accessible housing priorities within the One Sioux Falls framework. The Housing Division has $12.8 million budgeted for strategic housing partnerships to address housing challenges in Sioux Falls. The budget also includes $68 million for culture, recreation, and entertainment expenditures that enhance the quality of life in Sioux Falls. Highlights include the construction of a new outdoor aquatics facility at Kuehn Park beginning in 2026 and continued collaboration to complete the indoor recreation center at Frank Olson.
“The Sioux Falls we love today did not happen by accident,” TenHaken said. “The ribbon cuttings, ground breakings, and heartwarming stories of families finding stable and affordable housing that we celebrate now are the result of intentional decisions made years ago. We need smart, pragmatic community members with bold and visionary leadership to step up, serve, and be willing to make the thoughtful and sometimes difficult decisions that will shape Sioux Falls today and well into the future.”
The proposed 2026 budget and 2026–2030 capital program can be viewed online at siouxfalls.gov/budget. After the department budget presentations are completed in August, the Sioux Falls City Council is expected to consider approval of the annual budget and the capital program at its meetings on September 2 and 9.