This story has been updated.

PIERRE, S.D. (KELO) — The $200 million that South Dakota lawmakers have wanted to spend on affordable housing infrastructure since a year ago probably won’t start reaching projects until this fall, at the earliest.

That was the word Thursday from Chas Olson, interim director for the South Dakota Housing Development Authority.

Olson told the Legislature’s Executive Board that September might be the first time the state housing board will be able to consider applications.

According to Dixie Hieb of Sioux Falls, this is the first time in her 30 years as the housing board’s attorney that the agency has needed to put a lending or grant program through the state’s formal rule-making process.

Legislators originally had hoped the money would be flowing in time for the 2022 construction season. They first approved the money in the 2022 session after a lengthy fight, but Governor Kristi Noem wasn’t comfortable spending it, because she said the money couldn’t properly be deployed.

Legislators came back in the 2023 session and made it the first bill they passed. The governor signed it into law on February 1. Her announcement said, “Due to the bill’s emergency clause, this funding is available immediately, which allows it to be sent out prior to this year’s construction season.”

But it hasn’t been. Instead, the housing board released the first draft of the proposed rules on March 14. Five weeks later, the latest version of the proposal was now at the Governor’s Office of Economic Development, awaiting clearance from GOED Commissioner Steve Westra.

That’s because the housing agency is attached to the Governor’s Office of Economic Development in state law, according to Tim Engel, a private attorney who represents GOED.

The governor last year originally wanted GOED to be in charge of half the money.

Once Westra gives the go-ahead, the housing board can set a public hearing date, Olson said. That could be in May.

After the housing board gives its approval, the proposed rules would next need a final greenlight from the Legislature’s Rules Review Committee. Olson said he hopes the package could be ready for the review committee’s July 18 meeting.

The rules then must go to the South Dakota Secretary of State and would take effect 20 days later.

Under that timetable, Olson said the housing agency could start taking applications in August. The housing board then could consider the first applications at its September meeting, he said.

Several lawmakers said after the meeting they had expected a faster turnaround.

“It’s two hundred million dollars and we want it spent wisely. We don’t want any fraud, waste and abuse,” Republican Senator Jim Bolin told KELOLAND News. “But there still is frustration it’s taking as long to disperse this money. There are many communities that have housing needs, especially in southeastern South Dakota, and we’re hopeful that this money can be dispersed as quickly as possible to meet those needs.”

Bolin said that “a substantial portion” of the 2023 construction will be missed as a result of the pace that the agency is taking through the rule-making process. “The calendar just moves forward. I think a lot of people anticipated that some of this money might be available by Memorial Day. Now, I think we’re hearing that some of it may be available by Labor Day. So perhaps some building construction will begin in the fall, but I think it was the hope of the Legislature that this could be moved forward as rapidly as possible, so that housing could be built in the construction season of 2023.”

Republican Representative Chris Karr sounded disappointed as well. “When this legislation came through, there was a lot of conversation how fast we could get this through,” he said. “Remember, this was a bill that was right in the beginning of session, it had an emergency clause on it so the governor could sign it right away, and there was this big push to get it out, so that it could get out to the construction season this year, start putting up some affordable housing this year — that’s what we were told.

“And so the concern has been, I think all legislators, including myself, have been asked, ‘What’s been the hold-up? Why hasn’t this money become available?'” Karr continued. “This program is instituted, we still have rules to develop, so now we’re hearing, probably September we’ll see some applications that might get approved for these dollars.”

Karr, who also serves on the Legislature’s Joint Committee on Appropriations, said that the panel also plans to call in the housing director and economic development commissioner at its May 5 meeting.

“This two hundred million is one of the largest appropriations. A hundred-fifty of it is general fund dollars, I think the largest general-appropriation fund that we’ve ever approved in a bill. So, I had concerns about it, but at this point it’s gone through, I want to make sure it’s doing what they said it’s going to do,” Karr said.

“I think we’ve definitely missed the construction season,” he added, listing the steps yet to be done before the housing board can start making funding decisions. “I think we’re looking at September, October. I think most of the construction season, these guys (builders) have planned, they know their projects, they know where they’re going to go and start building the rest of this year, I would say October at the very least, so I don’t think these dollars will become meaningful until the next construction season.”

During the meeting, director Olson was asked whether the housing board would be ready for the July rules-review meeting. Olson said it “certainly is in the ballpark,” adding “That would be our objective, to make the July meeting.” He said the board posted the original draft allocation plan and the original rules draft on the SDHDA website.

Another legislator asked Olson about whether his recent appointment as interim director played any role in how the long process of rolling out the rules has become. “The leadership change, I don’t think there’s been delay caused by that,” Olson said. “We’ve continued the work as we would have,” he added. “It just takes time to get to a final product.”

GOED’s attorney Engel said South Dakota Housing received Westra’s clearance to start writing rules on February 24 and the package was delivered to GOED on March 15. He said the housing office made revisions that went back to GOED on Wednesday, April 19, and addressed “the vast majority” of GOED’s concerns.

Said GOED commissioner Westra, “We received them late afternoon yesterday and I have not had a chance to look at them.” He said he understands the legislators’ sense of urgency.

One fourth of the funding — $50 million — is federal COVID-19 aid. Olson said the deadline for committing that portion of the money is December 31, 2024, and the deadline for spending it is December 31, 2026. “As long as we have the volume of applications that we need to get the money out, I don’t think it should be an issue,” Olsen said.