PIERRE, S.D. (John Hult /SD Searchlight) – South Dakota’s governor and lawmakers put more than two years of debate behind them recently with a decision to build a prison, but there’s more than rhetoric in the rearview.
They’re also leaving behind more than $20 million.
That’s how much unrecoverable money the state spent on a rural Lincoln County prison site before the Legislature rejected it in February over concerns about the location and the project’s $825 million cost. Those concerns — and opposition that included a lawsuit from neighboring Lincoln County landowners — led the Legislature and governor to approve a different plan last month for a $650 million prison in Sioux Falls.
By that time, the executive branch under the leadership of former Gov. Kristi Noem and her successor Gov. Larry Rhoden had already spent or obligated $52.7 million on the Lincoln County plan, from an incarceration construction fund lawmakers had been filling up for several years. The expenditures covered an array of costs, ranging from design work and contracts for infrastructure installation to everyday expenses such as herbicide application and travel.
In the process of working out an alternative plan, Rhoden’s office said it was able to claw back more than half of that money for use in the prison project on Benson Avenue in Sioux Falls.
South Dakota Searchlight used an itemized spreadsheet from Rhoden’s office and searched the state’s database of contracts to piece together where the sunk costs landed at the Lincoln County site.
The figures listed below account for around $20.4 million in wasted money, but not an additional $10 million in federal funding the state directed to the city of Lennox for wastewater treatment plant upgrades to service the Lincoln County site. That money had to be used for infrastructure under federal rules, and spent by the end of 2024. The upgrades will still happen, and although the state Department of Corrections won’t benefit from them, the growing city of Lennox will, so the Rhoden administration argues that’s not wasted money.
Partial losses
Nelco: $10.2 million
Nelco, a Minneapolis architecture firm, produced designs for the Lincoln County facility, at a cost of $24.7 million. The state was able to reuse $14.5 million worth of those designs for the Benson Road site.
Land swap: $3.4 million
The state valued the Lincoln County land at $7.9 million as a prison site. It transferred that amount from its incarceration construction fund to the school trust fund managed by the Office of School and Public Lands to obtain the 320 acres on which the Lincoln County prison would’ve sat. The land had passed into the office’s possession years ago when the owners died without heirs or a will.
After abandoning its plan to put a prison on the site, the state valued the land at $4.5 million for agricultural purposes. The difference — $3.4 million — is considered a loss.
But the Rhoden administration considers the $4.5 million of ag value to be recovered, because the land was swapped at that value for the Sioux Falls site, in a deal that also included the state paying $12.5 million.
JE Dunn/Henry Carlson: $1.5 million
These two companies, headquartered in Kansas City and Sioux Falls, respectively, are partnered as the state’s construction manager at-risk, which acts as a consultant before building and the general contractor once building begins. By the time lawmakers voted to endorse the Benson Road site, the state had paid the team a total of $3.14 million. Of that, $1.5 million was work specific to the Lincoln County site.
Tegra: $340,000
This Twin Cities-area company was hired as an owner’s representative. Its job is to oversee a construction project with an eye to the best interests of the client. It worked with the Office of the State Engineer to coordinate the project, doing things like overseeing project milestones and deliverables, investigating how long it might take to get construction materials, and reviewing and delivering proposals and estimates for various tasks. Of the $540,000 of work the company completed for the Lincoln County site, the state was able to reuse $200,200 for Benson Road.
Soukup Construction: $212,340
The state hired Soukup, of Sioux Falls, to prepare the Lincoln County land for construction and the sewer piping that would have connected the Lincoln County prison to Lennox. The contract for that work, signed Dec. 2, 2024, was for $3.7 million.
Between payments and pending invoices, Soukup did $503,380 worth of that contract’s work in Lincoln County before a stop work order was issued.
Rhoden’s office said $291,040 of the sewer piping and casings, now being stored in Sioux Falls, can be used for the Benson Road prison.
Office of State Engineer: $147,722
The office of Stacy Watters, state engineer, did about $352,000 of work on the Lincoln County site. Of that, the state will reuse about $204,000. Gov. Rhoden’s office told South Dakota Searchlight that a majority of that money represented labor costs paid to engineers within the state office working on the project.
Bureau of Information and Telecommunications: $41,036
This line item is listed as IT Development Services. Rhoden’s office said much of that expense is tied to an information technology project manager for the new prison’s security systems. “Much of that will be reused,” Rhoden’s office said, but the exact amount hasn’t been calculated.
Total losses
South Lincoln Rural Water: $1.58 million
The state paid $1.58 million of what was to be a $3.15 million agreement for South Lincoln Rural Water to deliver water to a tower that would’ve served the Lincoln County prison through 2044. The water system would’ve owned and maintained the tower.
The purchase agreement from Aug. 27, 2024, required half the money to be paid upfront. Rhoden’s office told Searchlight the payment was meant to get the system moving on the upgrades it needed to have done in order to service the prison on the state’s construction schedule (the prison was meant to open in 2029).
As with the federal money paid to Lennox, the money will be used for upgrades that will benefit local customers.
Sayre Associates: $738,905
The state paid this Sioux Falls firm to design the wastewater infrastructure that would’ve been used to connect the Lincoln County prison to Lennox.
East River Electric: $250,000
The state paid a quarter million dollars to this cooperative for a stake in a new electric substation meant to allow for the delivery of electricity to the Lincoln County site. The total estimated cost of the state’s stake in the substation was $4 million, according to a purchase agreement signed on Aug. 6, 2024. The $250,000 payment was the amount payable “upon execution of this agreement.” The state has released its stake in the substation, according to Rhoden’s office.
Southeastern Electric: $153,000
Southeastern was meant to provide power to the Lincoln County prison. To secure access to electricity, the state paid Southeastern $153,000. It’s unclear how much the state was set to pay the cooperative for power. The rate schedule is blacked out in the publicly available contract between the state and the co-op, dated Nov. 22, 2024.
Burns & McDonnell: $173,200
This Kansas City firm was used to commission the prison’s mechanical, electrical, lighting, security and other systems. Commissioning is meant to verify that such systems are designed as ordered prior to construction, and installed as designed afterward. Because the mechanical system is changing for the new building, this work will need to be redone, Rhoden’s office said.
Geotek: $100,300
The state paid Geotek, of Stewartville, Minnesota, $100,300 to prepare the Lincoln County site for dirt moving, testing and monitoring. It also did preparatory testing work for the land where the sewer line from the Lincoln County site to Lennox would’ve been built.
Steffl Drilling and Pump: $82,500
Steffl’s contract asked the Willmar, Minnesota, company to “install three 500-foot deep wells with 1.25 inch piping and thermally enhanced grout” by Aug. 30, 2024. The wells were installed in May 2024, Rhoden’s office said.
Geothermal Resource Technologies: $12,000
This Elkton company was meant to use the three wells dug by Steffl to test the viability of geothermal heating and cooling at the prison site.
Lincoln County Title Company: $13,680
This company sold the state title insurance on the Lincoln County land, plus title reporting fees.
Property taxes: $11,973
The 320 acres in Lincoln County cost the state $11,973 in property taxes across two years, 2024 and 2025. The land was taxed as agricultural. The state typically doesn’t pay property taxes, but the Lincoln County land was operated under a unique, decades-old crop sharing agreement, which had been leased for agricultural use. The land has not been in production since 2023, but the Department of Corrections paid the property tax bills after it obtained the land. The property now belongs to the family that sold South Dakota the Benson Road land on which the new Sioux Falls prison will be built.
Travel reimbursement: $12,206
The state Department of Transportation spent $12,206 to reimburse its employees for travel-related expenses tied to work done to prepare the Lincoln County prison project. The largest travel expense, according to Rhoden’s office, was a trip to Utah to tour a correctional facility in that state.
CHS Inc.: $9,012
In July, the state paid this company to spray herbicides on the Lincoln County land, which had been rented to farmers but had gone unplanted for two seasons.
Project Prison Reset costs
After the Legislature shot down the $825 million Lincoln County prison plan, Rhoden convened a task force to study the state’s prison needs, and to decide on the appropriate size and site for any new prisons it deemed necessary. The group landed on the Benson Road site approved by lawmakers during the special session in September. Task force costs were paid out of the state’s incarceration construction fund.
Arrington Watkins: $872,194
This Arizona-based consulting firm did an assessment of Department of Corrections facilities, population trends, and future needs on behalf of the Project Prison Reset task force. The firm essentially redid and updated the work performed by a consultant group called DLR three years ago, but did so in a few months. The firm also looked at proposed prison sites that emerged during the task force process, which added another $140,000 to the cost of its consulting work.
Travel cost reimbursements: $30,730
The Department of Corrections paid $27,155 to cover the travel of the 22 members of the Project Prison Reset task force. There were two meetings in Sioux Falls, where a dozen of the group’s members live, and two others, in Pierre and Springfield. The Department of Transportation paid $3,575 to pay for the travel of the state employees involved in the task force.
South Dakota Veterans Alliance: $4,494
The task force’s first and last meetings were held at the South Dakota Military Heritage Alliance facility in Sioux Falls, located on Russell Street near Howard Wood Field and the Denny Sanford Premier Center. The money paid for use of the facility and food for task force members.
TKOs Custom Catering: $350
The operators of the cafe at the state Capitol were reimbursed for opening up on the day of the task force’s meeting in Pierre.
