PIERRE, S.D. (KELO) — Governor Kristi Noem and her economic development commissioner, Steve Westra, are getting some state grants into use by county governments, through agreements with businesses that have been approved to receive the grants. Essentially, sales and use tax that the project paid to state government winds up in the treasury of the county where the project is located, rather than being returned to the business.
Governor’s Office of Economic Development official Joe Fiala recently answered questions about this practice from KELOLAND Capitol News Bureau reporter Bob Mercer.
One of the innovations of the Noem administration is having projects assign their state-government incentives to their local governments. Where did this idea originate?
As a clarification, the only programs that allow an assignment are the South Dakota Jobs program and the Reinvestment Payment program. Both of these programs were created in 2013 as part of the Building South Dakota legislation. No other programs within GOED allow for the assignment of a payment. These two programs have always allowed the recipient of the payment to assign the payment to another party.
With the inception of the livestock development initiative this year, Governor Noem and Commissioner Westra working together with legislators decided to utilize the South Dakota Jobs program and Reinvestment Payment program on projects that increased livestock within South Dakota. As a condition of the application to these programs, the recipient agrees to assign the payment to the county where the project is taking place.
Walk me through a recent example.
J and K Feeders, LLC, went through the full proposal process. The company contacted the business development representative and the proposal process began. A proposal letter was sent September 16, 2019. Application received. Conditional use permit was obtained on October 7, 2019. (The state Board of Economic Development) approval was October 24, 2019. Followed the process and was done very seamless.
Governor Noem took office in January. How many of these arrangements has the state Board of Economic Development approved through October? What is the total amount?
SD Jobs has six projects approved totaling $588,301. Reinvestment Payment has three projects approved totaling $1,711,170.
At the October 24 meeting, the state board approved two involving South Dakota Jobs grants and one involving a reinvestment payment. To what groups of incentives do these sharing arrangements apply?
Turner County Dairy was approved for a reinvestment payment of $756,000. This full amount will be assigned to Minnehaha County from Turner County Dairy.
Diamond Five Feeders, LLC was approved for a SD Jobs grant in the amount of $61,055. This full amount will be assigned to Brown County from Diamond Five Feeders, LLC.
J and K Feeders, LLC was approved for a SD Jobs grant in the amount of $87,123. This full amount will be assigned to Turner County from J and K Feeders, LLC.
Each of the grants, once received by its respective county, may be used how the county sees fit. There are no strings attached and is fully-controlled at a local level.
How are these pass-along agreements reached?
The project developer should contact a GOED business development rep and GOED will issue a proposal. The developer completes the application to be presented to the Board of Economic Development, and if the grant money is approved, the company agrees to assign the grant to the county.
The company pays sales and use tax to the State of South Dakota and reports periodically to GOED. The company then submits an affidavit upon completion of the project, and the sales and use tax is distributed to the county with no restrictions placed on how to use the money.
Is there a running record kept? If so, is there a list of counties and amounts available?
These approved projects can be accessed via open.sd.gov (on the internet) under the Economic Development tab.
What ultimately is the goal of these arrangements?
Agriculture is an important component of the South Dakota economy and livestock development is one of the targeted industries at the Governor’s Office of Economic Development. Livestock development projects create jobs with good pay and benefits and enhance the tax base within the state. Using these programs is an innovative way to encourage economic development across South Dakota.
Is there anything you’d like to explain about how these work?
The use of these programs does not impinge on the ability of the county to approve or deny projects. The county maintains local control. For counties that see livestock development as a fit this is a tool they can utilize.