Voters get to decide whether large projects get state grantsPIERRE — At its root, Referred Law 14 is a question of whether voters want to earmark 22 percent of the many millions of dollars that they and others pay in contractor excise taxes.
By: Bob Mercer, Republic Capitol Bureau
NOTE TO READERS: This is the fifth in a series of stories about the four constitutional amendments, two referred laws and one initiated law that South Dakota voters will decide on the Nov. 6 general election ballot.
PIERRE — At its root, Referred Law 14 is a question of whether voters want to earmark, for a special purpose, 22 percent of the many millions of dollars that they and others pay in contractor excise taxes on projects from handyman repairs and home remodeling to road surfacing and new construction.
The purpose of setting aside the 22 percent is to pay for grants that would be made by the state Board of Economic Development, as incentives and rewards for business projects costing at least $5 million to build.
The annual amount available for the grants would vary with the economy and construction activity.
In 2008, the contractor tax generated about $79 million and in 2009 about $70 million, while in 2010 the amount was about $61 million and in 2011 more than $65 million. In the 2012 fiscal year, which ended June 30, the tax produced about $82 million.
Using that five-year range, the annual amount from the 22 percent set-off would have varied between about $13.3 million and about $18 million.
Had the law been in place for those five years, about $78 million would have been used for the grants to businesses, rather than for other purposes.
Gov. Dennis Daugaard wants the grant program. The governor appoints the members of the state board that would make the grant decisions.
Technically, the board would have the final authority on grant decisions under the law. Based on standard operating procedure in state government, however, it would be unlikely the board would make grants that hadn’t been first cleared by the governor.
A yes vote on Referred Law 14 is to approve the governor’s plan. A no vote is against the governor’s plan.
Daugaard, a Republican, proposed the grant program for the Legislature’s approval in the 2011 session. The House of Representatives supported it 50-18, with the votes splitting almost precisely along Republican-Democratic lines. The same was true in the Senate, where the vote was 28-4.
South Dakota Democratic Party Chairman Ben Nesselhuf stopped the legislation from becoming law by successfully gathering sufficient signatures in the spring of 2011 to force a statewide referendum this November.
The Daugaard program would replace a construction tax-refund program that was greatly expanded during the administration of his predecessor, Gov. Mike Rounds. The tax refunds were available in varying percentages depending on the amount of the project.
The Legislature repealed the tax refund program in 2010 but made the effective date Dec. 31, 2012. When Daugaard took office in 2011, he proposed the grant program as the replacement.
The tax-refund program was used the most by wind farms and ethanol plants. The new program would cover wind farms, electricity production and transmission facilities, agricultural procession, laboratories and testing facilities and manufacturing, all of which are mentioned in the referred law.
The referred law also contains restrictions. Projects would have to cost at least $5 million and would have to be subject to either property taxes or gross-receipts taxes. Grants would be prohibited for projects involving retail trade, residential housing, transient lodging and raising or feeding livestock.
As a general practice, depending on the year, the Daugaard program would make about the same amount or a larger amount available for the grants than companies have been taking in tax refunds.
In recent years, the annual totals for refunds varied from as little as $3 million to as much as nearly $18 million.