Economic development incentives advance in CapitolGov. Daugaard now says he supports package as 2013 session nears end.
By: Bob Mercer, Republic Capitol Bureau
PIERRE — With the Daugaard administration expressing its support for the first time publicly, House and Senate negotiators moved another step forward Wednesday toward a final version of the Building South Dakota program.
The latest amendments show the Legislature now will be asked to put in $7 million of state general funds for the first year of the program on July 1.
The program’s purpose is to direct millions of dollars annually for financial incentives from state government for economic and community development.
The initial $7 million of state funding would be followed in year two by the state treasurer transferring 25 percent of unclaimed property revenue.
The one-quarter share would generate an estimated $7 million, according to Senate Republican leader Russ Olson, of Wentworth.
For year three the state treasurer would transfer 50 percent of unclaimed property revenue. That one-half share would be about $14 million, Olson said. The 50 percent transfer would continue annually after that each Nov. 1.
Unclaimed property is money and other items of value that people have left behind at banks and other businesses and institutions. State government can take possession of unclaimed property after three years for public use.
The amendments under consideration call for a circuit-breaker sought by Gov. Dennis Daugaard regarding the unclaimed property transfers.
They would be suspended in years when the Legislature’s revenue forecasts for the coming budget aren’t sufficient to meet mandatory increases in funding for public schools, Medicaid and state government employees’ salaries.
Sen. Corey Brown, R-Gettysburg, presented the amendments Wednesday afternoon.
He said one other feature that would take immediate effect is additional aid to school districts where assistance is needed for teaching English as a second language.
The Building South Dakota program also would receive a share of state government’s revenue from the 2 percent contractor’s excise tax charged on real estate improvements.
The contractor’s excise tax on projects of $20 million or more would be steered into the fund rather than into state government’s general treasury.
Projects of $20 million or more would become eligible for a new form of tax refund called a reinvestment payment.
Businesses would need to apply for a permit to qualify for reinvestment payments.
They would need to show they wouldn’t have otherwise come to South Dakota without economic development incentives.
The state Board of Economic Development in turn would have the discretion to provide a refund up to 100 percent of the sales and use taxes paid on the business project.
The state board’s members are appointed by the governor.
The amount of contractor’s excise tax available for the Building South Dakota program would vary year to year depending on the size and number of large projects.
Equipment replacement by existing businesses also could qualify for the reinvestment payments on projects costing at least $2 million. The contractor’s excise taxes on those projects wouldn’t flow into the Building South Dakota fund.
Four years ago, the Legislature repealed the construction-tax refund program for business, manufacturing, energy development and agri-processing projects. The repeal took effect Dec. 31.
That left the Daugaard administration to propose a replacement after it took office in 2011.
Many of the Legislature’s Republicans and the governor came up with a large-project grants program, but the law was referred by Democratic leaders to a statewide vote on the 2012 general election ballot.
Voters rejected that program in November. Building South Dakota comes as a bipartisan attempt among legislators for a broader approach.
No one from the Daugaard administration testified Monday at the first hearing held on the plan by a House committee.
House of Representatives members approved the rough outline Tuesday and the Senate sent it into a conference committee Wednesday so there could be more adjustments.
Pat Costello, the governor’s commissioner of economic development, testified in favor of the program Wednesday during the conference meeting. There are “pieces of it we like more than others,” he said.
Money from the Building South Dakota fund would be earmarked for specific purposes:
• 25 percent to a new state fund for local infrastructure improvements;
• 15 percent to a new state fund to assist local economic development staffs in development and training;
• 30 percent to workforce development programs including vocational and technical training in high schools;
• 25 percent to a new program for housing development for workers and their families; and
• 5 percent to a special state fund for making loans and grants to projects costing less than $20 million.
The three House and three Senate negotiators are scheduled to meet again this morning.
There are three working days — today, Friday and March 25 — left in the 2013 legislative session.