$7M pricetag, safety valve added to SD development plan

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PIERRE (AP) — South Dakota lawmakers on Thursday advanced a comprehensive bipartisan economic development plan intended to help recruit projects to the state after they pledged $7 million to kick-start the fund.

A negotiating committee added the $7 million appropriation and a provision that would halt its funding in tough times Thursday during the penultimate day of South Dakota's main legislative session. Both the House and Senate must concur.

Building South Dakota would eventually be funded on an ongoing basis by a portion of the contractors' excise tax collected on large projects and some of the unclaimed property that the state receives from abandoned bank accounts.

But most of those funds won't be available until 2015 or 2016, so sponsors are asking the House and Senate to "prime the pump" with $7 million from the state's general fund, said Senate President Pro Tem Corey Brown.

"I think a lot of us felt pretty strongly that if we're going forward with a proposal like this, then we need to be willing to put some skin in the game right away this first year," said Brown, R-Gettysburg.

Republicans and Democrats worked for two months to find a compromise to help South Dakota better compete with other states in recruiting large projects and to help lure smaller projects to the state.

The bill also helps communities build the infrastructure needed to encourage development, works with the state's technical centers on training and helps K-12 schools bear the cost of English language training when a project draws workers from other cultures.

House Democratic Leader Bernie Hunhoff, of Yankton, called the bill a workable piece of legislation that's only as good as the spirit in which it's implemented.

"It brings education to the forefront of economic development, which is where it should be, and it gets the biggest share of the Building South Dakota Fund," Hunhoff said. "It stresses higher quality jobs in the first sentence."

South Dakota currently has no incentive plan because a previous program that refunded construction taxes for large industrial projects was allowed to expire Dec. 31. In November, voters rejected a replacement plan suggested by Gov. Dennis Daugaard.

Officials say the state is at a disadvantage because of its up-front tax structure.

South Dakota charges a 4 percent sales tax on construction projects, as well as a 2 percent contractors' excise tax on gross receipts. Few other states have a contractors' excise tax, so construction is cheaper elsewhere.

The new plan would refund part or all of the state sales tax paid by projects of more than $20 million that would not located in South Dakota without such an incentive.

"These will be companies that will pay better than average wages and provide better than average benefits and are very actively involved in their communities in the charitable sense and have every intention of being very outstanding employers in our communities," said Pat Costello, commissioner of the Governor's Office of Economic Development.

The contractors' excise tax collected on those projects would be placed in the Building South Dakota Fund so the state can reinvest in future projects. The new fund would also get a portion of unclaimed property that the state receives from abandoned bank accounts.

The amendment adopted Thursday added a safety valve, withholding spending if projected ongoing revenues would be insufficient to fund education, Medicaid and state employee costs.

House Republican Leader David Lust of Rapid City said there has been some criticism that the process related to the economic development bill was not as open and transparent as some would have hoped. But he said the approach last week of getting the original proposal out and taking amendments has strengthened the final product.

"It's where we need to be and it represents a good step forward for our state in economic development," Lust said.

Hunhoff said the state has been dealing with economic development issue for five years and it was time to do something.

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