Senators give economic development plan standing ovation

• SD senators at work

While Senate Republican leader Russ Olson, of Wentworth, left, introduces his family, his assistant leader, Tim Rave, R-Baltic, center, confers Thursday afternoon with Senate Democratic Leader Jason Frerichs, of Wilmot, about the upcoming bills for consideration. Thursday was working day 36 of the 38-day legislative session. Lawmakers return today, then take a two-week break until veto day on March 25. (Bob Mercer/Republic Capitol Bureau)

Talk about it

PIERRE — South Dakota’s commissioner of economic development told state lawmakers Thursday they are filling a need with their proposed incentives for large business projects.

“We have nothing in place,” Pat Costello told a panel of House and Senate leaders, as they assembled the last parts of their Building South Dakota package for economic and community development.

The final steps came Thursday evening. The Senate voted 31-2 for the package. The roll call was followed by spontaneous applause that turned into a standing ovation from the senators in both parties.

They turned and faced Sen. Corey Brown, R-Gettysburg, who had steered the plan through its formation.

Meanwhile the House of Representatives gave its approval 60-6.

Projects costing at least $20 million would be eligible for what legislators are calling reinvestment payments. They would be only for businesses that otherwise wouldn’t have come to South Dakota.

Costello said he knew two prospects were “actively watching” the legislation.

The state Board of Economic Development would receive the discretion to decide how much to pay. The amount could be no more than what the business paid in state sales and use tax on its project.

The reinvestment payments also would be available to existing businesses that spend at least $2 million on new equipment.

The final stop is the desk of Gov. Dennis Daugaard for his decision to sign it into law. On Wednesday, Costello stepped forward at the House-Senate hearing to declare the administration’s support for the plan.

Brown said the package is the product of two months of work by many legislators, business people and the governor’s office.

A special fund will be created to collect money that can be distributed for infrastructure improvements, housing, education, workforce training and local economic development.

Money from the contractor’s excise taxes paid on the large projects would be placed in a special fund. So will a stream of revenue from the state’s unclaimed property fund, which is money that people leave behind in banks, utilities and other institutions.

Brown said about 90 percent of the unclaimed-property revenue will originate from people who live outside South Dakota and have accounts with major banks headquartered in South Dakota.

Legislators are putting $7 million into the Building South Dakota fund as start-up money immediately. Next year 25 percent of the unclaimed-property revenue will be transferred into the fund. That will rise to 50 percent in year three and the years after.

In 2010 the Legislature scrapped the old construction tax refund program effective Dec. 31, 2012, because of its automatic nature regardless of whether a project would be built without the need for an incentive.

In 2011, after Daugaard took office, he and many of the Legislature’s Republicans developed a large-project grant program that would have diverted 22 percent of the contractor’s excise tax revenue to be used for discretionary grants by the Board of Economic Development.

But Democrats led by their state party chairman, Ben Nesselhuf, forced a referendum on the large-project program. Voters rejected it in the November general election.

The result was a less partisan approach in developing the new package.

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