On Main Street in Stickney, a good indicator of recent business is in the Great Plains Lumber and Supply’s lumberyard.
To the point where Dave Beckman is almost running out of wood to sell.
“Business has been great, and it has been hard getting some stuff in," Beckman said. “We can’t get a 4-by-4 right now.”
As Beckman hustles to fill orders, what’s been good for the lumberyard has been part of Stickney’s success since COVID-19 has hit South Dakota. The community of fewer than 300 people had a nearly 18% increase in sales tax collections in the month of April, followed by a 24.6% increase in May. For the first six months of the year, Stickney was ahead 13.3% compared to the first half of 2019, and there’s dozens of other small towns in the state that have seen similar effects since the pandemic has hit.
While communities throughout the state have braced for a big impact from the coronavirus pandemic, with jobs lost and businesses impacted in almost every sector, small towns have been more insulated. Taking into account their population, they’ve had relatively few cases and residents have limited their travel and have chosen to shop locally.
In the first six months of the year, South Dakota has had more than one-third of its municipalities — 67 in all — report an increase of 10% or more in municipal tax compared to the first half of 2019, according to South Dakota Department of Revenue data. In the Mitchell Republic’s 17-county region in the central and southeastern part of the state, 25 towns have seen a 5% or higher increase in that six-month comparison. Only five area communities had a decrease of 5% or more.
Stickney Finance Officer Amy Mulder said municipal tax collections in the town are the largest since the community had significant storm damage in 2014. The town has a few eating establishments, a bar, the lumberyard and a grocery store as its primary businesses, along with some agricultural industry. Mulder said nearly every business sector in Stickney has thrived during the virus.
“More and more people in town have kept shopping local, and it’s been having a big impact on many businesses,” Beckman said.
Following the lead of Republican Gov. Kristi Noem in South Dakota, Stickney’s city leaders opted to shy away from imposing business shutdowns and restrictions related to COVID-19 and very few businesses temporarily closed.
Beckman said his business has sold a lot of home improvement products, such as projects for building decks. His business has been good and now it’s become harder to receive supplies because of production chain issues related to the pandemic.
“A lot of people who have been staying home from work around the country have used their available time to fix their decks and do other home improvements, so there have also been wait times for getting products in,” Hoffman said. “We’re close enough to the Missouri River here, and so everybody has been asking us to supply decks down along the river.”
Local and state leaders say there’s a handful of factors that have given small towns an edge during the pandemic.
David Lambert, director of regional development for the Mitchell Area Development Corporation, said communities were bracing for a reduction in sales tax numbers.
“We certainly had other sectors that really felt the impacts, such as restaurants,” Lambert said. “But as I look at the numbers, I’m pleasantly surprised… I think for many of these area city councils and development corporations, they knew that if we just held our own during this time, we would be in a good position.”
One aspect that can’t be understated, South Dakota Department of Revenue Secretary Jim Terwilliger said: South Dakota was fortunate to keep its businesses open during March, April and May, with Noem urging the state’s residents and leaders to make personal choices as it related to the virus, rather than placing a state mandate.
“Gov. Noem did not shut down our state and allowed businesses to stay open, when a lot of other states were closing their economies down,” Terwilliger said.
Terwilliger said with the loss of events in which people would travel across the state to attend, whether it was sporting events or tournaments or shows, that provided small-town opportunities.
“People just stayed home," he said. “They shopped in their hometown.”
In the smallest of South Dakota’s communities, one or two large-scale construction projects can tip the scale and cause large percentage differences.
That’s included the 60% increase in Alpena, a community of 286 people between Mitchell and Huron. Mayor Randy Peterson said the Jack Link’s Protein Snacks plant there completed a large-scale construction project, boosting the community’s revenues. (The plant has also been one of the most affected by COVID-19 because of the outbreak of more than 120 cases at the plant.)
Terwilliger believes the importance of South Dakota’s push for remote sellers and internet sales tax legislation, which won in the U.S. Supreme Court in 2018, is making a major impact now.
“It’s hard to measure exactly what it is, but from my perspective, it’s significant,” he said.
The legislation approved by the South Dakota Legislature following the Supreme Court decision in 2018 enforces sales tax collections on those who meet a $100,000 sales or 200 transactions threshold in the state. Depending on where that purchase is made from, sales tax is distributed back to the state and to those communities just as it would be with a purchase at a brick and mortar store.
He also noted that as of June 30, more than 431,246 South Dakotans received $777.4 million in Economic Impact Payments from the federal government to help stimulate the economy through the heart of the pandemic, which comes out to about $1,800 per recipient.
A throwback stretch of time
From the standpoint of purely supporting local business, Kimball Mayor Wayne Tupper described the last few months as being just about ideal.
Tupper said it harkened back to the late 1980s when the small town had a thriving economy propelled by community members who supported local businesses before trekking 50 miles to Mitchell for their shopping needs. Many community members rely on Mitchell’s stores for a myriad of products and goods, but Tupper said that all changed when Davison County had the state’s first confirmed case of COVID-19 in mid-March.
Nearly every Kimball business felt the impact of the renewed support, Tupper said, which helped the town see a 30.2% increase in municipal tax for the first six months of the year, and an 18.39% increase for the month of April compared to April 2019.
"We’ve been really fortunate, and it just shows when people stay at home and spend their money at home, that money stays home and gets spent for improving the community,” Tupper said. “Between the hardware store, the gas stations, repair shops and the bars, it’s been a combination of all our local businesses seeing the benefits.”
As official figures for the second quarter of the year are not yet finalized, Tupper anticipates to see an even larger increase, considering coronavirus cases in the state climbed up in the months of April, May and June.
Tupper understands the unique circumstances that are playing a major role in the sudden spike of local shopping and support. But he’s hopeful Kimball will continue maintaining its support for local businesses, pandemic or not.
"This has been as good as it gets, and I hope we can keep supporting local business,” Tupper said.
In Parkston, where tax revenue is up 17.5% for the first six months of the year, Parkston Development Corporation President Mike Maxwell said the community has done well because it has a lot of service-oriented businesses, with companies that steady work regardless of time of year.
Maxwell’s business, co-owning the Maxwell and Bowar insurance agency, had previously scheduled a remodeling of its office and the exterior of the building. When the pandemic set in during the spring, he said his business was fortunate to be ready to renovate and easily transition to work from home. Other businesses in Parkston, including a bar and another business office, he said, did the same thing.
“I think there were some businesses that saw it as a good use of their time, that if they couldn’t be open and serving the public and had some little things to be done, we might as well do some of these projects,” Maxwell said.
Residents in the town of about 1,500 residents aren’t living in fear but Parkston has taken the virus seriously, he said.
“In general, most people in Parkston are pretty cognizant of being socially distanced and trying to take care of yourself,” Maxwell said. “In small towns, we’re socially distanced by nature.”
Terwilliger said South Dakota has one of the broadest sales tax laws in the country, which generally speaks to stability from year to year. Municipal tax includes sales and use tax, which varies by municipality between 1 and 2 percent, and gross receipts tax, which is 1 percent, and can be imposed on alcoholic beverages, eating establishments, lodging, and admission tickets to amusement parks, athletic and cultural events.
“It covers a broad basket of goods and services, comparatively to other states. It becomes a very stable source of revenue to state government and to the municipal governments around the state.”
Despite the small town successes, state leaders are giving a clear-eyed message about the future. The South Dakota Legislative Research Council presented this week to the interim Joint Appropriations Committee and noted that at the end of the fiscal year 2020 on June 30, the state of South Dakota closed $11.8 million below estimates for sales and use tax, but still grew by 4.6% over the previous fiscal year.
South Dakota’s fiscal year 2021, which started July 1, points to a tougher forecast and anticipates a long-term threat from COVID-19. The projection estimates a $26.5 million decrease at the end of the 2021 fiscal year, which is a 2.4% decrease due to possible elevated unemployment and a growing national recession affecting sales tax revenues. Ongoing general fund revenues are projected for a $15.9 million decrease but the projections also note that South Dakota has received $4.41 billion in federal funds since March, including $1.66 billion in Payment Protection Program Loans to businesses, $1.25 billion in Coronavirus Relief Funding to the state and the EIP payments.
In almost any case, Terwilliger said he expects South Dakota’s government to proceed cautiously, and prioritizing personal-level decisions.
“We’ve never experienced a situation like this ever in modern history and it’s pretty difficult to predict economically what’s going to happen over the next year,” Terwilliger said. “When you haven’t experienced something like this, the different models you use to predict the economy and the state revenue don’t really apply in a traditional sense. We have to be cautious and have to be flexible. ... There’s going to be uncertainty.”
An increase around the region
The following Mitchell area towns have seen an increase in municipal tax collections of at least 5% or more through the first six months of 2020 compared to 2019.
- Geddes: 15.57%
- Gregory: 5.55%
- Kennebec: 16.95%
Wessington Springs: 9.98%
Source: South Dakota Dept. of Revenue