A group of concerned organizations, chambers of commerce and citizens have joined together to turn back a challenge to Gov. Dennis Daugaard's economic development initiative to appear on the November ballot as "Referred Law 14."
South Dakota's tax structure for operating businesses is very competitive, but new and expanding businesses pay a high tax rate on initial investments made for larger projects that can have significant positive effect on South Dakota's economy. Referred Law 14 creates a fund that can be used for grants to offset the higher taxes, allowing South Dakota to be more competitive when competing for growing businesses.
"We need RL14 to help offset short-term costs for businesses who are expanding or re-locating," said David Owen, executive director of the South Dakota Chamber of Commerce. "It's an improved version of a program that, over the last 16 years, has secured businesses that today contribute more than ten times our participation to our economy, yearly."
The fund will use an annual appropriation from taxes collected from contractors for new construction for grants that are approved by the state economic developments board. This process of approving the grants will be open and the awards will be public.
Qualifying projects must spend more than $5 million. Qualifying projects listed in Referred Law 14 are: Manufacturing, laboratories, facilities for testing, electric generation and transmission, agricultural processing and wind power (including manufacturing of wind power equipment). The law says the grants cannot be given to retail stores, residential development, lodging facilities, health care facilities and large animal feeding operations.
Referred Law 16 makes improvements to a former law that expires in December. The Governor and the economic development team can focus grants on companies with projects where the grants make the biggest difference. The lower threshold will help smaller communities find projects that will qualify whereas the former law's $10 million dollar level was widely viewed as restrictive.
Says Owen, "Economic development creates good paying jobs, increases funding available for schools, law enforcement and other public services and helps make South Dakota's economy more recession proof."
Success in economic development requires South Dakota to compete against surrounding states, large states on both coasts and other countries. This competition is not only affects companies looking to relocate, it entices our local businesses to move out of South Dakota. The most intense competition is aimed and the largest investments and at large projects that create the best jobs, offer benefits, pay significant taxes and significantly diversify the economy.
The contractors' excise tax combined with the application of sales and use taxes on construction creates a total tax burden that is higher than many other states and can mean that businesses will look for a better use of that money elsewhere.
Should voters reject Referred Law 14, South Dakota will not have an answer to the higher tax rate on large investments. Lawmakers will be required to consider how to attract the kind of investment that can grow the economy, provide jobs for the future, enable long term funding for schools and public services and make South Dakota even more resistant to recession.
The "Vote Yes on 14" committee asks South Dakota voters to join a coalition of more than 15 organizations that represent agriculture, chambers of commerce, construction, and associations that represent public officials. These organizations are "For 14."