State of South Dakota
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EIGHTY-EIGHTH SESSION
LEGISLATIVE ASSEMBLY, 2013
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690U0585
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HOUSE ENGROSSED NO. HB 1161 - 02/20/2013
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This bill has been extensively amended (hoghoused) and may no longer be consistent
with the original intention of the sponsor.
Introduced by: Representatives Munsterman, Hunhoff (Bernie), and Lust and Senators
Brown, Frerichs, and Olson (Russell)
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FOR AN ACT ENTITLED, An Act to establish and provide certain incentives for projects that
create new jobs or promote economic activity and to establish the rural economic
development partnership program.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
Section 1. Terms used in this Act mean:
(1) "Applicant," any municipality, economic development corporation, county, or other
political subdivision of the state that applies for funding under the program;
(2) "Award," funds provided to an applicant by GOED under the program;
(3) "Commissioner," the commissioner of the Governor's Office of Economic
Development;
(4) "Construction date," the first date excavation, demolition, or construction begins for
a project;
(5) "Equipment," any new equipment that is installed or placed in a new or expanded
facility;
(6) "GOED," the Governor's Office of Economic Development;
(7) "New or expanded facility," a new building or structure, or the expansion of an
existing building or structure;
(8) "Person," any individual, firm, copartnership, joint venture, association, cooperative,
nonprofit development corporation, limited liability company, limited liability
partnership, corporation, estate, trust, business trust, receiver, or any group or
combination acting as a unit;
(9) "Program," the rural economic development partnership program established in
section 20 of this Act;
(10) "Project," either the construction of a new or expanded facility or equipment installed
or placed at a single site, or both;
(11) "Project cost," the amount paid in money, credits, property, or other money's worth
for a project.
Section 2. For the purposes of sections 1 to 19, inclusive, of this Act, the term, new or
expanded facility, does not include any building or structure:
(1) Used predominantly for residential housing; or
(2) Used predominantly to provide nonprofit health care services.
Section 3. For the purposes of sections 1 to 19, inclusive, of this Act, to qualify for a grant
from the economic development grant fund, the project shall meet the following criteria:
(1) A business plan is submitted to the local development corporation which shows that
additional jobs will be created or retained and economic activity will occur if the
project is constructed;
(2) The local development corporation has reviewed the business plan for the project and
has made a determination of the economic impact including job growth which is
scored pursuant to section 16 of this Act;
(3) The municipality has adopted a resolution to approve the municipal sales and use tax
incentives provided by sections 1 to 19, inclusive, of this Act and to authorize the
Department of Revenue to deposit such tax revenue in the economic development
grant fund for the purpose of granting funds to a person that has entered into an
agreement pursuant to section 6 of this Act. A copy of the municipal resolution shall
be submitted to the Department of Revenue;
(4) A copy of the municipal resolution is submitted with the grant application to the
Board of Economic Development; and
(5) The county or municipality has adopted a formula to reduce property taxation for the
project for five years under the discretionary formula pursuant to § 10-6-35.2 or has
approved a tax incremental district pursuant to chapter 11-9 for the area where the
project will be located.
Section 4. As provided in sections 1 to 19, inclusive, of this Act, any person that has entered
into an agreement pursuant to section 6 of this Act may apply for a grant from the business
incentive grant fund that is two times the amount of the municipal sales and use tax imposed
and paid by such person for the project under the provisions of chapter 10-52. However, if the
project costs exceeds twenty million dollars, the grant may be for an amount not to exceed all
of the state and municipal sales and use tax collected pursuant to chapters 10-45, 10-46, and 10-52.
If a project is located outside the incorporated limits of a municipality, the Board of
Economic Development, created pursuant to chapter 1-16G, may waive the requirement that the
municipal sales tax revenue be deposited in the economic development grant fund if the other
provisions of sections 1 to 19, inclusive, of this Act have been met. If such requirement is
waived, any person that has entered into an agreement pursuant to section 6 of this Act may
apply for a grant from the economic development grant fund that is equal to one-half of the state
sales and use tax collected pursuant to chapters 10-45 and 10-46 for the project costs. However,
if the project costs exceeds twenty million dollars, the grant may be for an amount not to exceed
all of the state sales and use tax collected pursuant to chapters 10-45 and 10-46 for the project
costs.
Section 5. The grant pursuant to section 4 of this Act pertains only to project costs incurred
and paid after July 1, 2013, within thirty-six months from the construction date. No grant may
be made unless:
(1) A resolution has been adopted by the municipality where the project is located
agreeing to deposit all of the sales and use taxes imposed on the project by the
municipality pursuant to chapter 10-52 into the economic development grant fund;
and
(2) The person applying for the grant enters an agreement as provided in section 6 of this
Act.
Section 6. Any person desiring to receive a grant pursuant to sections 1 to 19, inclusive, of
this Act shall apply to the Board of Economic Development for a grant from business incentive
grant fund prior to or within ninety days after the construction date.
If the municipality has adopted a resolution to approve the municipal sales and use tax being
deposited in the economic development grant fund pursuant to section 3 of this Act, an
application and business plan shall be submitted to the Board of Economic Development. The
board shall review the application and business plan and determine whether the grant from the
business incentive grant fund shall be approved or disapproved. The application shall be
submitted on a form prescribed by the board. A separate application shall be made and
submitted for each project.
If the application is approved, the board shall enter into an agreement entitling the applicant
to submit claims as provided by sections 7 and 8 of this Act. Such claims are not assignable or
transferable except as collateral or security pursuant to chapter 57A-9. However, the
commissioner may permit the assignment or transfer of an agreement and if the initial permit
holder entity reorganizes into a new entity, if the new entity and the initial entity share common
ownership and the reorganization was completed solely for a legitimate business purpose. The
new entity shall file with the GOED an amended application for the grant.
Section 7. Any claim for a grant shall be submitted on forms prescribed by the commissioner
and shall be supported by such documentation as the commissioner may require. The
commissioner may deny any claim where the claimant has failed to provide information or
documentation requested or considered necessary by the commissioner to determine the validity
of the claim.
Section 8. Any person who has entered into an agreement pursuant to sections 1 to 19,
inclusive, of this Act shall submit a claim for a grant to the GOED no more frequently than on
or before the last day of each month and no less frequently than on or before the last day of each
month following each calendar quarter. The commissioner shall determine and pay the amount
of the grant within ninety days of receipt of the claim. However, no claim may be paid until on
or after the construction date. No interest may be paid on the grant amount. The commissioner
shall pay the grant by electronic funds transfer.
Section 9. No claim for a grant pursuant to sections 1 to 19, inclusive, of this Act may be
considered by the GOED if the claim for the grant is received twelve months after the thirty-six
month time period set by section 5 of this Act. Moreover, any such claim is barred from any
future grant eligibility.
Section 10. No document or record in support of any claim for grant may be considered by
the GOED if the document or record in support of any claim for a grant is received twelve
months after the thirty-six month time period of section 5 of this Act. Moreover, any such
document or record is barred from any future consideration.
However, if the GOED requests any additional document or record from the project owner
after a review of the claim for a grant, and the request is made after the applicable time period
provided by this section has expired, the project owner has sixty days to provide the requested
document or record. No document or record received after this sixty-day period may be
considered by the GOED. Moreover, any such document or record is barred from any future
consideration.
Section 11. If any claim has been fraudulently presented or supported as to any item in the
claim, or if the claimant fails to meet all the conditions of sections 1 to 19, inclusive, of this Act,
then the claim may be rejected in its entirety and all sums previously granted to the claimant
shall constitute a debt to the state and a lien in favor of the state upon all property and rights to
property whether real or personal belonging to the claimant and may be recovered in an action
of debt.
Section 12. Any person aggrieved by the denial in whole or in part of a grant claimed under
sections 1 to 19, inclusive, of this Act, may within thirty days after service of the notice of such
denial by the commissioner, demand and is entitled to a hearing, upon notice, before the
commissioner. The hearing shall be conducted pursuant to chapter 1-26.
Section 13. Any amount granted pursuant to sections 1 to 19, inclusive, of this Act for a
project that is not completed within the time frames prescribed in sections 1 to 19, inclusive, of
this Act, including any extensions granted by the commissioner, shall be returned to the state
without interest. Any granted amounts not returned pursuant to this section and all sums
previously granted to the claimant constitute a debt to the state and a lien in favor of the state
upon all property and rights to property whether real or personal belonging to the claimant and
may be recovered in an action of debt.
Section 14. Any person aggrieved by a decision of the commissioner under sections 1 to 19,
inclusive, of this Act may, within thirty days of receipt of written notice of the commissioner's
decision, make written application to the commissioner for a hearing to be conducted pursuant
to chapter 1-26. Hearings are to be conducted and appeals taken pursuant to the provisions of
chapters 1-26 and 1-26D. A copy of the hearing examiner's proposed decision, findings of fact,
and conclusions of law shall be served on all parties when furnished to the commissioner. If the
commissioner, pursuant to chapter 1-26D, accepts the final decision of the hearing examiner,
no appeal from a final decision of the commissioner upon any additional tax to be paid may be
taken unless any amount ordered paid by the commissioner is paid or a bond filed to insure
payment of the amount. However, if the final decision of the commissioner, pursuant to chapter
1-26D, rejects or modifies the decision of the hearing examiner regarding the amount due, an
appeal may be taken without payment of the amount ordered to be paid and without filing of a
bond. If the commissioner's decision is affirmed by the circuit court, no appeal may be taken
unless any amount ordered to be paid by the commissioner is paid or a bond is filed to insure
payment of such amount.
Section 15. The name of any person or entity that receives a grant pursuant to sections 1 to
19, inclusive, of this Act and the amount of any such grant or credit is public information and
shall be available and open to public inspection as provided in § 1-27-1.
Section 16. The local economic development corporation shall determine the economic
impact of the new or expanded facility by using the following factors:
(1) Project impact factors;
(a) Economic impact of primary jobs created or retained;
(b) Net economic effect of increasing or stabilizing the economy on the
community, area, and state;
(c) Competitive effect on existing businesses;
(d) Support of the public entities of the community and area;
(e) The amount of the owner's equity contributed to the project;
(f) The effect of the project on the environment, health, and safety of the people
in the community, area, and state;
(g) Compatibility with economic development plans of the area and state;
(h) Type of business;
(i) Payroll, pay structure, and employee benefit structure;
(j) Number of jobs created or retained; and
(k) Likelihood that the project would occur without the grant incentive; and
(2) Business feasibility factors:
(a) The potential success of the business and the potential for creating quality jobs
and the growth of those jobs;
(b) The character, experience, management record, and background of the
business management;
(c) The economic feasibility of the project;
(d) The financial status of the project, business plan, and applicant;
(e) The satisfaction of engineering, legal, and environmental regulations; and
(f) The availability of necessary public utilities.
Section 17. There is hereby created in the state treasury the economic development grant
fund. The Board of Economic Development may award grants from the fund for projects that
create or retain jobs and economic benefits to the state and provide matching funds for rural
economic development partnership program created by sections 20 to 23, inclusive, of this Act.
The board may accept and expend for the purposes of this Act any funds obtained from
appropriations or any other source if such acceptance and expenditure is approved in accordance
with § 4-8B-10. Interest earned on money in the fund shall be deposited into the fund.
Expenditures from this fund shall be appropriated through the normal budgeting process.
Section 18. If a grant is approved by the Board of Economic Development pursuant to
sections 1 to 19, inclusive, of this Act, the Department of Revenue shall deposit fifty percent
of the sales and use taxes imposed by chapters 10-45 and 10-46 on the project into the business
incentive grant fund. However, if the project costs exceeds twenty million dollars, the
Department of Revenue shall deposit all of the sales and use taxes imposed by chapters 10-45
and 10-46 on the project into the economic development grant fund.
Section 19. The Board of Economic Development shall promulgate rules pursuant to chapter
1-26 concerning the following:
(1) Establish application procedures for a economic development grant;
(2) The submission of a business plan;
(3) Establish criteria to determine which applicant may receive a grant;
(4) Establish criteria for the terms and conditions upon which a grant may be made,
including performance criteria and matching requirements plan; and
(5) Determine the procedures for distributing the grant funds to the applicant.
Section 20. The rural economic development partnership program is hereby established
within the Governor's Office of Economic Development. Under the program, any municipality,
economic development corporation, county, or other political subdivision of the state may apply
to GOED for funds on a matching basis as provided in sections 20 to 23, inclusive, of this Act.
Section 21. GOED may award funds under the program for new staff, or elevate existing
part-time staff, equipment, and training needs for the purpose of developing or expanding
housing, community, and economic development programs. Areas of emphasis under the
program include creating employment opportunities, higher wages, better-quality jobs, greater
access to resources, repopulation, stronger economies, access to replicable best practice
methods, continuous housing development, business growth, and job creation and retention.
Section 22. Funds awarded under the program shall be provided on a matching basis over
a five-year period for each award so that fifty percent of the first year's project cost is paid by
GOED, forty percent of the second year's project cost is paid by GOED, thirty percent of the
third year's project cost is paid by GOED, twenty percent of the fourth year's project cost is paid
by GOED, and ten percent of the fifth year's project cost is paid by GOED. In each year the
remaining portion of the project cost for that year shall be paid by the applicant. GOED awards
and matching funds paid by the applicant shall be structured so that the project cost for each of
the five years is as nearly equal as practicable.
Section 23. GOED shall promulgate rules pursuant to chapter 1-26 to provide for the
implementation and administration of the rural economic development partnership program. The
rules shall include:
(1) Application requirements, procedures, and forms;
(2) Award procedures;
(3) Eligible uses of award funds;
(4) Eligibility requirements for applicants;
(5) Responsibilities of applicants and award recipients;
(6) Procedures for rescinding and repayment of awards if the applicant's or recipient's
responsibilities are not met;
(7) Reporting requirements; and
(8) Other items necessary for the administration of the program.