Democrats File Papers to Refer Project Development Fund Bill to Public Vote

South Dakota Democrats are trying to refer Gov. Dennis Daugaard’s economic development fund to a public vote.

Ben Nesselhuf, chairman of the South Dakota Democratic Party, filed papers Thursday with the Secretary of State to refer HB1230 to a public vote in Nov. 2012.

That bill, one of Daugaard’s key initiatives this legislative session, would set up a large project development fund with around $16 million per year in state money to offer incentives for businesses to start or expand.

If critics of the bill can collect 15,855 signatures by June 27, voters will get to decide whether HB1230 should be come law.

“The governor claims that we need to have handouts for corporations in order to convince them to come to our state. That’s a debate we can have,” said Nesselhuf.

HB1230 is a replacement for the current large project refund program, which provides automatic tax refunds to business projects worth more than $5 million. That program was set to cost the state around $23 million per year and gave large refunds to projects that both Democrats and Republicans argued would have come to South Dakota anyway.

Daugaard’s office trumpets the development fund as a way to provide needed development incentives in a more efficient way than the past.

“This program is narrowly focused on bringing projects to the state or encouraging expansions that wouldn’t have happened otherwise,” said Tony Venhuizen, Daugaard’s communications director. “He (Daugaard) thinks it’s an important tool for creating jobs and growing the economy, and that’s our number one priority.”

But Democrats say South Dakota can’t afford to be spending money giving incentives to big companies when schools and health care facilities are being cut.

“It takes money out of the general fund, which otherwise goes to schools and nursing homes, to create this slush fund that he wants,” Nesselhuf said. “In a year when we are making drastic cuts to our education system and to our nursing homes and Medicaid providers, this is the wrong statement and the wrong time to make this statement to the people of South Dakota.”

Referring a law to a public vote also suspends implementation of the law, as happened with the smoking ban originally passed by Legislature in 2009. But HB1230 isn’t scheduled to take effect until January 2013.

Venhuizen said the referendum could still hurt the state’s development efforts.

“A lot of times these projects approach the state and we begin to work with them on their financing and incentive packages in advance,” he said. “Having that degree of uncertainty up until the very end of 2012 could put some economic development in the state at risk.”

Nesselhuf argued Daugaard should seek another source of money for his development fund instead of taking money from the general fund.

“If the governor strongly believes that this is the appropriate way to do economic development, he should find the money somewhere else,” Nesselhuf said.

Nesselhuf referenced former Gov. George Mickelson, who championed a temporary tax in order to create the Revolving Economic Development Initiative fund.

The REDI fund is a revolving loan fund that doesn’t receive regular payments from the state general fund. Daugaard’s proposed large project fund would receive general fund money every year.

Nesselhuf said he expects collecting more than 15,000 signatures to be a challenge but believes “there is desire to refer this law.”

Venhuizen said Daugaard will defend HB1230 if it’s successfully referred.

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