Not yet tanked by the Trump tariffs is the big soybean plant AGP is building here in Aberdeen. AGP has been cagy about telling us how much the total project costs, but our leaders have told us it’s the biggest economic development project in Aberdeen ever. My morning paper tells me AGP’s final building permit puts the cost of “all buildings, site work, and other elements” at $77.87 million.
Remarkably, AGP hasn’t needed to tap any EB-5 investors or other risky financing the way Northern Beef Packers (now Demkota Beef) did a decade ago. They are, however, benefiting from plenty of government subsidies. Aberdeen has set aside $354,230 for an anticipated sales tax refund. AGP and other big builders may get even more of a tax break if the Aberdeen Development Corporation has its way:
…Mike Bockorny, CEO of Aberdeen Development Corp. asked the council to consider an ordinance revision that would amend the city’s existing ordinance pertaining to tax rebates.
The city’s existing ordinance allows for a 50-percent tax rebate of city sales tax on projects that add $5 million in real property value, capital improvements of $10 million or combined property and capital improvements of $10 million or greater.
In his presentation to the council, Bockorny asked if the council would consider tax rebates of up to 100 percent and a provision that would waive the $5 million and $10 million thresholds.
“We have come across this in many states, like places that don’t charge sales tax on equipment purchases,” Bockorny said [Elisa Sand, “Northern Seeks to Vacate Part of 15th Avenue for Stadium,” Aberdeen American News, 2018.07.17].
100% refund on all sales tax? I recall Senator Brock Greenfield (R-2/Clark) opposing a break like that to poor people buying food, saying that everyone needs to pay a little so that no one pays a lot. I recall Senator Al Novstrup (R-3/Aberdeen) saying that we should give a higher priority to meeting unmet needs than to giving more tax cuts. AGP seems to be trucking along just fine with their building; they don’t appear to need any new tax breaks.
One of these days, I’d like to see Aberdeen and South Dakota flip its tax refund model. Instead of relying on trickle-down economics, let’s offer regular folks a tax break for their participation in economic development. Instead of $354K to one big business, let’s give $1K to 354 families who build new homes in Aberdeen. I know a lot of construction workers are scurrying around the AGP site and buying a lot of sandwiches and dungarees in town, but imagine how many more workers would be boosting our sales tax if they had 354 new houses to build.
That’s interesting; the last time I owned a business (very small) I was living in Vermont and had a sales tax exemption on the supplies I purchased. The rationale was that after I added the value to my products my customers paid sales tax on the final product. I have not given any thought to the taxation of value-added processing since.
Anne Beal, SD has a similar provision of sales tax law where items purchased for resale are exempt from the sales tax. The purchaser must hold a sales tax exemption certificate.
Poor people don’t hire employees.
Just when you think Jason can’t get more ridiculous in his arguments? He does.
So as we drift on back to the good old days of 2008, what happens when the bottom goes out? Aberdeen has invested a sizable chunk of taxpayer money in this that may or may not work. It may turn out to be just like the Northern Beef, a big ol place that just never seemed to catch on. But you can bet someone is gonna come out smelling like a rose and it sure is not gonna be the local taxpayers.
Nick is right—AGP probably won’t pay sales tax on a lot of stuff. But here, I think we’re talking about the tax they may for materials during construction of the plant. Typical homeowner or business sends his contractor to Menards to buy brick and beams for a new building, and the contractor pays sales tax and passes that on to the homeowner for whom he’s building. That’s the tax Aberdeen plans to rebate to AGP up front.
Poor people are employees. They make economic development possible.
Rich people can afford more sales tax than poor people.
Great idea, Cory!
For additional information checkout these AGP Soybean Processing Links
https://www.agp.com/about/overview-purpose
https://www.agp.com/business/business-soybean-processing
RR
Yeah, 354k in exchange for 50 permenant jobs, or 1k to 354 people that won’t by the shingles for the roof. Dumbass