My friend Frank Kloucek notes that neighbors in Tyndall and Yankton have a chance today to get educated about tax-based incentives. Kloucek sends a press release noting that Iowa State University economist David Swenson will speak today on "The Rationale, Rewards, and Risks of Using Property Tax-Based Tax Incentives in Rural Areas." Swenson presents twice today:

Tyndall Community Center, right next to the Eiffel Tower (?)

Tyndall Community Center, right next to the Eiffel Tower (?)

Kloucek says the topic is particularly relevant to the thirty-million-dollar rail facility that Cargill/Agrex Dakota Plains Ag Center is building west of Tabor. That project is getting tax increment financing (Bon Homme County Commissioner John Pesak greeted the project by saying, "We're just going to have to have a TIF"), plus getting the county and state to shoulder the majority of the cost of rebuilding the rail to the Napa junction near Yankton.

Swenson's research has found that TIFs are not clearly associated with economic growth or expanding tax bases, particularly in smaller communities. In his 2012 summary of his Iowa research, Swenson says public subsidization of private development has become "inefficient, imprecise, and inevitable." TIFs, says Swenson, have become an entitlement program for business.

Swenson makes the news elsewhere casting doubt on the job projections and other wishful economic thinking of the Dakota Access Bakken oil pipeline that will cut across East River and Iowa and whose corporate fathers have apparently used the same deceptive "job-year" statistics as Keystone XL backers.

Come ask Swenson your economic development questions this afternoon in Yankton and this evening in Tyndall.

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The Nee York Times turns some socioeconomic statistics into a map of the quality of life in every county in the United States. Looking at "education (percentage of residents with at least a bachelor’s degree), median household income, unemployment rate, disability rate, life expectancy and obesity," the Times calculates that much of South Dakota is in the top quarter of the nation's 3,135 counties. Lincoln County actually ranks 8th nationwide (if NYT included the impact of being Todd Epp's neighbor, Lincoln County would've made the top five).

Alas, the big islands of orange trouble amidst South Dakota's healthy blue on the NYT map are Indian Country. Shannon/Oglala Lakota County is not the worst in the nation, but it's down there, ranking 3,080 out of 3,135. That's still better than the ten worst counties by this measure, six of which are in eastern Kentucky in the Appalachian Mountains and all ten of which are in the South.

But Oglala Lakota County likely would have come out worse with a closer look at unemployment. NYT says unemployment on Pine Ridge is 13.7%. Some would argue that 13.7% is closer to the employment rate, not the jobless rate, on Pine Ridge.

Whatever the actual numbers, the gross disparity between economic metrics in Indian Country and the rest of South Dakota should call the Legislature to action. Instead of fussing about who wrote which parts of science curriculum standards, legislators (especially those from districts with large Indian communities) should focus their attention on the number-one economic development problem in South Dakota: providing infrastructure, jobs, and better quality of life on Pine Ridge, Rosebud, Standing Rock, and the rest of our Indian reservations.

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In somewhat better local economic news, Madison's movie theater is reopening next week. Owner Todd Frager shut the West Twin Theater down at the beginning of October to give the place its first real renovation since it opened back in the late 1970s. The main upgrade is to digital projection equipment, but we can hope the renovation has also upgraded the movie house itself, which over four decades had declined to an embarrassing state of disrepair.

Alas, the rechristened Madison Theatre loses the distinction of being a two-screen cineplex. Evidently we're down to a one-screen house... which is fine, because really, how many good movies are out there?Update 2014.11.13 09:32 CST: Mistake on my part! Cinema manager Carol Frager calls me today after hearing some confused stories about this blog post at the Community Center and tells me that her son Todd Frager has not gutted the interior and consolidated screens. The newly rechristened Madison Theatre still has two screens! But during this first reinaugural week, the Madison Theatre will show just one film.

The cinema grandly reopens with a special early showing of The Hunger Games: Mockingjay Part 1 on Thursday, November 20, at 8 p.m. (for seven bucks!).

Note that this community cultural preservation is brought to you by government intervention, in the form of an economic development loan coordinated by the Lake Area Improvement Corporation. LAIC director Julie Gross says the theater renovation "coincides with the mission of the Madison Downtown and Beyond taskforce, which is committed to enhancing the vitality of the Madison area." Emphasis on Beyond, of course, since the Madison Theatre is located one mile west of downtown, at the back of a gravel parking lot, along a state highway with no sidewalks where kids can ride their bicycles.

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The Governor's Office of Economic Development and Madison's Lake Area Improvement Corporation score another coup, bringing Iowa sexy bra manufacturer Best Darn Guns (should a company really force us to swear?) to town:

Best Damn Guns website, http://bdguns.corecommerce.com, screen cap, 2014.11.13

Best Damn Guns website, http://bdguns.corecommerce.com, screen cap, 2014.11.13

In a brilliant example of vertical (or is it horizontal, or cross-your-heart?) integration, the LAIC announces it is also bringing the closely associated Wilt Manufacturing, whose subsidiary Wilt Wire and Fabrication does something with Wire EDM, which is obviously connected to the the supporting industry of making underwires.

Or not. Once I get past the crass and gratuitous disembodiment and oversexualization of the female body, I realize Best Darn Guns makes gun parts. But their advertising makes clear the real psychology behind South Dakota's gun nuttery. Carrying guns and now building local economic development makes us real men and gets us action.

Welcome to South Dakota, Best Darn Guns and Wilt Manufacturing! We look forward to your billboards.

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Republican U.S. Senate candidate Mike Rounds repeated in Thursday's SDPB candidates' debate that his EB-5 program brought over $600 million and over 5,000 jobs to South Dakota. Aberdeen attorney Rory King, who provided legal counsel to bankrupt EB-5 project Northern Beef Packers, says Rounds drew $400 million and created "directly or indirectly" over 8,000 jobs.

Journalist Bob Mercer questions all of these fat numbers being thrown around to distract from the malfeasance committed under Rounds's administration of EB-5. He reviews available data and concludes Rounds's and King's numbers are exaggerated at best:

There weren’t “over 5,000 jobs created.”

Instead, there might be just hundreds of new jobs, many of them in dairy operations in the I-29 corridor and at the casino complex in Deadwood.

And there might have been hundreds of jobs preserved — but that we really don’t know, at least not at this time [Bob Mercer, "Analysis: EB-5 Jobs Data Highly Elusive," Aberdeen American News, 2014.10.24].

Voters, Mercer comes to the same conclusion I came to last month from real South Dakota jobs data: there is no hard evidence to support the claims Mike Rounds is making about EB-5's economic benefits. In other words, voters, Rounds is telling you things that he can't prove are true.

Related Reading: Meanwhile, by Denise Ross's diligent calculation, Joop Bollen may have generated $13 million for himself in fees from running EB-5 through his private company while he was still on the state payroll and operating from a state-funded office in 2009. Stay tuned!

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Campaign manager Rob Skjonsberg has had an awful time explaining away his boss Mike Rounds's foibles. Now he has to explain his own. The Nation's Lee Fang discovers that Skjonsberg used his position on the state Board of Economic Development to funnel taxpayer dollars to a company he and Rounds have invested in.

In 2012, Skjonsberg formed Lake Sharpe Investments, which invests in new companies. Mike Rounds had over $50K in Lake Sharpe Investments in early 2013. Lake Sharpe has invested in Novita LLC, a company hoping to build a plant near Brookings to produce oil and livestock feed from ethanol processing by-product. (Remember, Skjonsberg worked for Poet Ethanol.) In September 2013, Novita got a $771K grant from the Board of Economic Development. And Skjonsberg, appointed to the Board of Economic Development by Governor Dennis Daugaard in January 2013, voted for that grant.

Read that back: a guy invests in a company. Guy gets on public board. Guy votes to send public dollars to that company. Guy has a conflict of interest, right?

Conflict of interest. No member of the board or the GOED staff may participate in or vote upon a decision of the board concerning an application in which that member has a direct personal or financial interest. [South Dakota Administrative Rule 68:02:09:13].

Skjonsberg turns Republican relativist and says there's just a perception of a conflict of interest:

I am a member of a LLC. That LLC is subsequently invested in a separate fund. That separate investment fund, twice removed, has their own independent management and they make their own investment decisions. I am not fully versed on the investments, now three times removed, made by this separate fund—but nonetheless I’ve come to understand that the perception of a conflict has arisen. I’ve advised both the commissioner and the board chair that I have taken steps to ensure the perceived conflict is avoided in the future [Rob Skjonsberg, in Lee Fang, "Revealed: A New Ethics Scandal Involving the GOP’s South Dakota Senate Candidate," The Nation, 2014.10.23].

John Tsitrian sees through that relativism and challenges Skjonsberg to explain how voting for that grant and two extensions for Novita's construction delays is anything other than a conflict of interest. But we know Skjonsberg's style from the Rounds Senate campaign: he'll probably just ask to change his answer but still expect never to be held accountable for violating the public trust for his personal benefit.

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I have contended that in allowing Joop Bollen to privatize South Dakota's EB-5 program, Mike Rounds sacrificed a key competitive advantage that we had over other private EB-5 regional centers.

Robert Stratmore, head of EB-5 recruiter Darley International, agrees. In his testimony on Day 2 of the Darley v. SDIBI arbitration hearing last April, Stratmore said that the association of our EB-5 agency with the state made it easier to recruit Chinese investors for South Dakota projects:

I actually was quite attracted to the fact that not only was it Northern State University but that it was the state of South Dakota and that would give a leg up for credibility in China that it would be a mandate that was given from the federal government to a state government [Robert Stratmore, transcript, Darley v SDIBI arbitration hearing, 2014.04.29].

EB-5 chief Joop Bollen pressed this advantage even after completely privatizing the EB-5 operation, as indicated by Chinese press material from October 2010.

If we accept Mike Rounds's thesis that EB-5 is a good program, if we accept the idea that raising capital from foreign investors more interested in green cards than business results is healthy, then we should expect state government to run the EB-5 program as competitively as possible. Yet Mike Rounds gave up the official state control of EB-5 that an EB-5 recruiter said would draw more EB-5 money.

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In responses to reporter Bob Mercer's questions about South Dakota's EB-5 program, Mike Rounds downplayed his involvement in the EB-5-promoting South Dakota International Business Institute and his interaction with SDIBI director Joop Bollen:

[Mercer]: EB-5 began for dairy development in South Dakota in 2003. What was your role in that decision?

[Rounds]: I was aware of the desire to expand the federal program beyond dairy development.... I wasn't involved in the transactional details — but I did agree with the concept to create those jobs and diversify South Dakota's economy.

...[Mercer]: Joop Bollen was in charge of EB-5 and dairy development while he was employed at the South Dakota International Business Institute at Northern State University. How did you come to know him?

[Rounds]: I was aware of Mr. Bollen's early efforts to expand dairy development in South Dakota, and I have always been supportive of dairy development in our state. Direct interaction was limited updates on SDIBI's efforts came by way of staff reports [Bob Mercer, "Rounds Answers Reporter's Questions on EB-5 Scandal," Black Hills Pioneer, 2014.10.02].

Once again, Northern State University counsel John Meyer's sworn testimony in the Darley v. SDIBI arbitration contradicts Rounds's claims. On Day 3 of the Darley arbitration hearing, April 30, 2014, Darley attorney Jennifer Elkayam asked Meyer about several letters of agreement between SDIBI and the Governor's Office of Economic Development from 2005 to 2009. These letters laid out the economic development activities, including EB-5 visa investment recruitment and management, that GOED expected SDIBI to perform.

[Elkayam]: Can you explain, to your understanding or if you know, why GOED would not directly engage in these activities that SDIBI is called upon to perform under these letters of agreement?

[Meyer]: Well, I would say, in terms of the history of that office, these functions would have been performed by personnel employed within Tourism and State Development located in Pierre, but what happened was Joop Bollen was loaned under this cost reimbursement structure to GOED, and that's how SDIBI got involved

MS. ELKAYAM: I'm sorry. You said "loaned"?

THE WITNESS: "Loaned."

MR. [Darley Attorney Max] BLECHER: "Loaned."

MS. ELKAYAM: "Loaned" [transcript, Darley v. SDIBI JAMS arbitration hearing, Los Angeles, CA, 2014.04.30, pp. 484–485].

This loan piqued the interest of the arbitrator, the Honorable Robert A. Baines:

[Baines]: ...Who initiated this loaning process? Is it something that started at GOED and came to SDIBI for help, or was it the other way around where SDIBI proposed to the State Department that it would do these functions for a certain amount of money for the State?

[Meyer]: Judge, I don't know firsthand, but I, in my own mind, know what happened. I believe that idea came from the governor of South Dakota.

[Baines]: Okay.

[Meyer]: And I believe, based on a statement that Joop Bollen mentioned to me once, that he had gone down and interviewed with the governor.

I believe that's where that came from. So it would have emanated from the governor through Tourism and State Development and GOED to Northern --

[Baines]: Uh-huh [Darley v. SDIBI, 2014.04.30, p. 486].

Uh-huh. Mike Rounds says he was "aware" of the things SDIBI did. John Meyer says Mike Rounds had the idea that sent SDIBI down the EB-5 path. Mike Rounds says he was "aware" of Joop Bollen's efforts but interacted only indirectly, through staff reports. John Meyer says Mike Rounds interviewed Joop Bollen personally in Pierre to get the program going.

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