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Madison Gives Away One Million Tax Dollars to Custom Touch Homes

Last updated on 2013.06.26

Discover the Unexpected... government transfer of wealth....

I knew it! The dog ordinances on Monday's Madison City Commission agenda are a ruse to distract us from the corporate welfare our commissioners plan to hand out. Madison is taking sales tax dollars away from homebuyers and other towns to subsidize one local business, Custom Touch Homes.

Scroll down to pages 37–43 of the May 16 agenda packet (I'll include screen shots below) and you'll see the scheme Custom Touch, the City of Madison, and the Lake Area Improvement Corporation have cooked up.

Right now, Custom Touch builds homes at its factory on the south side of town. Per state law, homebuyers pay sales tax on their new domicile where they take possession, at the point of delivery. If you buy a Custom Touch house and have Custom Touch plunk it down in Madison, you pay Madison sales tax. If you put that house in Sioux Falls, you pay Sioux Falls sales tax, not Madison's.

Madison made $14,086.21 in sales tax on Custom Touch houses delivered in Madison in 2010. 2% municipal tax means $2K on a $100K purchase, so that's five, six, maybe seven houses out of the dozens(?) of houses Custom Touch sold last year. Much more went to other communities and even other states.

Madison wants more, and Custom Touch is apparently happy to oblige. In deals with the Departments of Revenue in South Dakota and other states where they do business, Custom Touch has arranged to collect and remit all sales taxes in Madison. Every sale will thus generate 2% for Madison.

To return the favor, Madison plans to split the extra sales tax revenue with Custom Touch. This lucky private business will get a rebate of one half of this enhanced sales tax revenue for the next ten years, or until the cumulative rebate reaches one million dollars.

Follow the money here, people: right now, if Custom Touch sells a $100,000 house to someone in Sioux Falls, Sioux Falls gets $2,000 and Custom Touch gets $100,000. If Madison's city commissioners o.k. this sales tax rebate, then Sioux Falls gets bupkis. Madison gets $1,000. Custom Touch gets $101,000. Taxpayers outside of Madison subsidize a boost in pure profit for a Madison business. Clever!

Under this deal, Madison creates the illusion of doing more business. One big-ticket house sale will count on our ledger, not Sioux Falls's or Howard's, and will replace hundreds of lost sales at Dakota Drug and Books and More. Again, clever!

Madison does put conditions on this rebate. Custom Touch must create 50 new jobs over the next three years. They must also report regularly to the city on their job growth and maintenance. Funny that the City will set benchmarks for Custom Touch to get its tax subsidy, but it has never set similar job creation benchmarks for the LAIC to get its taxpayer dollars. Hmm... maybe this sales tax rebate program will set a good precedent after all....

Custom Touch gets a million for 50 jobs; that's $20,000 per job. Superior Homes, 20 new jobs this year should get you $400,000. Start lining up at City Hall! Show Mayor Hexom that your company can create even five new jobs, and he'll write you a check for $100,000... funded entirely by draining other communities' tax bases.

Madison City Resolution and Agreement authorizing Enhanced Sales Tax Rebate for Custom Touch Homes, presented May 16, 2011. Click images to enlarge.
Custom Touch-Lake Area Improvement Corporation-City of Madison sales tax rebate resolution, p.1 Custom Touch-Lake Area Improvement Corporation-City of Madison sales tax rebate resolution, p.2 Custom Touch-Lake Area Improvement Corporation-City of Madison sales tax rebate agreement, p.1
Custom Touch-Lake Area Improvement Corporation-City of Madison sales tax rebate agreement, p.2 Custom Touch-Lake Area Improvement Corporation-City of Madison sales tax rebate agreement, p.3 Custom Touch-Lake Area Improvement Corporation-City of Madison sales tax rebate agreement, p.4

7 Comments

  1. moses 2011.05.14

    CH great stuff but lets keep on the subsidy queen to see when she can meet and have a town meeting .I have several seniors who want to come and we will have an open forum get back to me so PLEASE CONTACKTTHE PARTY OF NO TO SEE WHEN SHE CAN COME.

  2. Charlie Johnson 2011.05.15

    First of all, is this new directive from the SD dept. of Revenue backed by statute. Much of my sales taxes as a farmer is spent at Campbell Supply. Perhaps I should get together with Les, Dan, Annette, and Andrew. Then proposed that we threaten the city of Madison with having all of my supplies delivered to my farm-outside of city of madison. Campbell Supply gets to keep the 2% as a delivery tip. Better yet they split the 2% with me for thinking of the idea. We are too kind here. We need to call this sales tax scheme for what it is---a KICKBACK. You know the kind that organized crime, mafia, and corrupt officials use in real life and in the movies. We have too many needs and services everywhere(not just madison) to allow this kind of giveaway. We have taxes to fund services not for corporate welfare.

  3. RGoeman 2011.05.15

    Better yet, Charlie...Let's propose that Gehl charge sales tax on every skid steer built here in Madison, regardless of where it is sold, split the tax with Gehl and the City. Now that's some big dollars!

  4. John Hess 2011.05.15

    Best not to prejudge. Let's first hear what they have to say after we lock up all those nasty pit bulls.

  5. Steven Kant 2011.05.16

    Does anyone know why Custom Touch is allowed to park all their homes on the road in the industrial park? Just curious.

  6. Wayne Pauli 2011.05.16

    My understanding was that the houses were allowed to be parked their waiting for load limits to be removed from the highways so that they would then be delivered. At least that is what I was told at Rotary a few weeks ago.

  7. Chris Johnson 2011.06.16

    Well maybe we could at it from a “doing business the right way” stand point. They are building ENERGY STAR qualified homes. The last one we, Johnson Environmental, tested had a HERS rating of 48, which transfers into saving $1,885 a year on utilities. At that rate 50 homes in 50 years saves those tax payers $4,712,500.00!!! But, the 2% sales tax on the utilities would be $94,250 in that 50 years. Many states offer tax breaks for energy efficiency maybe this is SD’s way of doing it.

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