Press "Enter" to skip to content

Start Business in Sturgis, Dodge Property Taxes for Five Years

Just west of Exit 30, after witnessing the roadside glory of Sturgis, I-90 motorists see an invitation to shirk their civic duty by building their business in the Sturgis Industrial Park. As if the natural splendor of Vanocker Canyon isn't enough, the billboard promises, "No Taxes for Five Years." The official deal applies throughout Meade County: no property tax on new commercial structures or renovations over $30K, including four-plex housing units.

I understand the argument economic developers offer for such business tax breaks: new businesses create jobs. Those new workers buy more stuff, which produces more sales tax revenue. Those workers may also buy or renovate houses, thus boosting property tax revenue. The county can afford to give the business a tax break, because the county will capture some of that new wealth through trickle-down effects.

This formula has flaws, of course. In the especially mobile Northern Hills, Meade County gives up tax revenue for benefits that will accrue in Butte, Lawrence, and Pennington County. Workers will commute to Sturgis, put in their 40 hours for their new tax-dodging employer, and haul those paychecks home to Belle Fourche, Spearfish, Lead, and Rapid City. Sturgis, Piedmont, and Blackhawk residents enjoying those paychecks will export another chunk of that wealth when they go shopping at Walmart, Target, and Safeway outside Meade County. Neighboring counties get free benefits from Meade County's sacrifice.

So do the business owners who bite on the no-tax billboard. Meade County maintains the roads that bring the businesses' employees in and carry their goods out. Meade County pays for the police who keep marauders from Whitewood (eyepatches! cutlasses! Arrrr!) from pillaging their shops. Meade County pays firefighters who will rush in to stop those businesses from burning down.

Let's explore the question this way: Who deserves to get out of paying taxes? South Dakota refunds some taxes to folks in deep poverty, but those beneficiaries have to demonstrate their need. Does a businessperson who can put up a million-dollar manufacturing plant really need to skip paying property tax?

Or try this angle: if a person erecting a new commercial building and thus providing the social value of more jobs and economic activity deserves a pass on taxes, then what other providers of social value deserve a break? Teachers give kids skills they can use to create jobs and economic activity; should Meade County exempt teachers from property tax? (Sub-question: by that logic, do science teachers deserve a bigger tax break than French teachers?) Advertising agencies come up with the slogans and billboard designs that draw business to Sturgis; should Sturgis give advertisers a free pass on sales tax for local purchases? Workers in general make possible the economic contributions of every business in the Sturgis Industrial Park; should we simply strike all of those workers from the tax rolls as thanks for their clocking in each day?

Businesses are not the sole creators of social value. If businesses deserve a break from shouldering their burden of the cost of civilization, then so do workers. Then again, if businesses and workers already receive compensation for the value they create through sales and wages in the free market, do we really need more compensation from the government, on top of the value government provides through roads, schools, police, and other public services?

18 Comments

  1. Bill Dithmer 2013.07.05

    "Who deserves to get out of paying taxes? South Dakota refunds some taxes to folks in deep poverty, but those beneficiaries have to demonstrate their need. Does a businessperson who can put up a million-dollar manufacturing plant really need to skip paying property tax?"

    The answer of course is nobody should get out of paying taxes. That's what throws everything out of wack in the first place. If one person gets out of paying their taxes, that means everyone else has to pick up the tab for that person.

    With the exception of disabled vets who have paid both their and our taxes many times over and in return have gotten screwed for their service nobody should get a break.

    People with kids should pay more then those that don't. If not, someone else is paying for you to raise your kids. If you don't pay enough in taxes to put your children through school every year then that amount of money should be spread out for the next twenty years until it is paid off. Or if you don't want to go that rout let those that have never had kids in the system cut the amount of taxes that are put into education. Nothing more fair then that is there?

    The Blindman

  2. Owen Reitzel 2013.07.05

    I'm on the city council and on the Developmental Corp in the small town I live in. We have attracted a company that will soon build here and 5 years down the road will employ 41 people. The benefits that this company will bring to our small community are enormous. This company also didn't ask for a tax break on their property taxes. In fact the only thing they asked for was being annexed into the city for sewer and water.
    What the Developmental Corp. and an anonymous donor has done is to help the company buy the land and the city will invest approximately $65,000 to get sewer and water to them.
    This is example of a city and people in the community investing in the future of our town of 600.
    The company had other choices but the CEO liked our school and the people in our town. As it should be.
    If a company asks for special tax breaks it should raise red flags-at least in my book. The question that should be asked of the company who wants a 5 years tax break is what happens after 5 years?
    In my case the company I used to work for that got incentives and tax breaks left after 7 years.
    If a company truly wants to open in a city they'll do it without incentives.

  3. caheidelberger Post author | 2013.07.05

    Bill, at peril of stars-and-stripes blasphemy, why single out disabled veterans for special treatment? Why not moms injured in childbirth? Without the sacrifice of soldiers, moms wouldn't have the chance to raise their children in liberty... but without the sacrifice of moms, we wouldn't have soldiers.

    Owen, good work! It sounds like your town in on the right track. I wonder: could we ever count up the percentage of new businesses a town would lose if it offered no incentives, then figure out the losses that would come from those incentive-only recruits who would come, milk the community for those incentives, then leave when those incentives dried up?

  4. Owen Reitzel 2013.07.05

    " I wonder: could we ever count up the percentage of new businesses a town would lose if it offered no incentives, then figure out the losses that would come from those incentive-only recruits who would come, milk the community for those incentives, then leave when those incentives dried up?"

    Good question Cory. I think the problem you have in a of of these cities and politicians who are willing to sell their souls for short-term gain. Sure the politicians look good and can brag about what they've done. In our situation we gave incentives by our choice and the this company didn't ask for anything.
    What I would like to see is for somebody (the state) to so a study to see what happens to companies after, lets say 5 years, who get incentives. Are the companies still in business or not?
    Basically are the incentives cities give out really worth it.

  5. Bill Dithmer 2013.07.05

    "Bill, at peril of stars-and-stripes blasphemy, why single out disabled veterans for special treatment?"

    That's simply Cory. Because we owe a debt to those soldiers , "one that our country isn't paying now," and we owe nothing to those moms. Those are their kids, not the publics kids. Kids like pets are your responsibility, not those around you.

    While the vets commitment was to the protection of this country, what they brought back from doing their service will last forever. Those children will not add to the general financial welfare of their communities or the country until they reach the age of 18 when they are legally on their own and can get work, if there is any.

    If having children is a right, then paying for what those kids need while growing up should be a part of that right.

    Two things here. I don't mind paying a little for your kids to get a proper education, but when 80% of my property taxes go towards education while I have to donate gravel for eight miles of road that runs by the front of my house graveled something's not right. I might add that this road was one of the first recognized mail routs in the county, and that goes back more then eighty years.

    One more thing and then I'm through. I am very anti war unless it is to protect us from a direct threat to those that live here. Having said that, I support our military even when our leaders get us into bad situations that seem stupid to the rest of us. Those people do the jobs that most of us can't or wouldn't do.

    "Why not moms injured in childbirth? Without the sacrifice of soldiers, moms wouldn't have the chance to raise their children in liberty... but without the sacrifice of moms, we wouldn't have soldiers."

    I'm sorry Cory there isn't any way to compare the two. People will always reproduce, if you want to have kids that's the risk you take "four yourself and your mate." If you go into the military, you risk everything not just for yourself but for every person that lives in this country.

    "moms injured in childbirth" their problem
    "disabled veterans" all of our responsibility and one that most people aren't taking seriously now.

    The Blindman

  6. Bill Dithmer 2013.07.05

    Owen that would be a great study for an economics class at one of our universities wouldn't it?

    The Blindman

  7. caheidelberger Post author | 2013.07.05

    Bill, permit me to remain on this shaky limb. What if the soldier's sacrifice produces no net gain for the general welfare? What if the solider helped lose a battle, or participated in a war (might our three most recent be examples?) that were net negatives for U.S. military and economic security?

    Now, just to make sure, Bill, are you saying we should repeal the child tax credit? Are you saying that parents contribute no value to society by raising children?

  8. caheidelberger Post author | 2013.07.05

    Owen, maybe your local economic development group and local government could cooperate with neighbors on recruitment and on sharing benefits. Consider this note from Ezra Klein on Minneapolis's relatively strong jobs numbers:

    "Three decades ago, the regional governing body set up the Fiscal Disparities Act, which created a tax revenue-sharing agreement for a seven-county area. That facilitates regional cooperation in attracting companies–something that the tri-state Washington D.C. area struggles with, as each jurisdiction tries to steal companies from its neighbor."

    Hmmm... cooperation over competition? I suppose it would be tough to extend this principle across state borders, since states would be more loath to share revenues with each other. But could it benefit the Alexandria-Fulton-Emery-etc. metroplex?

  9. Bill Dithmer 2013.07.05

    "Bill, are you saying we should repeal the child tax credit?"

    Why not make them spend that money that they saved by getting that tax break for the education of their children instead of other things? Sounds about right to me because I don't have any kids for the rest of you to educate.

    "Are you saying that parents contribute no value to society by raising children?"

    Not if they have to do it on my dime. Just think about this. Would there be near as many children born if their parents knew that they had to be responsible for every detail of that child's development without the rest of us having to help out every step of the way?

    The only way what you are saying makes sense is if like Israel we have a draft and every single person serves, no excuses. It doesn't look like that will be happening any time soon.

    This is no different then if your family went out to eat every week, and someone else had to pick up the tab for eighty percent of the check each time. You ate, your family ate, but someone else had to pay for most of the food and the service.

    We will never see eye to eye on this subject because you are getting something for a lot less then what I'm paying for nothing.

    Oh and that little thing about the education being good for the community, well we wouldnt have to worry about it if the parents paid for the education would we. When the future leaves the community those educations that were paid for are lost to that community. Then the people that are helped are again the parents because they no longer have to support those that have been educated anymore, those people are gone.

    The Blindman

  10. Rorschach 2013.07.05

    This is an interesting thread for me. I have always thought that taxpayer funded incentives like this tax break are a bit like a shell game. They don't produce anything extra for the public that pays for them because they just move business from one place to another for no net gain. The only way they would produce a net gain is if they helped create a business that would not have started someplace anyway.

    The redeeming quality of this Sturgis tax break is that it applies on an equal basis to everyone. Contrast that with the issue going on in Ft. Pierre where in one development several businesses built without tax breaks and now the city wants to give tax breaks to other businesses in the same development (and deprive the public of a vote on the issue). That's clearly government favoritism using taxpayer money.

    The best policy would be to do away with special taxpayer-funded deals and put in place an advantageous tax and regulatory system for business (which I think SD has) and focus our public efforts on a well-trained workforce and quality of life amenities. If Sturgis quit offering tax breaks and used revenue from those taxes for community improvements, the city and her people might be better off and more attractive to businesses.

  11. caheidelberger Post author | 2013.07.05

    R, Meade's tax break may be a little better than Ft. Pierre's—indeed, it appears to avoid favoritism. But someone who established his business in Sturgis before the five-year-tax-free policy was implemented could feel a little miffed at newcomers getting the tax break. Of course, existing businesses can take advantage of the tax break for renovation and expansion, so that eases some of the newcomer-envy.

  12. caheidelberger Post author | 2013.07.05

    Bill, we do all sorts of things on each other's dimes, because we recognize the shared value we all derive from certain things. Public education is not mooching.

    But before I lead us to far astray discussing veterans, moms, and teachers, let me refocus my question to you, Bill: do any businesses deserve tax breaks? Do any businesses contribute value to the community that is not fully rewarded by market forces?

  13. Bill Dithmer 2013.07.05

    "Bill, we do all sorts of things on each other's dimes, because we recognize the shared value we all derive from certain things."

    Of course we do, but not at the tune of 80% of one tax paid. That tax just happens to be property taxes where other things also have to come from besides school. Do I get that much value from my property taxes when it comes to school? Nope.

    "Public education is not mooching."

    No mooching is when you bum a smoke from someone on a regular basis and never pay for it. Everyone pays for education. The difference is that when there are people that have kids they get a break when those of us that dont have children have to pay more then our share. You have to admit that those that have kids in the system are getting way more for their tax dollar then those that never had any kids.

    "But before I lead us to far astray discussing veterans, moms, and teachers, let me refocus my question to you, Bill: do any businesses deserve tax breaks? Do any businesses contribute value to the community that is not fully rewarded by market forces?"

    If it is a business it is controlled by market forces. That is of course unless it's a church. In that case they are moochers.

    I would guess before I could answer that question I would have to know which taxes.

    Property taxes for start up businesses? NO not for any business no matter where they are.
    City sales taxes? NO
    City utility taxes? NO
    Or are you talking about a business outside the city limits?

    The Blindman

  14. Deb Geelsdottir 2013.07.06

    I have a couple of examples of how this can work, or flop:

    A few decades ago, St. Paul made a tax deal with Macy's to open a store in downtown. (Downtown StP seems in a constant struggle to lure and keep businesses.) Part of the deal was that Macy's had to stay there until at least 2010. They did. Even though business became deteriorated, Macy's fulfilled their legal contract.

    The MN metro didn't want Northwestern Airlines to merge with Delta. NW paid several thousand paychecks in MN. Delta is based in Atlanta. Delta promised MN and the FAA that they would not move operations out of MN. There was nothing in a contract about that and within 18 months they were all gone.

    Moral of the stories?

    Get it all in ironclad legalese. Don't trust the bastards, especially the ones who don't seem like bastards at all.

  15. caheidelberger Post author | 2013.07.06

    Location doesn't matter, Bill. I'm talking about tax breaks for a business from whatever governmental entity has authority over it.

  16. caheidelberger Post author | 2013.07.06

    Hear, hear, Deb! In business and government, write it down!

  17. Bill Dithmer 2013.07.06

    Cory I dont know of a business like that.

    The Blindman

  18. Rod Hall 2013.07.07

    Why not come to Mitchell for a Davison County TIF for 20 years? You even get the Joe Graves' permanent school opt-out for 20 years!

Comments are closed.