While economic development dominated Governor Dennis Daugaard's State of the State address yesterday, the Daugaard Administration continued to scramble back from its emblematic economic development failure, the EB-5-visa-backed Northern Beef Packers plant in Aberdeen. Bob Mercer reports that the state Board of Economic Development voted yesterday to cancel a five-million-dollar loan guarantee the state had made to NBP in 2010.
The tight-lipped, closed-door board declined to explain why it canceled the loan commitment, or why the state offered that deal to NBP in the first place and extended it last year into 2014.
The Board of Economic Development appears to be catching up with the Economic Development Finance Authority, which canceled an unused twenty-million-dollar loan guarantee to Northern Beef Packers last September. (Northern Beef Packers is on EDFA's agenda Thursday as well.) That $20 million was predicated by the amended credit agreement that the state's EB-5 visa agent, SDRC Inc., run by Joop Bollen, imposed on Northern Beef packers in 2010 and 2011. Bollen, acting on behalf of the Governor's Office of Economic Development, gave NBP access to up to $60 million in a second round of EB-5 investment dollars. But that cash, which only postponed NBP's collapse by a couple of years, came with numerous strings. Below are strings 8.1.11 and 8.1.12:
To get this EB-5 money, Northern Beef Packers had to obtain another $20 million in loan guarantees from the state and federal governments. If the Daugaard Administration had not extended these loan guarantees, the SDRC-NBP credit agreement would have canceled the EB-5 investment, leaving NBP broke and a few dozen Chinese investors with no visas. Once NBP went broke on its own and the EB-5 investors from 2010 and early 2011 had gotten the conditions taken off their EB-5 visas, the state could safely extricate itself from its loan promises.
The $5 million the state Board of Economic Development canceled yesterday wasn't bound up in the SDRC-NBP credit agreement. As Scott Waltman reported back in July, that $5 million from BED was separate from the $20 million swung through EDFA (the alphabet soup is getting thick!). Both loan commitments would have run out on March 1, just six weeks from now. NBP's bankruptcy sale hasn't been finalized, and creditor-buyers White Oak Global are probably too busy looking for real buyers who might actually chop beef to bother asking the state for a loan to restart operations. But the state is probably wisely cutting all of the strings that might drag any more state money down into Northern Beef's black and profitless pit.
One thought is that the loan (and loan guarantees) related to the marketing of the securities to the overseas investors-similar to the (now vanished) claims on the SDRC website that the State of South Dakota was involved in reviewing and monitoring the EB-5 projects. What it did was imply that the investments were safe and secure because the State was backing them up.
Now that SDRC is no longer marketing securities with the blessing of the State and NBP is bankrupt, there is no longer any need to maintain the "commitment" or illusion of State backing which was never likely to be funded, yet must be shown as a contingent expenditure on the books of the State. With a new budget being put together, the Governor needs to restore the 10M to the available cash side of the ledger.
That South Dakota business climate says that if you think the State is backing it, might disappear when you need it. Thinking short term rather than long term is as bad a business friendly policy as there is.
Not sure of the dates involved, but I believe the investment has to be viable for two years in order for the eb5 program administrators to remove restrictions on the visas for them to become permanent. So it would seem that the people that got Jooped into investing within the two years of the bankruptcy filing may SOL on permanent visas. Don't imagine that does much to improve our business image with the chinese
Looks like Daugaard locked the barn door after the horses where stolen or in this case the Visa's
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Hey Cory, you should read Montgomery's article today regarding Daugaard denying that he knows anymore than the public does regarding the EB-5 scandal. Yeah right, governor.
South Dakota can coin it's own less racially offensive term for gypped,named in honor? of Joop Bollen. The meaning can remain the same,but you can feel superior to surrounding states that don't have "jooped" in their vocabularies. An added benefit is the fact it will automatically be tied to the ethically challenged, rethuglican party of South Dakota, forever. I believe Stephen Colbert is on the line. :)
The Rapid City Journal is reporting today that in addition to the $5 million loan cancelled yesterday, a final loan guarantee of $8 million for NBP was cancelled. What was that? I don't recall seeing that figure.
One of these days Jenny, we may get to the bottom of this of what who knows and when they knew it. The good folks over in New Jersey have been listening to their bloviating bully speak of not knowing anything about a bridge deal and now, we are seeing the drip drip drip of the truth coming out. I think the deal in New Jersey though has more precedence than millions disappearing out here in fly over country by interesting dealings between the state and the Chinese. I also wonder how future dealings with the Chinese are going to go when they know how we do things here regarding business.