South Dakota attempting to lure Minnesota businesses
Friday, February 22, 2013
Over the years, a steady trickle of Minnesota companies have been coming to South Dakota because of its favorable business climate, but that might turn into a gusher if Gov. Mark Dayton's plan to increase taxes on Minnesota businesses becomes law.
At least that is what business leaders in Minnesota fear, according to an Associated Press story.
The increased business taxes would boost Minnesota's personal income tax rates from eighth to fourth highest in the nation, behind only Hawaii, California and Oregon, according to the story.
That makes Minnesota vulnerable to other states, such as South Dakota, which are consistently recruiting in the state for businesses.
"It is not really that we are trying to steal businesses from Minnesota," said Pat Costello, commissioner from the South Dakota Governor's Office of Economic Development. "However, when Illinois or Minnesota starts raising taxes, it just makes us look even better."
One of the office's recruiting tactics is to send postcards to business executives. One of them has a photo of Gov. Dennis Daugaard on the front with a phone to his ear saying, "Tired of Taxes? Call Me."
The back of the card lists the lack of taxes in the state:
• No corporate income tax.
• No personal income tax.
• No personal property tax.
• No business inventory tax.
• No inheritance tax.
Costello said the process of recruiting is continuous and involves relationship building.
"Most of the time it takes years before it comes to fruition," he said. "That is especially true for small, mid-size and family businesses. It is a tough decision for them."
The easiest move is for a company to open a branch office or additional factory in South Dakota, he said.
A good example of that is Minneapolis-based Twin Cities Fan. The company first opened a facility in Brookings and then one in Aberdeen. Another plant is now planned for Sioux Falls which will employ about 100 people.
Some of the companies the governor's office has recruited in the past year are Eagle Creek Software to Pierre, Aber Tech to North Sioux City and Worthington Ag Parts to Sioux Falls, Costello said.
One of the biggest recruiting successes was the landing of the Bel Brands cheese plant in Brookings, said Costello. The $100 million-plus plant, which is under construction, is expected to employ about 400 workers. Bel Brands is an international company with headquarters in France.
"Whenever we are recruiting, it is usually a combined effort of the local economic development groups and the state," he said.
Aberdeen has had good luck in attracting Minnesota-based businesses, said Chris Haar, director of operations for the Aberdeen Development Corporation.
"Just look at our industrial park and you can see a strong Minnesota influence," he said. "We have 3M, BAE Systems and Twin Cities Fan. I think it is because of our location and also that we do offer a very favorable business climate."
Neither Haar nor Costello would predict if increased taxes in Minnesota would lead directly to more businesses coming to South Dakota. However, both said South Dakota's favorable business environment will continue to be a strong selling point for recruitment.
"There is no question that companies are interested in us because of our healthy business environment," Costello said. "We have a low tax and regulatory structure, a great work force and a balanced state budget. A lot of it goes back to the balanced state budget. States in debt are forced to raise taxes. In South Dakota, we stay consistent. That is very attractive to businesses. A business wants to know that its business plan will work within a certain tax structure, and they don't want the rules of the game to keep changing."
In May, the Governor's Office of Economic Development will launch its annual Minnesota Blitz Day, Costello said. Daugaard and other state officials will travel to Minnesota to meet with prospects interested in opening businesses in South Dakota.
While the office works to attract businesses from other states, it spends most of its time working with South Dakota companies on retention and expansions.
"About 70 percent of our efforts are with South Dakota companies," Costello said. "People lose sight of that. It is easier to recruit and retain within our state then to get businesses to move to us."
Picking up a business and moving to another state is not easy, which is one of the reasons Minnesota businesses might not rush to leave the state. They do have plenty of opportunities to do so, however, and not just to South Dakota.
Wisconsin Republican Gov. Scott Walker said he might "put a little bit more of a push" into luring Minnesota companies, according to the AP story. Walker has already put Wisconsin "Open for Business" billboards along Minnesota borders, and now he is pushing for more business tax relief.
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