Grant County on the move!
Wednesday, March 05, 2014
This article was featured in the Grant County Review written by Deb Hemmer.
Grant County’s economy in 2013 was robust according to sales tax figures posted on the South Dakota Department of Revenue’s website.
Big Stone City, LaBolt, Revillo and Milbank all showed healthy increases in revenue received through sales tax as compared to 2012 numbers.
All the statistics used in this story are based on numbers obtained from the state’s website and not the actual numbers that city finance officers may have. The numbers compiled on the website are derived from the sales tax forms that businesses must submit monthly.
The preliminary figures may differ slightly from the dollar amount actually received by the cities. However, they do paint a fairly accurate picture of a healthy economy in the county.
Showing the biggest percentage jump in sales tax revenue was LaBolt which experienced a 304 percent increase from $5,121 in 2012 to $20,703.40 in 2013.
Revillo’s sales tax receipts rose from $14,751.06 to $19,902.69 or 34.92 percent while Big Stone City jumped 23.57 percent, from $214,378.78 to $264,909.09.
In the county’s biggest city, Milbank, a 14.48 percent increase was realized in sales tax revenue, from $1,834,072.52 to $2,099.586.63.
“We are definitely up in sales tax revenue,” said Jason Kettwig, city administrator. “This is the highest it has ever been in recent years. The year 2009 had been the highest year prior to 2013.”
Construction is the main driving force of the thriving economy in the county.
In Big Stone City, not only was there an increase in funds spent on construction work within the city, from $868,837 to $1,059,101, but retail income was up by $728,268.
A major portion of the retail increase can be attributed to the large construction project currently in progress at the Big Stone Power Plant.
The plant is outside the city limits, therefor the sales tax from the project is not included in the city’s sales tax revenue. However, the workers on the project are spending funds in the small community.
“We have some workers stopping in twice a day,” said Karen McFarlane, who with her husband, Jim, owns MacDaddy’s on the west edge of the city. “They stop in the morning for coffee and to pick up snacks. At night they will return to buy gas and beer.”
The business started selling gas three years ago and for the 15 years prior to that there was not a gas station in the town.
The store’s staff has also been cooking a few burgers over the noon hour to provide for the workers. The business runs a restaurant during the summer season and will start offering its full menu February 28.
In addition, workers buy groceries at the convenience store. “Our biggest sellers are the individual cereal boxes and a pint of milk,” revealed Karen. “It is an easy mid-morning snack.”
Kitty-corner from MacDaddy’s, the Big Stone Motel is also benefitting from the laborers in town. “We have a few guys that have been here all winter and that is unusual,” said Gail ?Hudson, owner. The motel has 15 units and closes down four units in the winter months.
In addition to those staying long-term at the motel, others have rented rooms while looking for alternate housing in the area. There are also guests who come for just a short amount of time to work on the project and then leave for another project elsewhere.
Both business owners have had good experiences with the workers. “They are fun to get to know and are very friendly,” said McFarlane. “Graycor (the contractor) doesn’t put up with anything and supervises the employees to make sure they are conducting themselves appropriately. They don’t want the company to get a bad name.”
Not only is Hudson impressed with the workers, she noted that the workers are impressed with the area. She has heard many comments stating how nice the area and the people are and that they wouldn’t mind living here. “The boys, that’s what I call them, would stick around (Big Stone City) if we had a few more amenities. But we don’t have enough houses or restaurants,” observed Hudson. “When workers call to book a room, the first thing I tell them is that we are a rural community and if they have special needs they should bring it with them as they might not be able to get it here.”
Hudson noted the employees are hard workers and have not presented any problems. “They are in bed by 9 or 10 o’clock. You can’t work that hard and go out and raise h---,” she declared.
According to Deb Wiik, mayor of Big Stone City, the construction has had a good impact on the city. “It is good to see the workers here and it is not just the workers,” she revealed. “Their families come to visit and they go out. I see a lot of them in stores and restaurants.”
The influx of workers has not increased the city budget much. “There will always be some added expense when you change things up, but everything is fine,” noted Wiik.
Otter Tail Power company did provide a lump sum of money to the city to help with any added expenses it may incur because of the construction project.
The city council chose to use the funds to add part-time police officers. “When you have more traffic, you need more policemen,” said Wiik.
The city had just one police officer and he was responsible for the coverage of the town 24 hours a day and seven days a week. “One person can’t do it all and we felt he needed a little help,” observed Wiik. “However, we haven’t had a lot of major problems.”
Workers from the project have also been utilizing the Milbank hotels. According to Rob Holmquist of the Manor Motel and Brenda Block of the Super 8 Hotel, both establishments have housed workers.
“It has slowed down because of the cold weather, but for awhile we were full,” said Holmquist. At least 10 of the 30 rooms in the hotel were being utilized by power plant workers earlier this year. Holmquist anticipates more business once the weather warms up.
Holmquist has owned the hotel for four years and commented that he has been full every summer since taking over ownership. “We have had a good mix of guests, from hunters and fishermen to construction workers to people visiting relatives in town,” he revealed.
The Super 8 Hotel is seeing more short-term customers. “Normally winter can be desolate in the hotel, but we have seen an increase in business. There seems to be new people always coming,” observed Block.
People arriving to take employment tests at the plant site will utilize the hotel. ‘They will come to town because they have to take a welding test,” said Block. “They will arrive the day before and if they are hired they will stay a few days before they find other housing. If they aren’t hired, they move on.”
It is not just laborers staying at the Super 8. “Employees representing companies involved in the project will stay when they have meetings to attend,” Block noted.
The rental market in Milbank has also improved. Kettwig owns several rental properties in the city. When he took ownership of a 12-unit property he noted that just two units were rented.?“Now all the units are full and I have a waiting list,” he revealed. Many other landlords are experiencing the same thing. The project at the power plant has added a boost to the county economy, but in Milbank much of the increase has come from major commercial construction projects.Three permits were issued for commercial projects in 2012 and that number jumped to 11 in 2013.
Funds spent on construction in Milbank rose from $1,240,958 in 2012 to $2,332,551 in 2013, an increase of more than $1 million. Included in those figures are plumbing, heating, air-conditioning, carpenter and concrete work provided by contractors. However, construction also boosted retail, wholesale and services provided numbers.
Some of the projects include a new warehouse at Valley Queen Cheese Factory, a new Runnings store on the east Highway 12, an addition to St. William’s Care Center, a new building for J.J. Earthworks in the industrial park and a new structure for Living Word Church north on Highway 15, in addition to other projects.
Valley Queen Cheese Factory saw the amount of sales tax it paid increase $75,322.44 to the figure of $315,435.81. That accounts for 28 percent of the $265,514 the city saw in increased sales tax revenue in 2013.
“We are a big taxpayer and I don’t think that is always recognized,” said Mark Leddy, CEO of Valley Queen Cheese Factory. “The amount we pay in sales tax impacts Milbank in a very positive way. This is sales tax paid by Valley Queen, not collected from our customers.”
Because the plant is situated within the city limits, the city realizes the benefit. “In counties where facilties are set up outside city limits, the cities don’t see the tax benefits that Milbank does,” said Leddy.
For example he cited the city of Aurora where an ethanol plant was constructed outside the city limits. The state receives sales tax proceeds, but the city itself does not.
According to figures supplied by Leddy, sales tax per capita in Milbank is double that of other similar sized cities. Much of that can be attributed to the fact that Milbank does have a manufacturing plant such as Valley Queen within city limits.
Sisseton had a sales tax per capita of $395.29 and Madison $366.92 while in Milbank it is $625.91. Those are numbers based on 2010 sales tax collections and population.
“We do pay sales tax and people often miss this point,” stated Leddy. “They realize that sales tax comes from the buying of groceries, shoes and clothing, but often sales tax received on construction work is forgotten.”
Valley Queen’s 2013 sales tax increase can be attributed to the construction of a new warehouse, refurbishing of several buildings on Main Street and a new whey project started in the last quarter of 2013.
The factory is adding equipment to produce a whey product that is 80 percent protein. They currently produce whey which is 24 percent protein.
According to Leddy, there is a big consumer demand for the high protein whey which is used in infant formula and health drinks. The company has two to three new customers for the product and expects much of it to be exported while some will be used domestically.
New equipment to produce the whey will be housed in existing floor space. A dryer was converted and membranes added to further refine the whey.
Two silos costing $100,000 each will also be installed. The cost does not include installation fee. The company paid $4,000 in city sales tax on the silos and another $8,000 in state taxes.
Adding staff also benefits the community. The company has gone from 116 employees in 2004 to 217 in 2013. “We have been stable with the number of employees in the last two or three years,” observed Leddy. The company is taking on younger workers. Employees of Valley Queen had 125 school-aged children in 2004, that number has increased to 195 school-aged children in 2013.
Milbank school enrollment figures show that the trend of dropping enrollment has stabilized and in fact, in the last two school years enrollment increased slightly.
More students means less down-sizing of staff at the school, thus keeping people in Milbank employed and aiding the economy.
Unfortunately, not all construction was beneficial to city businesses. The replacement of the overpass on Highway 12 this summer had an adverse affect on businesses located along the highway.
Steph and Jim Trevett, owners of Trevett’s Cafe, reported a 35 percent drop in business during the six months the road was closed.
“We had a lot of workers from the crew stop in to eat, which helped,” stated S. Trevett. “However, we didn’t see our elderly crowd and some of our regulars. It was a tough summer.”
Business rebounded after the road opened, but then the cold weather set in and another drop in patronage was experienced. “We are waiting for spring,” she said. Greg Thomas, owner of Food-N-Fuel, also saw a drop in business. “I could tell as soon as they closed the intersection,” he acknowledged. “Business was down about 15 percent during the month of June.”
Thomas is uncertain how much of the drop was because of the construction, because he had shut down his pizza department to prepare for an expansion. He enlarged his cooking area and opened the Back Door BBQ.
Business has returned to normal and also increased in the last few months of 2013. “I hope the BBQ is helping drive more traffic, but it is too new to tell at this point,” observed Thomas.
The road construction did have some positive impact as housing was needed for the workers. The contractors put workers up in houses and some workers stayed in hotels. Both the Manor Motel and Super 8 Hotel rented out rooms to crew members.
Construction dollars were up in Milbank, but so were the numbers in the retail sectors. The motor vehicle category which included dealers, auto and home supply stores and gasoline service stations saw revenue increase from $7,906,284 in 2012 to $8,208,197 in 2013.
Grocery, bakery and miscellaneous food stores revenue increased from $13,599,505 in 2012 to $14,182,990 in 2013.
Revenue for miscellaneous retail stores such as drug, liquor and floral shops saw an increase from $6,398,408 in 2012 to $7,048,435 in 2013.
Bars and restaurants also shared in the prosperity with figures showing an increase from $5,893,261 in 2012 to $6,132,554 in 2013.
Since the economy took a nose dive in 2008, much of the nation has had to deal with high unemployment numbers and what economists consider the worst recession since the Great Depression in the 1930s.
Although the financial crisis did have an effect on South Dakota and Grant County, it was not as bad here as it was in other areas of the nation.
Unemployment hit 10 percent nationwide in October of 2009, but South Dakota was just 4.7 percent at the time and Grant County, 3.8 percent.
Grant County’s unemployment did rise to 7.2 percent in February of 2009, but by May of 2009 it had already dropped to 4.6 percent.
The national rate was 6.7 percent in December of 2013 and 4.8 percent in Grant County. Unemployment was just 3.6 percent in November of 2013. “It would have been a lot worse had the farm economy not stayed strong through the years,” was the opinion of Kettwig. The strong farm economy was driven by rising commodity prices. Nationally, the average price for a bushel of corn was $3.75 in 2009, but it rose to an average of $6.67 in 2012. It dropped to $6.15 in 2013.
Soybeans averaged $9.97 in 2010, but hit an average of $14.07 in 2013. Wheat was $5.12 in 2010, and rose to $7.60 in 2012. The average dropped to $7.31 in 2013.
Here in Grant County, corn was $7.04 in August of 2011; $7.00 in December of 2012 and $6.67 in June of 2013. The current price is $4.01..Soybeans were $12.78 in May of 2011; $15.70 in December of 2012 and $14.83 in June of 2013. Current price is $12.83. Spring wheat was $10.06 in May of 2011; $8.74 in October of 2012, and $7.90 in June of 2013. Current price is $6.96.
While construction was strong in 2013 in the cities, the rural areas saw a large increase in construction in 2012.
In the rural areas of Grant County, permits were filed in 2012 for six new houses, seven garages, six grain bins, one barn, two house additions, one shed addition and one feeding building.
In addition, permits were filed for 40 buildings such as machine, pole and storage sheds. The number dropped to 19 in 2013.
Eight new houses were constructed in 2013 and nine house additions were permitted, but permit numbers dropped in all other areas.
Bob Biersbach, store manager at Titan Machinery in Milbank, revealed that the company saw increased business in 2013. “When commodity prices are good and interest rates low it is always positive in farming and in any other business,” he noted.
He observed that the increase was extending into 2014 and hoped it would be as good as 2013. “We are a little bit ahead, but so many things impact the farming industry such as weather patterns and grain prices,” he acknowledged.
Agriculture is a key source of income in rural communities with elevators usually the major employers and largest businesses in towns such as LaBolt and Revillo.
The LaBolt Farmers Elevator recently erected a new agronomy plant. Construction started in 2012 and finished in 2013. That resulted in added sales tax revenue for the town.
Revillo figures showed construction revenue was $424,805 in 2012 with a major project at the elevator the main source.
Construction revenue dropped to $52,858.22 in 2013, but wholesale trade rose to $725,808.86 in 2013. That figure had been $83,881.27 in 2012. This accounted for some of the increase in the sales tax revenue for the city.
The construction projects in the county have boosted the economy, but whether it is sustainable into the future is unknown.
“The amount we pay on normal purchases is fairly steady from year to year,” noted Leddy. “However, the factor that really moves this number is what we pay on our capital expenditures. The year we undertake a large project, the tax we pay jumps. If we don’t have a large project, the number we pay shrinks.”
This applies to any business that expands its operations. The city in which the business is located will see a rise in sales tax revenue, only to see it drop back down to the normal range after construction is completed.
According to Bobbie Bohlen, executive director of the Grant County Development Corporation, there are two critical areas for continued growth and sustainability in Grant County.
“The most important, I believe, is workforce. We need to be proactive in our recruitment efforts,” stated Bohlen. “That is important for both retention and expansion of new businesses. Recruitment has to start inside borders. We need to be recruiting and sending a message to our students that we have great opportunities here.”
Leddy is of the same opinion. “We have to be much more proactive,” he acknowledged. “We have to get more aggressive collectively to bring young people into the community. Recruiting is an ongoing challenge. The community has many good selling points, but it doesn’t sell itself.”
According to Bohlen, that is the second piece of the equation, marketing. “We need to refine our message,” she noted. “At the end of the day, the single most important thing that we can do for growth is to take care of the existing businesses and do everything we can to help them grow and expand.”
Category: Construction, Sales Tax Revenue