With 34 minutes to spare, someone walked into a state government office Thursday in Pierre and delivered a check that could stave off the repossession of a former state-owned juvenile detention campus near Custer.
The check was for $116,588, which includes interest plus the amount of an annual payment that SLIC-e Holdings was supposed to have paid to state government on May 1, per the terms of a contract of sale.
Ryan Brunner, the state’s commissioner of school and public lands, said the check was handed to him at 5:26 p.m Central time, ahead of the deadline of 6 p.m. Central (5 p.m. Mountain).
“We will not be repossessing the property tomorrow,” Brunner said Thursday evening. “We will wait and see if the check clears or doesn’t clear before taking any further action.”
Brunner said he does not know how long it will take to determine whether the check is good.
Had the check not been delivered by Thursday’s deadline, Brunner was prepared to file repossession paperwork. He had already followed a process spelled out in state law that gave SLIC-e Holdings a three-month grace period after the company missed its payment May 1, followed by delivery of a default notice and another 30-day grace period. The 30-day period ended Thursday.
In January 2018, SLIC-e Holdings was the only bidder and submitted the minimum bid of $2.34 million for the state's former STAR Academy campus during an auction in Custer.
The company’s contract with the state required a series of payments totaling $351,000 by May 1, 2018, and it took the company until that day to fulfill those payments, Brunner said. The money went into a state trust fund, where it generates interest for the Department of Corrections, which formerly managed the property.
The contract then required annual payments of $115,801.21 beginning on May 1 of this year.
Brunner said Thursday that just prior to the arrival of the May 1, 2019, deadline, the company gave him a check and asked him to hold it until an expected wire transfer came into the company’s account. But Brunner said the wire transfer never came, and he obliged when the company asked him not to cash the check.
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At the end of the three-month grace period, according to Brunner, he asked for another check and was given one, but that check bounced. Brunner said he then proceeded with the default notice and the final 30-day grace period.
Brunner said the person who delivered the check Thursday is an investor in SLIC-e Holdings, but Brunner declined to identify the person, saying he was not sure if he was legally able to disclose the person’s identity.
The only person identified on SLIC-e’s publicly available corporate filings is Jared Carson, of Custer, who served as the company’s president but told the Journal on Wednesday that he no longer has any active role with the company. Carson said he signed a non-disclosure agreement that prevents him from publicly identifying any investors in the company.
The campus of the former STAR Academy is about 5 miles south of Custer. It dates to 1911, when it was the site of a sanatorium for tuberculosis patients. It was later converted to a state hospital for severely disabled people and was converted to the State Training and Rehabilitation (STAR) Academy in 1996.
The academy was closed by state government in 2016 following juvenile-justice reforms that resulted in a dwindling number of children at the facility.
In 2017, the Legislature and then-Gov. Dennis Daugaard passed legislation authorizing a sale of the property. The sale was opposed by some legislators and members of the public who said state-run juvenile detention facilities were still needed, and said the state’s criminal-justice reforms had passed the burden of juvenile behavioral problems on to schools and local governments.
The campus measures 173 acres and has a collection of buildings totaling 168,880 square feet. A first auction of the property in October 2017 drew no bidders, and the second auction drew an overflow crowd of about 75 people to the Custer County Courthouse but produced only the one bid from SLIC-e Holdings.
When the company purchased the property, it announced plans for an “ecologically minded, clean-air, light industrial project” and “a place for economic development” for the Custer community. The company's name, "SLIC-e," stands for "Sustainable Light Industrial Complex and energy."
Carson said Wednesday that there are tenants on the property, including about a dozen artists who have studios and a joint gallery, a barbecue restaurant, a woodworking business, and a digital marketing and media company.