A new initiative to promote livestock development is being touted by state officials as a creative incentive and derided by critics as state-sanctioned bribery.

The initiative, administered by the South Dakota Governor’s Office of Economic Development, offers county governments the chance to receive hundreds of thousands of dollars each time they approve a new permit for a large feedlot, dairy, hog confinement or other concentrated animal feeding operation, known as a CAFO.

Kathy Tyler, a Democratic former legislator and member of the grassroots organizing group Dakota Rural Action, is among the program’s detractors.

“I basically consider it bribery to the counties,” said Tyler, of Big Stone City.

Cory Heidelberger, author of the Dakota Free Press blog, has criticized the initiative several times in writing. In one blog post, he wrote that state government intends "to pressure counties into abandoning their zoning regs and approve all the factory feedlots that come a-calling."

Joe Fiala, community development director for the Governor’s Office of Economic Development in Pierre, defended the program.

“We want local control to continue without any changes. We are not inserting ourselves in those local-control questions,” Fiala said. “If a county sees livestock development as a fit, we’re excited to work with those counties that want to utilize the program.”

The initiative is a new twist on two programs that have existed since 2013. That year, the Legislature and then-Gov. Dennis Daugaard, a Republican, created a package of economic development programs known as Building South Dakota.

Among the programs are the Reinvestment Payment Program, for projects costing more than $20 million, and the South Dakota Jobs Grant Program, for projects costing less than $20 million. Fiala said both programs offer qualifying companies a rebate of the sales and use taxes they pay while constructing new or expanded facilities in South Dakota.

The administration of Republican Gov. Kristi Noem recently began offering new program terms for livestock projects. The new terms allow the developers of livestock projects to assign their tax rebates to a county government, if county officials approve a conditional use permit for the project.

The Governor’s Office of Economic Development explained its rationale in a May 13 news release announcing the initiative: “Last year, counties turned down millions of dollars in capital investment related to livestock development.”

The news release gave no examples, but instances of rejected CAFO projects in South Dakota abound. Just last month, a zoning board in Gov. Noem’s home county of Hamlin denied a conditional-use permit for a 10,000-cow dairy.

In some cases, when county zoning laws require conditional use permits for CAFO projects, public hearings on permit applications draw opponents who express concerns about odors, noise, environmental damage and other problems associated with CAFOs.

Tyler said those concerns could get overlooked by county officials who might be eager to reap a revenue windfall.

“It’s going to be really frustrating, because now you’ll be fighting the state,” Tyler said. “Before, you were just fighting locally. Now, it’s going to be the big guys versus the little guys.”

In addition to local permits, state water pollution control permits are required of CAFOs that exceed certain sizes while confining or feeding animals for 45 days or more in any 12-month period. There are 448 permitted CAFOs in the state, mostly east of the Missouri River.

In hopes of adding to that tally, the Governor’s Office of Economic Development has recently been presenting details of the new livestock initiative to county governments and other groups.

At a presentation to the Pennington County Commission last month, the GOED included a hypothetical example of a $10 million project. Perhaps $5 million of such a project’s costs would be taxable, the GOED officials said, resulting in $225,000 in sales and use tax revenue for the county. No strings would be attached to the county’s spending of the money.

Gary Drewes, a Pennington County commissioner, said he does not think the enticement of sales-tax revenue will unduly influence county officials.

“We’ve got to make a decision when somebody brings a project forward, and we’re not going to base that total decision on whether or not the project will generate tax dollars,” Drewes said.

Another critique of the initiative comes from state Sen. Troy Heinert, D-Mission. He is concerned about the legality of a program that captures sales-tax revenue intended for state government and reassigns it to counties, which rely on property taxes and cannot levy sales taxes.

“I don’t think it’s legal,” Heinert said. “GOED needs to rethink that.”

Heinert also said state government should do more to help smaller-scale farmers and ranchers, rather than CAFOs.

Fiala said he is open to discussing Heinert’s concerns.

“We are all about economic development, no matter the size,” Fiala said.

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Contact Seth Tupper at seth.tupper@rapidcityjournal.com

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