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Capital One leaving Sioux Falls is the latest failure of Crony Capitalism

Yesterday Keloland reported that 750 employees in Sioux Falls will be losing their jobs:

Capital One tells KELOLAND News it's shifting its call center strategy.  According to Julie Rakes, director of external communications, this will "allow us to become nimble, flexible and scalable to meet our customer needs." 

"We have made the difficult decision to close our Sioux Falls site by the end of 2015 and will be moving the work to our other locations within our network," Rakes said.

750 employees will be affected. The company says employees can apply for other jobs within the company or it will help employees find new jobs and will also offer severance packages.  At one time Capital One had 1,000 employees in the Sioux Falls office.  

Pat Costello from the Governor's Office of Economic Development tells KELOLAND News that he received a phone call Wednesday from Captial One notifying the state it would be closing its Sioux Falls operations.  

Capital One says its had too much turnover and a hard time filling open positions.   Capital One says it will set up an on-site Career Development Center to help employees with resume writing and interview skills to find new jobs.

"We're very dissapointed to hear that Capital One will be exiting the market.  We understand and respect the decision of the company and all businesses, large and small have to evaluate their business plans and operations from time to time and make decisions that are in the best interest of their stockholders," Costello said.

And Capital One stockholders can thank South Dakota taxpayers who gave them $200,000:

In 2011, Capital One aquired HSBC and announced it would add 400 jobs in Sioux Falls.   The South Dakota Governor's Office of Economic Development offered Capital One a $200,000 grant to help with the cost of training new workers.

Previous Story: Capital One Financial Corp Adds 400 Jobs

Don't expect a thank you note from Capital One stockholders. They will just take the money and run.

Only "smart communities" would take money away from taxpayers and give to big corporate special interests in order to create jobs that are not needed. I wonder how much the GOED offered Capital One to not make the decision to leave South Dakota? I wonder if the Governor will now spend less of our taxes on subsidizing  recruiting costs for private business interests, since we have 750 less jobs to fill? Perhaps someone should tell the Blue Ribbon task force that we can pay teachers more by paying corporations less by stop subsidizing their expansions via TIFs and other so-called economic development grants, by stop subsidizing their recruitment costs, and by stop subsidizing their training costs.

But that won't happen, since the task force is being driven by "stakeholders", or better known as "special interests". I am sure the Blue Ribbon task force will instead come up with more ways to tax the citizens of South Dakota. Then the South Dakota legislature will rubber stamp it next session.

ACLU of South Dakota confirm that the SCOTUS just established a New Age Theocracy

Cory Heidelberger is promoting the ACLU's effort to force Christians who work for the government to accept their worldview, or get lost:

Last week, Attorney General Marty Jackley told public employees that they could choose not to issue marriage licenses to couples their religion tells them not to like. I responded that upholding the Constitution (as now explained by Obergefell v. Hodges) and doing one’s job is not optional for public employees.

Today, the American Civil Liberties Union of South Dakota weighs in on my side… or, more appropriately, on the side of the rule of law. In this letter to AG Jackley, the ACLU says public employes must serve all Americans impartially...

and...

The ACLU notes that all public officers in South Dakota swear an oath, prescribed by SDCL 3-1-5, “to support the Constitution of the United States and of this state, and faithfully to discharge the duties” of their office.

Through the democratic process, the people of South Dakota voted to provide only for marriage between a man and a woman. So Cory, who often promotes democracy, says it is okay to ignore a democracy when it comes to enforcing his worldview onto others.

What the SCOTUS did was use the 14th Amendment to destroy the states' right to enforce its Constitution, which are suppose to be guaranteed by the 10th Amendment. The ACLU is now using that ruling to take away First Amendment religious rights of Christians.

What we now have in authority is a New Age Theocracy:

The overall approach to gender and sexuality within the New Age represents the movement's rejection of what it considers mainstream religion's negative assessment of sexuality, alternative gender and sexual identities, and the place of women. This approach follows the movement's overall approach of looking to itself as an inversion of the Piscean Age. New Agers critique western monotheists, and particularly Christians, for considering sexuality sinful and dirty, devaluing female sexuality, and enforcing a rigid heterosexual patriarchy.

What the Civil War did was not end slavery, but instead resulted in the 14th Amendment which has been used to destroy the original Constitution and we are now all slaves to the New Age Theocracy. Roger Cornelius explains what will happen to those who don't go along:

It is likely there will be a test case in the future if the Jackley’s of the country don’t absorb the ACLU’s opinion.

Welcome to the New World Order's Theocracy.

Cabela's and Walmart pushing wages down in Davison County, and below what teachers are paid

The hot topic currently in South Dakota is teacher pay. In 2013 teacher pay in South Dakota averaged $39,580 while the average across America was $56,383. Recently, the Mitchell Daily Republic reported similar data for all of South Dakota wage earners:

In 2014, working in South Dakota earned the average employee about $12,500 less per year than the rest of the country. If you work in Davison County, annual wages were approximately $3,000 less than the statewide average. However, a representative with the S.D. Governor's Office of Economic Development (GOED) cautioned that these numbers only look bad on the surface.

"In South Dakota, the real buying power, after you take out taxes and cost of living, your dollar goes much further than it does in most of the country," said Aaron Scheibe, GOED executive director. "Even if they're being paid more per hour, people in South Dakota are able to enjoy a better quality of life because they can purchase more with their money."

Do you suppose the economic development promoters and the business sector are saying that at the task force addressing low teacher pay? And is it really true, that our cost of living makes up for the lower pay? I found one source that says South Dakotan's paid 2.7% less in taxes than the national average. That amounts to a little over $1,000 annually and a far cry from the $12,500 drop in pay. So is South Dakota's housing, food and other costs $1,000 less per month than the national average?

Certainly  the cost of living in Davison County is not $3,000, on average, less than the rest of South Dakota. But what is interesting is the reason why Davison County's income is $3,000 less that the state average:

Davison County has an average annual wage even lower than the state's, but Mitchell Area Development Corporation's Executive Director Bryan Hisel said average wage doesn't tell the whole story.

"We're probably pulled down in the median income information because of the character of I-90 and the amount of really good retail stores that we have in our community," said Hisel. "But because of competitive factors, those are not high wage positions."

So that admission by Mitchell's economic development czar does not help make the argument that Cabela's was good for all of Mitchell, or even most who live in Mitchell. Earlier I pointed to Ball State study that said Cabela's did not increase employment. Now we are being told that Cabela's lowered the average pay in the Mitchell community.

Hisel then makes this statement:

"Retention and expansion is our bread and butter right now," said Hisel. "Building local companies with local ownership is the best way to build a high quality business."

Well, Cabela's and Walmart are not local companies. But to his credit, Roger Musick is a local company guy and his business was mentioned by Hisel:

Recently, the Mitchell Area Development Corporation has promoted the broadband infrastructure to attract businesses and expand existing businesses and create more high-paying jobs. Hisel said Innovative Systems, Vantage Point Solutions and Larson Data Communications have seen steady growth that is often under-the-radar for much of the community. These professional and technical service positions pay an average of approximately $47,000, but make up only 3.4 percent of workers in Davison County.

What Hisel did not mention is that technology is how business lowers their labor costs. With technology, business can produce more with less employees. Not sure if that is all that smart for those who argue that we need more jobs. And we have Roger Musick admitting on this web site that the purpose of Cabela's was to raise taxes for the City of Mitchell. Big government subsidizing big business in order to grow both. The result is $3,000 less pay for the blissful servant class who pay taxes.

Clearly the Mitchell Area Development Corporation is good at using taxes to subsidize its plans, but its plans have not been good for the masses. And we have the state economic development director promoting more deception:

Scheibe attributes low unemployment to a friendly economic environment, which features no corporate or business inventory tax, allowing companies to hire more employees. Davison County, in particular, has taken advantage of the favorable business climate, with unemployment rates dropping to a yearly average of 2.8 percent in 2014.

Yes, South Dakota's economic development movement wants to keep business taxes low. But when we need more funds to fix roads and bridges, they have no problem increasing taxes on their employees and customers by raising license plate fees, raising sales tax on cars, and adding more taxes on at the pump. These extra taxes are being paid by those who have those low paying jobs at Cabela's and Walmart. The business interests are using tax dollars to subsidize their expansions, making money off of low paid employees, and then they don't expect to pay the taxes needed to transport their goods.

What we are seeing here is the crony capitalists using big government to take from the blissful servant class and but those funds into the pockets of the Master Class. And only 3.4% of that servant class in Mitchell can be thankful to be only $4,000 below the national average in what they make. But for the average Mitchell wage earner, your pay is about $1,000 less than, on average, what a teacher makes working nine months in South Dakota.

I bet the Blue Ribbon education tax force will find ways to increase teacher pay by not taxing the business interests, but instead add taxes that mainly impact their customers and employees. That is what happened during the last legislative session in regard to funding roads. And keep in mind that this is for an education system that has been converted from providing the citizens with an education, to a system that is now focused on providing off-the-job training so business no longer have to spend as much on training.

City of Mitchell trying to redirect Davison County taxes into the pockets of Puetz Corporation through TIF

On Tuesday the Davison County Commissioners refused to extend a TIF to Puetz Corporation:

The Davison County Commission denied a request to delay the payoff date for the tax increment financing district plan for apartments at Mitchell Technical Institute.

The commissioners, holding a regular meeting Tuesday at the Davison County North Offices in Mitchell, voted 5-0 against the plan, primarily taking objection with the developer, Puetz Development LLC, of Mitchell, attempting to use the discretionary formula to pay for future year's taxes.

And one of the commissioners correctly points what I have been saying on this blog:

The commission wasn't very receptive to the idea, saying that using the discretionary formula and a TIF district runs the risk of "double-dipping" on incentives. They were also displeased with changing a project plan that had already been approved.

"You're changing it midstream," said Denny Kiner, who said he saw it as "breaking the original contract."

Deputy State's Attorney Jim Taylor advised the commission on the two main points used in the denial, saying the original plan didn't call for discretionary formula treatment and that the change would keep tax revenues away from the general fund for two extra years.

The proposal was approved by the Mitchell TIF Finance Committee April 21, and the Mitchell City Council approved the request for an abatement of taxes during its June 15 meeting. Commissioner Randy Reider expressed frustration about the city redirecting county property taxes.

So the City of Mitchell use of TIFs for economic development purposes ends up being a shift of monies from the taxpayers and into the hands of private business interests. In this case it is Puetz Corporation, whose was recently awarded a $14 million contract for a fine arts center for the Mitchell public schools that was 15% over budget.

David Swenson from Iowa State has done extensive research that says TIFs are not justified based on economics:

Proponents of this practice must look beyond economic principles to justify the practice, to include:

• The use of TIF authority enticed private investment that otherwise would have been indifferent to the community;

• The TIF authority is being used to substantially change or diversify the local economic structure as part of a comprehensive effort to raise area standards of living, stabilize a community, or address important social issues like pervasive unemployment or underemployment; or

• The TIF authority provides local investment “match” funds to be used to leverage state or federal aid.

These reasons may make sense at the local government level, but they are difficult to justify using economic principles on several grounds.

• There is little evidence to support the assertion that local incentives actually determine business locations. In fact there is a growing amount of research indicating the vast majority of businesses would have otherwise located in the “winning” jurisdiction, nonetheless;

• There is also precious little evidence indicating that local economic development activities substantially alter overall regional economic opportunities – the ability of a community to influence broad economic factors is limited; and

• Communities have many alternative economic development program abilities allowing them to substantially address business needs for infrastructure, to provide targeted and limited tax breaks, and to generate resources that might be used to leverage state or federal funds. These include existing general obligation bonding authority, capital reserve funding, and itemized budgeted amounts for those purposes.

• Finally, principles of intergovernmental fairness would question the legitimacy for taking other governments’ property tax collections in the name of economic development objectives.

Many communities in Iowa have suffered from losses in downtown commercial activity, industrial re-location, and population stagnation or loss.

And the negative impact on downtown Mitchell and the north side mall and other retail establishments due to the I-90 corridor development is discussed in an earlier post.

Cory Heidelberger is also covering a proposed I-90 corridor development at Spearfish:

Predictably, the developers aren’t just buying the land and making profit-magic happen. They are hoping for taxpayers to bear much of their costs through a business improvement district, tax increment finance districts, and public-private partnerships. The TIF might be not only the usual property tax arrangement, in which any additional tax revenue created by the development goes to pay off the developers’ construction loans instead of toward public works, but also a sales tax deal that would allow businesses in the new development to divert their sales taxes toward their expenses as well. Arrgghh!—are there no true capitalists left?

The Spearfish developers cite Cabela’s in Mitchell as an example of TIF and other taxpayer subsidies promoting economic development in South Dakota.

And this isn't just a natural free market response to customers' wants and needs. This is part of a "plan":

Local developers are proposing the Dakota Meadows project. The project isn’t just another housing subdivision, but a development designed to draw people to the area with amenities to include an indoor hockey arena that could host other sporting events and trade shows, a 322,000-square-foot outdoor lifestyle shopping center, three hotels and restaurants, an outdoor sports complex, a furniture store, a school, a travel center, and 400-500 acres of home sites near the intersection of Interstate 90 and Highway 85 at Exit 10 [Mark Watson, “$210 Million Development Proposed for Spearfish,” Black Hills Pioneer, 2015.06.30].

The taxpayers are being asked to fund a plan that have been no part of. Most of the benefit will be going to those who have been involved with the plan. That planning is done behind close doors or in informal settings so that the public, that is now being asked to help fund it, are in the dark.

Like Puetz Corporation in Mitchell, it will be a small number of business interests who will garner most of the benefit as they have inside knowledge of the plans and thereby have an advantage over the rest of the community. And as I have already covered, Ball State has research that says such types of economic development does not increase employment. The increase is the amount of money business owners have in their pockets.

This is the result of crony capitalism, which is not an economic system that uses a free market system to enhance competition. It instead picks winners and losers determined those who are members of the Chamber and Development Corps. These are non-governmental entities that include elected governmental officials on their boards, and that is how the informal "public/private partnerships" are formed. There is also research that warns about corruption in such relationships. I am not saying that the people involved are corrupt. I am saying the system creates legalized corruption by well intended people who believe they are doing the community good. Based on the three linked sources of research in this post, I argue that they are wrong. The competition is not where it belongs. The competition is for who can get the most out of the taxpayers. One community wins, all the other communities lose. And in the winning community, there are those who will also lose.