Proven Tactic
Loosening local laws to attract out-of-state business is a proven tactic for South Dakota. In 1981, it lured Citicorp’s credit-card business — and hundreds of jobs — from New York by becoming the first state to repeal limits on interest rates. Other lenders followed. The credit-card industry, along with a boom in farm profits, help explain why Sioux Falls’ unemployment rate of 2.9 percent is less than half the national average. Pockets of poverty persist in American Indian reservations in the state’s midsection.
So far, the trust industry’s contributions to state coffers have been modest. Without an income tax, South Dakota doesn’t get revenue directly from the trusts. Companies like McDowell’s pay franchise taxes on their earnings, a levy that raised about $1.2 million last year, according to the state Department of Revenue, out of a state budget of about $4 billion.
‘Worth It’
Nor has the industry become a major employer. The state estimates that about 100 South Dakotans work for locally chartered trust companies. Then there are an unknown number of jobs in local trust units of national banks such as Wells Fargo & Co. (WFC), and more work for local law firms and accountants. The trusts aren’t required to hire local money managers or invest in local businesses. By comparison, a typical Wal-Mart Supercenter, of which there are two in Sioux Falls, employs about 350 people.
“If you’ve got several hundred well-paying jobs, it’s worth it to us,” said Governor Dennis Daugaard, a Republican who used to travel to Minneapolis pitching tax-saving trusts when he worked at a bank in Sioux Falls. “It also gives us the opportunity to develop relationships with people who have the ability to encourage business here of other sorts. Now, I can’t point to a single case where that’s occurred yet, but I think it’s possible.”