Sunday, December 4, 2016

Memo to South Dakota's Governing Class: Keep Yer Pickle-Packin' Hands Off IM 22

South Dakota has a motto.  It's Under God The People Rule.  It isn't "under the government the people rule." It's "Under God."  Atheists and non-believers alike understand that to mean that the
Under God The People Rule
Get It?
people of the state are the ultimate source of authority when it comes to how things operate. Seems pretty plain, simple and straightforward to me, but seeing the apoplectic and apocalyptic reaction to last month's passage of the sweeping government reform measure (IM 22) that will change the way business gets done in Pierre, I wonder if our elected officials need reminding of where power lies in this state.
      opposed the measure here, in my column at the Rapid City Journal, on television and at a public forum. I abhor the fact that it will now require the state of SD to set aside $12 million right away in a public financing of campaigns provision.  The rest of it seems draconian, but for the most part I like that it puts transparency into government operations, creates an ethics commission and severely limits gifts to lawmakers by lobbyists. But, my arguments against it notwithstanding, the people went ahead and passed it anyway.  Oh, well. It's happened 'afore and it'll happen agin'.
     As to the reaction by the entrenched political class in Pierre, 25 legislators and some outside individuals/groups responded with a lawsuit filed in state court challenging the law's constitutionality.  The case is set to be heard this week.  Essentially they're saying that the judgement of the majority of voters in South Dakota was flawed and that they passed a law that in itself is illegal. Governor Dennis Daugaard condescendingly said that voters were "misled" and that they were "deceived" by $1 million in out-of-state money supporting the campaign.  The Governor ignores the fact that more than $600 thousand in opposition money came from out-of-state interests, mainly from the Koch Brothers' Americans For Prosperity organization.  
     South Dakotans who voted for IM 22 have good reason to feel disdained and insulted by
A New Day In Pierre
Like It Or Not
their Governor's cavalier dismissal of their ability to make intelligent judgements in a voting booth. Considering that serious money poured into both sides of the measure and that it got plenty of media coverage, voters were probably as well-informed on this issue as any they've ever had to consider. More to the point, they have strong memories of the blatant corruption and the weak investigation that followed the EB-5 fiasco in recent years, as well as the hideously ineffective oversight that let the Gear-Up scandal happen. People are sick of it, and "Under God" they have spoken.  Our political class should be paying heed, not resisting.  

Saturday, November 26, 2016

Time For South Dakota To Institute An Income Tax

   South Dakota has to find a way to shift its tax burden away from sales taxes to income taxes.  During the last few weeks we've gotten some pretty grim news about how sales taxes this
Why Is This Man Laughing?
We're Way Short Of Cash
year haven't matched up with projections ("sales tax isn't close to generating enough revenues," per a Rapid City Journal report a month ago), meaning that some tough budget-cutting is probably the likely outcome. The always excellent and comprehensive South Dakota Dashboard prepared by the Black Hills Knowledge Network notes that the revenue decline is nearly 2 per cent for the quarter completed last September, which contrasts badly against the 3% growth rate forecast by the state's analysts when the current budget was set last January.  That's a 5% drop from expectations, which is enough to set off the collective "ouch" we've been hearing from Pierre.

    A lot of this has to do with the big drop in agricultural commodity prices during the past couple of years.  USD business prof Ralph Brown told the RCJ that the falloff in farm revenues in South Dakota amounted to more than $3 billion, which reduced the ripple effect to something barely noticeable this year. Our economy just isn't diverse enough to absorb that much of a shock.  BHKN also notes that growing e-commerce sales, which are sales tax exempt, probably had something to do with it.  I'm having trouble getting information on how much those sales amount to in South Dakota, but I have no doubt that they're a factor.
     Consider this: swings in commodity prices make farm state revenues subject to the vagaries of global markets. By now we should have reached a point where
The Current Set-Up
Unfair As All Get-Out, Anyway
dependence
on sales taxes needs to be reconsidered as a primary revenue source.  Throw in the growth of e-commerce and you've got a situation like the present one, where the only surprise is the fact that so many people are surprised.  
     We really need to think about another source of state revenues, which in this case is income.  Even as our sales taxes have turned into a serious floppola this year, median income in South Dakota has been rising.  Though hovering slightly behind the national growth rate during the last 5 years, South Dakota median household income (per BHKN) has nevertheless risen steadily during that period.  Taxes raised from income would have avoided the sudden lurch we're currently experiencing.
      Politically difficult as the prospect of instituting an income tax may be, the sensibility of it seems self-evident.  It's long past time for us to start the conversation about this.  

Thursday, November 17, 2016

SD Democrats: "Now Is The Time To Re-Evaluate Your Basic Assumptions."

     First time I saw that phrase was on the inside of a wooden outhouse at some divinely-forsaken USMC outpost in Vietnam, up by the Demilitarized Zone.  Its provocative challenge counter-balanced perfectly against that most banal of human activities.  Many are the times during subsequent years when it applied to my personal and political
Can SD Dems Go
From This . . .
endeavors--and it came roaring back to mind yesterday when I saw a piece in the Sioux Falls Argus Leader quoting Paula Hawks, the just-defeated Democratic candidate for South Dakota's seat in the U.S. House of Representatives.  

     Hawks was engaging in a public post-mortem over the bi-annual pummeling that SD Democrats had just endured.  She told the A-L that "I think what we've seen in the last year is that what we're doing isn't working.  We do need a shake-up."  The gist of the piece is that Hawks's view reflects the state party's internal disagreement over how many of its woes should be blamed on its current leadership.  As a Republican who wishes we had a more vigorous two-party climate in South Dakota government, I find myself cheering a lot for Dems that I admire, and I put Paula Hawks in the top tier of that list.  But on this issue of leadership I think Hawks is missing the underlying point.  Dems in South Dakota need to re-evaluate their basic assumptions, and they need to do it on three fronts.  
     First they have to settle on an identity.  Yes, they can be the agents of social change (and I'm with them on just about every aspect of that), but they simply must understand that their essential persona has always sprung from the roots of economic justice.  Remember "it's the economy, stupid?" 
     Next they need to tailor a coherent, statewide message that reflects that party identity.  Yes,
To This?
You Bet Your Whatever
there's room for cultural liberalism in their message, but they have to have an overriding economic argument that makes it possible for them to put the conversation into terms like education, healthcare, infrastructure, wages, tax reform and economic growth. That's the stuff that affects people's day to day lives.  For example, though moot now, I was very disheartened by the lack of urgency about Medicaid expansion in the message of Democrats throughout the state.  

     Finally, they must find the means to get their message across.  I've met Co-Party Chairs Ann Tornberg and Joe Lowe and can attest to their abilities and commitments.  They accomplish a lot without the mother's milk of politics--money. Fund raising should be a top priority, beginning now. South Dakota has 170 thousand registered Democrats.  That's a pretty sizable pool of potential donations.  
    Even though money is tight, there's no shortage of ideas and issues that SD Dems can put to work.  Once they resolve their identity crisis a lot of other things will fall into place.  

Sunday, November 13, 2016

Why Do We Need To Turn Spearfish Canyon Into A South Dakota State Park?

 
     Turning a beautiful hunk of federally owned land in Spearfish Canyon into a South Dakota State Park is a bad idea both in terms of the end result and the means by which the deal 
Roughlock Falls
This Ain't Grazing Land
 is being developed. The ride through Spearfish Canyon is on a road (Hwy 14A) that is officially designated as a "scenic byway" by both the U.S. and South Dakota governments, and with good reason.  It's gorgeous. Tourists love it as much as we locals do, and one of the best parts of the experience is the fact that it doesn't have any entrance fees.  According to a list of FAQs answered by SD's Game, Fish, and Parks Department last September 30, that won't change with respect to people driving through on 14A. However, people who want to get off the road for a day and use the 1600 acre segment that gives access to some of the premier assets (Roughlock Falls, Spearfish Falls and all that incredibly beautiful country in between) of the canyon will be in for a surprise.  After takeover and management by the State of South Dakota they can expect to pay what GF&P refers to as "potential fees," as yet to be determined.
     Having had interests in the local tourist biz for many years, I'm a little skeptical about how well this will sit with our out-of-state visitors.  They'll continue to follow the justifiably seductive literature promoting the scenic byway, only to find that when they want to stop at the most pristine point of the trek they'll have to fork over that yet-to-be-determined fee. The unknown fee would also apply to locals.  For context, consider that Custer State Park charges $20 dollars/car for a 7-day pass, Bear Butte charges $6/day. GF&P would do us all a favor by posting what it expects to charge for Spearfish Canyon so that the discussion has a focal point to it.  Meantime, I'm plenty familiar with tourists grousing about entrance fees and don't look forward to hearing people complain about this one.
      And speaking of focal points, what's the deal with swapping state range land at its agricultural value for federal land in Spearfish Canyon assessed at the same use-value?  GF&P
Great For Livestock
Tourists, Not So Much
says that "agricultural value makes sense because it is the best representation of how this land will be used." To which I can only say, "what!?"  That is complete baloney.  Since when does that land in Spearfish Canyon have even the remotest potential for agricultural use?  A bill facilitating this transfer (along with some federal land near Custer around Bismarck Lake) has provisions to ensure a transfer at fair value, but the starting point of arbitrarily creating equivalence between grazing land and Spearfish Canyon doesn't make much sense.  GF&P does a good job at Custer State Park, and I'm sure they'd run Spearfish Canyon well.  But the compelling question is, why do we want to make this change in the first place? We need to see more in the way of projected costs, fees, revenues and a fair comparison of land values before this idea moves forward.  


Addendum from Spearfish Canyon resident Jim Nelson:

Response to Tsitrian Blog re Spearfish Canyon State Park
By: Jim Nelson, Member and Past President of the Spearfish Canyon Owners Assn.

Sir: I am a resident of Spearfish and also an owner/resident of a summer cabin in Spearfish Canyon. I read your blog of Sunday, 13 November in the Rapid City Journal, regarding whether we really need to turn the Canyon into a State Park.
I grew up in Lead, graduating from HS there in 1947, and have fished, hiked, enjoyed the Canyon since old enough to do so, beginning in the 1930’s. I graduated from Yankton College in 1951, during the Korean conflict, entered US Air Force Aviation Cadets and eventually served 31+ years in the US Air Force, retired and worked 10 years for General Electric Aircraft Engines, retired again and later did some consulting work for USAF regarding aircraft engines ownership and management issues. My wife is a 1949 graduate of Spearfish HS and SDSU, 1953. We were able to purchase a cabin in the Canyon in 1987 and subsequently the lot in 1990-1 as Homestake offered the owners the opportunity to buy the land as part of the Homestake/USFS Land Exchange of those years. I served on the Spearfish Canyon Owners Association(SCOA) Board for 9 years, 6 years as Board President(2002-2011).

I am glad to see articles such as yours appear, questioning the need for the State Park in the Canyon. First, let me correct what you may not understand as I read your article. Highway 14A through the Canyon is a National Forest Scenic Byway and a SD State Scenic Byway…it is NOT a National Scenic Byway, such classification being rejected by a Corridor Management Plan(CMP) group convened by the USFS back in 1990 to address how to manage the Canyon with the then-pending sale/transfer of lands by Homestake as they shut down their gold mining operations in Lead and the Black Hills. The National Scenic Byway designation was considered but not applied for, due to the CMP group determining that the Canyon was well-enough known at the time, did not need further national exposure since the Canyon travel/visitation was already high and growing and would continue to grow as the Black Hills became a destination of growing popularity. Thus, the decision was to continue it as National Forest
and  State Scenic Byways.

The CMP was not published as a USFS document, but was printed by USFS as a local report for the participants to use as a guideline for the management of the Canyon, which has been done for almost 30 years now. That CMP group included all the stakeholders in assuming the increased responsibilities for attaining the goal of keeping the Canyon as natural as possible, avoiding commercial developments in the Canyon(beyond those existing such as Cheyenne Crossing Store, Wickiup Campground, Latchstring Inn, Rimrock facilities). Homestake, in their sale of the lots/properties they owned in the Canyon, required the owners to form an Owners Association with very strict Covenants and tasked them to maintain those lots as Homestake had done for a hundred years. Those Covenants are attached to each deed in perpetuity and the owners must belong to the Association. These Covenants, subsequent Articles of Incorporation(filed with the State), By-Laws, Architectural Guidelines were all formed at that time of SCOA formation and Homestake retained two Board membership positions to assure smooth transfer. All these documents are available for review on the SCOA website, Spearfish Canyon Owners Association.org.  The CMP group, convened by USFS, included all the significant stakeholders involved with the Canyon, including Homestake, SCOA, USFS, Spearfish Canyon Foundation, Lawrence County Commission, chambers of commerce for Lead, Deadwood, Spearfish, and SD DOT, DENR, and GF&P, as well as a few other organizations active in the Canyon at that time. In addition to the scenic highway designations, the group considered and made recommendations to restrict further development in the Canyon with the goal of keeping it as natural as possible. These restricted camping, open fires, off-road vehicles, snowmobiles, signage, speed limits, and recommended no further trail development on the Canyon floor, but connector trails to those on the rim. Homestake had stipulations that the Canyon should remain open to the public with no fees for its access. Access to Spearfish Creek(for fishing, recreational activities) was also assured. Details are available in the CMP and cover the activities/conditions that should be allowed/limited to preserve the Canyon’s unique beauty, serenity, and the waters of Spearfish Creek and its tributaries.

In 2004, when Governor Rounds proposed that the State purchase five parcels of land in the Canyon that Homestake had held onto in the 1990 Land Exchange for future sale, but only under their conditions. SCOA supported that sale after the then-Secretary of GF&P Cooper came to Spearfish in 2006, gave an open-to-the-public briefing on how the State would buy those parcels and comply with the Homestake conditions of sale, e.g., remain open to the public with no fees for access. Those parcels included the Savoy and Little Spearfish intakes on Spearfish Creek and Little Spearfish Creek(with dams), respectively, Roughlock Falls, and the to-be-negotiated-later Spearfish Falls. Management would be by GF&P. This model has been pursued with the support of SCOA,USFS and LCC as the dam at Savoy was removed and the step pools installed, the dam at Little Spearfish was removed and replaced by a fishing pool, and Roughlock Falls was cleaned up, trails restructured, picnic grounds restored, with viewing decks installed. All this has been done by GF&P while managing all as Nature Areas. Now, as negotiations have been completed to acquire Spearfish Falls, the Governor announced last December that all these parcels would be combined as a State Park, but with significant added land area, currently owned by USFS, to be acquired through another land exchange. Essentially all of Little Spearfish Canyon up to Timon Campground and some acreage in the main Canyon between Savoy and the Savoy pond would be added. SCOA submitted a letter with attachments to the Governor in February, essentially expressing concern with this expansion, and recommending the Governor reconvene the CMP group(with appropriate stakeholders) to assess the State Park concept and how it would impact the prior issues/concerns regarding keeping the Canyon as natural as possible while dealing with the significantly increased traffic/usage of the Canyon since the 1990 report. That letter was never answered or even acknowledged. Subsequently, SCOA has written an open letter to the Governor, published recently in the BLACK HILLS PIONEER and THE SIOUX Falls ARGUS LEADER. The letter was also submitted to the RC JOURNAL, but, as yet, it has not been published in the latter paper.

The point is made that even though SCOA is second only to USFS as the largest stakeholder in the Canyon, no member of the State government has contacted that organization or shown interest in what the LOCAL stakeholders or the public may think about the initiative for the State Park in the Canyon.

Jim Nelson
15 November 2016


  

Wednesday, November 9, 2016

Keep An Eye And A Leash On Trump And His Foreign Trade Rhetoric

     South Dakotans, who went for Trump two-to-one (I was a Johnson voter) can feel pretty good about their decision, considering their man won--but with one caveat.  Voters in this state
Not So Fast There,
Mr. President-elect
(from bloomberg.com)
really need to consider the consequences of the President-elect's tough talk on trade. Depending on where he was and when, Trump has promised to declare China a currency manipulator, put TPP talks on hold, and place tariffs as high as 45% on imported goods.  And that's just for starters.  I won't burden you with more of the rhetoric, which you've heard plenty of during the past couple of years.

     What's missing from Trump's politically repetitive tirades is a grasp of how his pugnacious approach to foreign trade might have consequences for Americans whose personal livelihoods and surrounding economic settings might be affected by his hard-line approach. Getting fair and mutually lucrative trade deals is everybody's goal, but I wonder if Trump understands the benefits that Americans get from the trade deals (NAFTA, WTO, among others) that are already in place.  On a manufacturing level, consider that General Motors sells twice as many vehicles overseas as it does in the United States, including more cars in China than here at home. Many are manufactured in or close to their markets, of course, but the profits are repatriated here, as millions of GM shareholders and their 5% dividends happily know.  As far as domestic activity, the U.S. auto industry is responsible for over 7 million jobs (including a 50% gain in direct employment since 2004), many of them created by foreign-owned companies like Nissan, Toyota and Honda, among others. 
     Here on the South Dakota homefront, the situation is just as meaningful. According to the Business Roundtable,  trade supports 130,000 (or 22%) of our jobs.  10% of those jobs are with companies that are mostly foreign-owned.  Last year South Dakota exported $1.4 billion worth of manufactured goods, about $1 billion of which went to our NAFTA partners Canada and Mexico. Our ag exports were even more stunning, totaling about $4.3 billion.  Since 2005, SD ag exports to
Agreed,  Wholeheartedly
our Free Trade Agreement partners have grown by 81%, with the growth to our NAFTA partners (about $400 million) far outpacing the rest.

      Numbers like these should be in the backs of our minds as we assess the hostile rhetoric that Donald Trump has directed at our trade policies.  My general sense is that Trump's bad-mouthing assumes that our trading partners will willingly go along with his threatened actions.  History shows that it doesn't work that way and that retaliation is the most likely result, something we most definitely do not need here in South Dakota.

Sunday, October 30, 2016

Along With Its Mine, Azarga Uranium Brings An Interesting Corporate History Into The Black Hills

     I've been leery of the corporate setup behind the uranium mine proposed for the southern Black Hills ("Dewey Burdock" familiarly, referencing its location near Edgemont) since
Should They Get On That Horse
And Ride Into The Sunset?
(from azargauranium.com)
January of last year.  
That's when I filed a complaint against Azarga Uranium, the company developing the site, with its regulators the British Columbia Securities Commission.  BCSC has regulatory jurisdiction over the company's securities (AZZ.TO) because its stock trades on the Toronto Stock Exchange. The letter I filed detailed several misleading statements that Azarga had just made in a press release that might have caused investors and potential investors to believe that the process was moving along at a pace faster than it actually was.
     BCSC promptly sent me a form letter acknowledging receipt without further comment and opened a complaint file on the company.  I figured, okay, I did my thing, and doubted much would result. Then, wham, the following April, (and I don't claim credit, I'm just providing the timeline) a chastened Azarga released a statement saying that its Canadian regulators, BCSC, were requiring it to "retract," "clarify" and "remove" several statements from its public report ("Preliminary Economic Assessment") issued at the time.
    On the face of it, Azarga most definitely didn't pass the sniff test.  After official scrutiny, the BCSC saw it the same way.  AZZ.TO has been trading at about 20 cents/share, probably as a permanent denizen of the "penny stock" market.  If you have a broker, you can get an opinion on that
Great Advice
From The People Who Know
(from BCSC)
market from your brokerage firm.  I can tell you that I wouldn't touch it.
    What's intriguing about Azarga now is the status of its largest shareholder.  For the past couple of years, 24% of the company was owned by a Singapore-based firm called Blumont Mining, which in 2014 was targeted by Singaporean regulators and police for investigation of "trading irregularities." I don't know what came of that, but the company last March filed a statement detailing 3 straight years of losses, which is probably why it just unloaded its stake in Azarga to a subsidiary of arbitrage fund Platinum Partners LLP in New York.  And that's another story: Platinum
Partners is currently under investigation by the Securities and Exchange Commission and the U.S. Department of Justice after the arrest of one of its associates for wire fraud.  The firm is also liquidating.  How that will affect Azarga and its long-stalled hopes of developing its mine in the Black Hills remains to be seen. I'll watch and comment as things develop.


Thursday, October 27, 2016

Kristi Noem Is Either Out Of Her League Or Out Of Her Mind

     South Dakota's lone Congressional Representative, Republican Kristi Noem came up with such an outlandish promise yesterday that you really have to shake your head at her
Noem Pitches Her Tax Plan
Voodoo Economics?  Hallucinatory Is More Like It
(from KSOOradio.com)
disconnection from economic reality.  
She actually told Sioux Falls' KSOO radio that if a tax reform package that she favors were enacted in the United States we'd see an economic growth rate of

"around 9.1 percent."  This is so stunningly ridiculous that you have to wonder if the Congresswoman even listens to herself or simply reads from a prepared script without thinking through the words that she's uttering.
     First off, a 9.1% growth rate in an advanced mature economy like ours is way beyond reach.  This is more than twice what Donald Trump claims he can achieve, and he wants to lower corporate taxes (to 15%) by even more than Noem does (to 20%).  Trump's draconian cut would at most, by even his reckoning, boost annual growth to 4%.  How Noem comes up with her flight into the fantasyland of 9% is something I'd challenge her to support.  I can comfortably say that no credible economist would back this up as a likelihood, much less a possibility.
     Just to get some grounding, I consulted with my favorite economist (my daughter Emily, who was trained in the field at UC Berkeley), who dismissed Noem's claim out of hand.  Emily notes that she "has yet to see a compelling example of where lowering taxes created that kind of growth."  Adds Emily, "the problem is that those kinds of models make incorrect assumptions about how people spend their tax savings.  Businesses tend to favor stable, solvent governments with good
Kristi-nomics
When You Wish Upon A Tax Cut
infrastructure and educated labor pools, both of which require higher taxes to achieve."  

     The most recent round of tax cuts, early on in the George W. Bush administration, produced nothing in the way of notable economic growth.  In fact, GWB's tax reductions in '01 and '03, were followed by one of the most calamitous economic debacles in history.  Why and how Noem comes up with the assumption that her notion of cutting taxes will lead to unparalleled levels of economic growth is something I'd like to see her explain. Given the looney-tunes magnitude of her claims, I doubt that Noem can make a serious case.