Tax Rebate Being Sought

Alvey told council members that the Vermillion School Board is hoping the City can provide sales tax rebates to the Vermillion School District on the various construction materials being purchased by the district to build the new school.

“A couple months ago we had a conversation about what was happening within the school district, and I made a request at that time for the city to waive the building permit,” the superintendent said, “… and then discussion with the group at that meeting determined that a better option might be to consider a sales tax rebate that has been used by the City in the past with different organizations.

“I’m coming today to ask for that,” he said.

Providing sales tax rebates has been a proven method for the City of Vermillion to help both private and public entities finance facility improvements. In 2018, the City agreed to provide a $24,000 sales tax rebate to Masaba, Inc. as it spent approximately $1.2 million for new equipment as it improved its facilities.

A similar financial tool was used several years ago to help Polaris improve its facilities in Vermillion. A sales tax rebate helped the University of South Dakota with the construction of the Sanford Coyote Sports Center.

Last fall, the Vermillion City Council approved a reinvestment agreement with USD to provide funding assistance for the upcoming expansion of the USD Wellness Center, which will include the construction of a new indoor swimming pool. The City will provide a rebate of local sales and use taxes paid on eligible construction costs to USD.

“The reason I’m here today is to continue our discussion … John (Prescott, Vermillion’s city manager) has been helping to coach us along about how the sales tax rebate works and so we’ve worked with the Department of Labor to work on a plan, assuming that we can get approval from this council, to move forward with this request,” Alvey said.

The superintendent said it is estimated that the $36 million school project will generate from $200,000 to $250,000 in sales tax for the City of Vermillion.

“Our wish is to have everything possible (in building supplies) delivered to the City of Vermillion and housed here so the city captures the sales tax instead of it being stored in Omaha or Sioux Falls or Sioux City and then waiting for it to be delivered here,” Alvey said. “We’ve asked that our contractors and vendors supply updated lists and contracts that allow that to happen and they’ve been complying with that so far.”

The superintendent said that Hausmann Construction, the construction manager for the building project “has been working directly with our vendors asking them to provide the documentation needed. Once they’ve verified the items have been delivered here and the sales tax has been paid on that, then that request can be dealt with by the (state) Department of Revenue, which then verifies that the steel, the cement – whatever the product is that has been delivered – has had its sales tax paid by the vendor and therefore the city has captured that.

“Our request would then be to ask the City to allow us to get back some of those dollars to enhance the (new school) project,” Alvey said. “In the event that cement and other products have been both paid for and verified by Hausmann Construction and then the Department of Revenue and finally John’s (Prescott, city manager) team here at the city, then quarterly we would be able to find a way to reconcile that, and we would work those details out with John and his team here at the city.”

The superintendent suggested the school district receive a rebate of up to $250,000.

“If we’re able to capture $200,000 to $250,000 in sales tax, we’re graciously asking for as much as you would give us, understanding that you use those dollars, as well, for enhancements that you would like,” he said, “but if we could get at least $100,000 that we were going to be paying in the building permit fees and then anything additional – perhaps $150,000 would be an amicable number, or whatever this council feels would be worthwhile, then we ask that you would entertain allowing us to move forward with a partnership with the city.”

Alvey noted that the school district’s discussions with Prescott have reached a point that have allowed samples of contracts between the district and the City to be crafted.

City council members will likely receive drafts of those contracts next month as they ponder the school district’s request.

“Quarterly, we could entertain getting some dollars back. I guess the benefit to the city would be that obviously we would advertise this as a partnership with the city and say, ‘hey, we were able to enhance the playground at this location because the city offered us … a sales tax rebate,” Alvey said. “That’s the long version of the request to continue moving forward with John and his team on this partnership.

“Clearly, you have to have this happen in a public meeting in council chambers sometime in the future,” the superintendent told council members. “I just wanted to make sure this is continuing to be on your radar and see if there’s anything else we needed to do to move this along.”

Alvey gave city council members an update on the construction which has been hampered by winter weather in recent weeks. He shared a rough blueprint of the building’s design and a couple aerial photos of the building site taken by a drone last month.

“Nothing has really changed with this plan from when you’ve seen us in previous months talking a little bit about it. Currently, they (construction workers) are probably about halfway done with the footings,” the superintendent said.

He described how the building’s design breaks up various classrooms into pods, with each pod housing classrooms of the elementary school’s various grades. One wing will house first and second grade student, there’s a wing for third and fourth grades, a wing for fifth grade students and a wing for kindergarten and pre-kindergarten pupils.

“One thing that’s penciled out in the drawing I gave you is the future planned addition,” Alvey said. “In the event that we grow out of the capacity of this building, we already have plans in place to add a future addition that you have outlined on the document in front of you.”

He also shared aerial photos taken by a drone that show footings already in place for the new school’s gymnasium, commons, art rooms and music rooms.

“It is a large footprint and the guys and the gals that are working over there are doing a great job of keeping the footings moving forward, even with unpleasant weather conditions,” Alvey said. “We did miss 10 days in December due to the weather. We have three days built in per month for weather delays, so we’re a little bit behind … they’ve got some really unique features to keep the footings (construction) moving even in subzero weather.”