This is on my development system, there is no server. I suspect that the SDK needs to be updated in Studio but for some reason the SDK setup says it cannot connect to the database.
I suspect that the application you are developing is referencing SoftPro DLLs that do not match the ones on the Server. Open your Visual Studio project and see where where the project thinks the DLLs are.
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Make sure that the path points to a copy of the same DLLs that are being used by the server. They must match. I sounds like you need to get the DLLs from the server and copy them on your local machine or else change the path of the project files to point at the Select client that you installed on your dev machine. I usually point my my project under development to the local Select client.