Accountable USA - Wisconsin

After taking office in 2011, Gov. Scott Walker moved to disband the existing Department of Commerce and put economic development spending into the hands of a privatized agency called the Wisconsin Economic Development Corporation (WEDC). Good Jobs First highlighted the problematic nature of privatizing state economic development agencies in a 2011 report. The new administration and its supporters in the legislature seem poised to pursue a more aggressive and costly subsidy strategy.

On top of increased subsidy costs for FY 2011, a number of economic development bills have been introduced that would allow increased subsidy spending. In FY 2011, eight companies received $238 million in Enterprise Zone Jobs Tax Credits, a huge increase from the previous fiscal year. Gov. Walker’s administration attempted to push through a $200 million CAPCO bill (see Big Giveaway index on this page). The Governor also signed into law a large tax deduction for businesses claiming to have created jobs and a bill lifting a cap on tax increment financing. All of this appears to be part of a campaign pledge to “create” 250,000 jobs, despite the fact that many economic development deals may be retention deals for companies threatening to leave the state.

A 2006 legislative audit and a Milwaukee Journal Sentinel series called “Subsidies Without Scrutiny” revealed that many of the jobs promised by subsidized companies never materialized, and the average cost per job for those that were created was far in excess of the state’s guidelines. Watchdog groups such as Wisconsin PIRG seized upon these scandals to press for greater accountability. They succeeded in 2007, when the state adopted strong transparency practices: Wisconsin now posts detailed company-specific information on all major subsidy programs. The searchable database lists the projected and actual number of jobs, where the company is located, and the subsidy value. The system puts Wisconsin in the top tier of subsidy disclosure among the states.

It’s still unclear how the new WEDC will incorporate existing safeguards, codified in Act 125, into subsidy programs. Even Act 125 may not be sufficient to safeguard taxpayer money. A 2011 analysis of subsidy recipients by the Wausau Daily Herald revealed continued lackluster results: only 16 out of the 191 active job creation agreements have met their targets. The state could improve disclosure by emulating Illinois and disclosing outcomes such as wages and whether clawbacks were triggered.

Even without the state’s new efforts to ramp up subsidy spending, the state legislature has had a history of authorizing a number of expensive and sometimes controversial deals. For example, in 1995 the state legislature authorized substantial subsidies for a new baseball stadium for the Milwaukee Brewers (see below). And in 2009 the state awarded Mercury Marine up to $70 million in refundable tax credits (on top of local subsidies worth $53 million), which the boatmaker proceeded to use as leverage against its workers to cut wages and pension benefits (see below). Harley Davidson made a similar threat to leave the state if unionized workers didn’t make concessions and received a $25 million subsidy package in 2010.

In the mid-2000s, there was a great deal of controversy over subsidy practices in the state. Citizen groups filed a legal challenge over secret negotiations that the city of Beaver Dam held with Wal-Mart concerning a $7 million subsidy deal for a distribution center. It was later revealed that the warehouse was being built with the help of state prison inmates on a work-release program (until protests ended that).

Key Subsidy Programs

Subsidy Program Recent Annual
Cost
Online Recipient
Disclosure
Recipient Disclosure
Score
Job-Creation/
Job-Quality Score**
Monitoring/
Enforcement Score***

Business Retention and Expansion Investment

financing through loans and loan guarantees to businesses expanding or relocating in the state

$9.8 million (FY 2013)
49/100
not included
not included

Economic Development Tax Credit Program

corporate income tax credits for companies locating or expanding in five types of special zones

$29.8 million (FY 2013)
49/100
90/100
75/100

Enterprise Zone Jobs Tax Credit

a corporate income tax credit for companies creating new jobs in designated enterprise zones

$62.5 million (FY 2013)
49/100
not included
not included

Jobs Tax Credit

a corporate income tax credit for companies creating new jobs

$9.4 million (FY 2013)
49/100
not included
not included

Transportation Economic Assistance Program (TEA)

a funding stream for transportation improvements built to benefit a company expanding or relocating in the state

$3.9 million (FY 2013)
33/100
35/100
55/100

* The score is derived from the Good Jobs First report Show Us the Subsidized Jobs (January 2014).

** The score is derived from the Good Jobs First report Money for Something (December 2011).

*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).

Major Subsidy Deals

Milwaukee Brewers (1995 and 1996)

In the early 1990s, the owners of Major League Baseball’s Milwaukee Brewers began seeking public funding for a new stadium, but they met public resistance.  In 1995, state legislators narrowly passed a plan for $160 million towards a ballpark initially estimated to cost $250 million. The amount was financed by an increase in sales and hotel taxes in five counties. One state senator who changed his vote to help the bill squeak through was later voted out of office in a recall election. In 1996, after selling naming stadium rights to Miller Brewing, team majority owner Bud Selig (now commissioner of Major League Baseball) was able to sweeten the deal (by getting public loans to help him pay his share of construction costs) amid rumors that he would otherwise move the team to North Carolina.

Taxpayer aid for Miller Park ultimately reached about $310 million. A 2004 legislative audit of the team’s finances found growing debt and declining revenue. The franchise was sold to money management executive Mark Attanasio in 2005. (Key sources)

Mercury Marine (2009)

In mid-2009, there were reports that boat engine producer Mercury Marine was considering moving at least some production from its plant in Fond du Lac, where the Brunswick Corp. subsidiary is also headquartered. One option was said to be shifting work to the firm’s plant in Stillwater, Oklahoma. The threat of losing a major employer prompted state and local officials to put together a retention subsidy package, while Mercury Marine put pressure on its unionized employees, represented by the Machinists, to renegotiate the terms of their collective bargaining agreement. The company was soon demanding a seven-year wage freeze, pay cuts for new hires and for laid-off employees called back to work, and higher healthcare co-pays for retirees.

Angered by management’s demands, workers voted overwhelmingly against the concessions in August 2009. But the fact that the company was still making noises about moving, along with the existence of the retention subsidy offer, put pressure on workers to reconsider their stance. In September the bargaining unit voted again, this time accepting the concessions. The city then made details of the subsidy package public. It included a $50 million low-interest loan from the county repayable over a 12-year period. The company would receive credits towards debt service based on the number of jobs retained or created, up to a maximum of $2.1 million. To finance the loan and the credits, the county would impose a 0.5 percent sales tax increase. The city also agreed to spend $3 million to buy surplus land from the company and/or in the form of forgivable loans.

Although some business observers tried to argue that Mercury Marine had considered moving because of high state taxes, a report by the Institute for Wisconsin’s Future revealed that the company had not paid any corporate income taxes at all for eight years. In November 2009 state officials disclosed that, in addition to the $53 million local subsidy package, Mercury Marine stood to receive $70 million in refundable corporate income tax credits from the state if it met job creation goals. (Key sources)

Walmart in Wisconsin

  • At least 5 Wal-Mart locations have received subsidies worth about $21.8 million in Wisconsin.
  • At least 2 Wal-Mart locations in Wisconsin have challenged their property tax assessment, recouping about $949,000.
  • Wal-Mart was found to have more workers than any other employer in the state relying on publicly-funded health insurance. This shows how taxpayers end up subsidizing Wal-Mart’s policy of providing low wages and inadequate benefits.
  • Wal-Mart receives about $980,000 a year from a state policy that allows retailers to keep a portion of the sales tax they collect from customers.

For more information, see the Wisconsin page of Wal-Mart Subsidy Watch.