Where are Wisconsin business incentives?
Photo
Brenda Shinneman operates a forklift at the new Lowe's warehouse as the rows and rows of shelves behind her wait to be filled.
JANESVILLE — When a company looks for a site for a new facility, the discussion often starts with geography, moves to labor costs and ends with state incentives.
In 2005, Janesville lost on the first and last elements in the battle to land a $100 million Lowe’s distribution center and its 500 jobs.
Lowe’s decision to build 1.4 million-square-foot facility in Rockford, Ill., was based on two factors. Rockford is only 45 miles from DeKalb, which Lowe’s said was the geographic center of the area to be served by the facility.
And Illinois officials brought a $26.1 million incentive package to the table. Janesville was able to muster only $15.6 million from state and local sources.
The lessons learned in 2005 take on more importance now as Janesville works to recover from the loss of thousands of auto industry jobs.
The Lowe’s project is not unique.
Wisconsin communities routinely find themselves on the short end of recruitment battles with neighboring states that are more freewheeling with incentive dollars and tax abatement programs.
When they’re not losing companies to foreign countries, Midwestern states are increasingly seeing companies relocate to or expand in other U.S. regions.
Last month, Thomas Industries unveiled plans to move 280 manufacturing jobs from its Sheboygan plant to Louisiana.
The move triggered finger pointing at the state Capitol, where some lawmakers said the state didn’t do enough to keep the jobs. Others countered that the move was based on cheaper labor costs in Louisiana.
Wisconsin reportedly offered $2.55 million to move about 80 Louisiana jobs to Sheboygan. Instead, the company took a $9 million deal to move 280 Sheboygan jobs to Louisiana.
The view from afar
Chief Executive magazine readers recently ranked Wisconsin as the 43rd best state for business, as did Forbes magazine. U.S. News and World Report looked at two other studies and determined that Wisconsin was either the 26th or 33rd best state in which to start a business.
“National outfit after national outfit looks at these things and routinely determines that we’re not competitive,” said James Buchen, vice president of government relations for Wisconsin Manufacturers & Commerce, the state’s largest business interest group.
Ron Pollina of the Chicago-based Pollina Corporate Real Estate said Wisconsin hasn’t made much effort to improve its business climate.
“The competition is primarily global, but in the United States, it’s these states that are real aggressive on taxes,” he said. “In this country, we’re seeing 8,500 manufacturing plants close each year. Most states aren’t prepared; they just don’t get it.”
Hands are tied
Away from the Capitol, Wisconsin’s economic development professionals routinely argue that the state’s biennial commitment of about $15 million in cash incentives is woefully inadequate.
They say an additional $85 million in tax credits exists only on paper. Many are never used because they don’t carry street value for companies eyeing Wisconsin. Income tax credits, for example, are of little value to logistics or distribution companies who might not sell anything from a new or expanded building in Wisconsin.
Tax credits tied to job creation are particularly antiquated, they argue, because businesses are generally reducing head counts by consolidation and an increased use of technology.
Janesville officials have lobbied state lawmakers for designation as a “Development Opportunity Zone” to boost the street value of tax credits by tying them to capital investment, as well as job creation.
In addition, Forward Janesville has asked the state to allow the sale, transfer or refund of state tax credits. Such portability, the business group contends, would make the credits much more appealing.
Zach Brandon, executive assistant for the state’s Department of Commerce, said Wisconsin has had confusing and duplicative programs.
The state recently consolidated its programs, a move that Brandon said has been well received by site selection consultants. The state now has about $94 million in tax credits available, he said.
Credits vs. hikes
The debate about the state’s economic development toolbox, however, runs deeper than tax credits. The business-interest group WMC lambasted recent proposals for $2.9 billion in tax increases on top of nearly $3 billion in hikes already proposed or signed into law by the governor.
Buchen said Wisconsin has one of the worst business climates in the country.
“Tax hikes of this magnitude will only make matters worse and cost us jobs at a time we can least afford to lose them,” he said.
Perception and reality
Site selection consultant Bob Hess hopes for a climate change in Wisconsin, the state where he was raised. He’s now with Newmark Knight Frank, one of the largest independent real estate service firms in the world.
“Rankings are certainly one side of it, and Wisconsin is generally in the bottom third,” Hess said. “It’s an Internet world, and when you Google Wisconsin and business climate, that’s what you see.
“Perception becomes reality.”
Wisconsin, however, is also known for its highly skilled labor, outstanding education system, agriculture and quality of life, he said.
“But from just the business side, Wisconsin is never near the top,” he said.
Brandon said his department prefers to hear from consultants such as Hess. Magazine rankings, he said, are typically the result of opinion polls that have no scientific basis.
“Those rankings are just a snapshot in time and not a true reflection of the state’s economic development efforts,” Brandon said. “We pay attention to them, but we give more credibility to scientific modeling.
“It’s perception vs. reality. What we know to be true is that businesses make decisions not by just Googling something. They tend to drill down farther.”
On the horizon
Hess said site consultants often are put off by the highly political, highly charged nature of Wisconsin government.
“In Wisconsin, the case for change has never really been made,” Hess said. “The state needs to get more aggressive with its programs and advertising, and now is the time for that to happen.”
Hess said it’s unlikely Wisconsin will ever be able to compete in the incentive game.
But the state needs to determine what industries it wants to court, learn them inside and out and then develop targeted recruitment and expansion plans.
“You can’t be everything to everyone,” he said. “There are returns on investment if you pick the right things to go after.
“It’s a scary thought to concentrate on doing fewer things better, rather than casting this wide net hoping you don’t miss something and you end up missing everything.”
Brandon said the state has consolidated and improved its programs. It has also sharpened its focus on its core manufacturing and ag sectors.
Emerging industries also are on the state’s radar, he said, noting Wisconsin’s proximity to the much-discussed wind corridor of the nation’s midsection.
“Being an original equipment manufacturer has its place, and we have a good number of those in the state,” he said. “But we can also build our economy on being a supplier to OEMs.
“The goal is to make sure that if we can’t make the final product here, then at least Wisconsin businesses have a fingerprint on it.”
A better array of tax credits program will help do that, he said, while incentive packages laden with cash probably won’t.
“Wisconsin is not going to be a state throwing $150 million at a battery plant,” he said. “Do a cost-benefit analysis of that, and you determine that each job generates ‘X’ in payroll.
“Divide that by the incentive, and I don’t know how those states can close the gap. We have to be responsible to the taxpayers.”
Still, Brandon said the state can target companies through broader tax credit programs and expect reasonable returns on investment.
“This state has a vision and is going after it,” he said. “Ninety-four million dollars in tax credits should be able to get us through this economic downturn.
“It’s a balancing act, but if you get the return on investment, it’s easier to return to the governor and Legislature and ask for more.”
Vision, Hess said, requires leadership from the public and private sectors.
“I get a sense that there’s a grassroots group of people interested in how they can make a difference, but on the political side, that’s a constraint,” he said. “You’ve got to get both sides to meet in the middle, and the question is who will take the lead.
“There’s no reason Wisconsin can’t do it, but it will take some political will, and some people might have to put their careers on the line.”
Jun 3, 2009 at 8:31 a.m.
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dub190, please spare us the government is out to get you speech. You like most of the right wing nuts deal in hyperbole that has little basis in reality. You talk about how you love your country but hate everything about it and everyone you disagree with, in it. Believe me no one wants your guns, your brains and I am sure you really don't have that much money or work very hard considering your absurd comments.
There is no such think as a free trade economy. States that have foreign automakers in them have provided huge subsidies to get them there so again please spare us the stench of you crap.
Jun 1, 2009 at 8:45 p.m.
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That the State of Wisconsin DWD considers 14.00/hr a "high paying job" says it all.
Jun 1, 2009 at 7:39 p.m.
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dub190, you and I are on the same page my friend. I agree.
Jun 1, 2009 at 5:50 p.m.
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I am not rock solid in that statement, Gonzo, you know money talks. But why would you buy a car from a bankrupt "government motors"?
How many billions more are we going to give them now?
I believe in a free trade economy. That is not what we have. You won't get credit, you won't be able to swap cars every few years, you will lose all your buying power.
A somewhat far left government that wants my guns, money, hard work, and overall freedom deserves none of my money. The President can fire at will now? Not good.
The government does not know how to run a business. I would certainly never invest.
UAW will receive 17.5% stake in GM. Bondholders, 10%. Just watch how much the government is going to let the unions get away with.
The company will most likely have nothing good to offer anyway. Unless you are interested in a high gas mileage, cost efficient, mass produced death trap, forced down the peoples throats. Damn what the consumer actually wants. They'll be using the OnStar like a criminal tracking system.
I assume they will have no trouble getting rid of the competition. Would you as a business owner want to have to compete with the American government?
Jun 1, 2009 at 5:25 p.m.
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ok dub, why would a loyal gm owner and presumably a loyal american now start to boycott both?
Jun 1, 2009 at 4:54 p.m.
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Doyle owes the unions so big they will continue to gain power until he's gone. Then they'll throw a crap ton of money at the new Liberal candidate.
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Just like the trial lawyers he owes a favor to. It's in the budget, 1% liability and you can be forced to pay for 100% of the cost of an accident. Tell me this won't put most ski hills out of business. Doyle is trying to sneak this by all of you.
Jun 1, 2009 at 4:49 p.m.
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I will never ever buy a new GM as long as the government owns 60%. I have been a loyal GM owner all my life.
A bunch of stooges who WERE NEVER EVEN ELECTED are running GM now. Do they have ANY business experience? NO.
Americans these days know more about what is in their messiahs Ipod, vs. what our Governor is doing to tear this great state apart.
Now we are printing so much money, bonds are going straight down the crapper.
What a wonderful change. Wonder why he didn't change the handling of Gitmo prisoners? Or the missile defense system he hailed as a huge waste of money? He hasn't CHANGED either of these things, even though he vowed to in his fluffy little campaign.
Jun 1, 2009 at 4:38 p.m.
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The new incentive for business apparently is to allow the government to own primary stock. If they can pull it off with GM, they can pull it off with anyone they so choose.
Jun 1, 2009 at 3:55 p.m.
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All these incentives chase after a deal that is headquartered in another state. These deals are often short term, or out shopping for the best deal out there, they want to take advantage. Why not focus our efforts on attracting and keeping new companies, ones that will put down roots and stay in place for a few decades. Let's start growing companies, not just attracting companies that are looking for the best deal.
Jun 1, 2009 at 3:38 p.m.
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Maybe this is just a simplistic view point. When/why did it become the norm to throw handfuls of tax money at companies to lure them in?? The whole idea is more than irritating to me. Another case of corporate welfare.
Jun 1, 2009 at 1:49 p.m.
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Yeah, you unions and your fair wages, safety concerns and desire to maintain basic human dignity. Who do you think you are driving our country into the ground using financial gimmicks that have no basis in reality. Oh wait that was the banks. Why am I bashing unions? LOL.
Jun 1, 2009 at 1:30 p.m.
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Who says there's no incentives? With the late-night budget proposal last Friday, there's plenty of incentives for insurance companies and law firms to come to Wisconsin...
http://maciverinstitute.com/2009/05/abou...
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*sarcasm*
Jun 1, 2009 at 1:27 p.m.
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what the heck can you buy from a minimum wage job? just barely food and a roof over your head!! paying just enough taxes to keep your garbage man picking up your trash- your police department with just enough men to protect you -your fire department to give you fire protection- keeping the roads passable & whatever else government provides for the common inhabitants of a community.
Jun 1, 2009 at 1:15 p.m.
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WISCONSIN NEEDS TO BECOME A RIGHT TO WORK STATE AND MAYBE MORE COMPANIES WILL BUILD HERE, FORGET ABOUT THE UNIONS AND ALL THE GREED THEY BRING WITH THEM.
Jun 1, 2009 at 11:09 a.m.
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"Quit the finger pointing and the they should have done more attitude and maybe work on getting more jobs and companies to come here!"
Just how exactly? Typical pie in the sky rhetoric. Let's just will jobs into Wisconsin. The fact is that the decisions that folks in Madison have made and continue to make drive jobs out of this state and until we as voters figure that out and do something about it we'll continue to live in a black hole for businesses. I don't know if you've figured it out but "hope and change" hasn't been paying the mortgage.
Jun 1, 2009 at 10:20 a.m.
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Who cares if a business decides to locate here and brings low-paying jobs? We should not only not offer incentives to Walmart, but we should force them to pay for the healthcare that the state provides for many of its employees.
Jun 1, 2009 at 9:22 a.m.
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Here is your problem right here:
The move triggered finger pointing at the state Capitol, where some lawmakers said the state didn’t do enough to keep the jobs. Others countered that the move was based on cheaper labor costs in Louisiana.
Quit the finger pointing and the they should have done more attitude and maybe work on getting more jobs and companies to come here!
Jun 1, 2009 at 9:21 a.m.
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Regardless of political party, the bottom line for Janesville/Beloit is that Madison looks down on us and could care less if we starve economically. They see no problems with their little world, which is based on 3 industries (gov't, university, which is also gov't, and insurance/financial).
Jun 1, 2009 at 2:30 a.m.
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If I remember right Beloit was also in the fight for this. If that was the case why don't Janesville and Beloit work together instead against each other. Then they may have landed it.
Jun 1, 2009 at 12:49 a.m.
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JasonTh: I agree with what I think is the gist of your post. Yes, there is ignorance, divisiveness and whining. However, I think we are ALL frustrated and have a tendency to point the finger of blame at those who don’t agree with us. I’m guilty of that myself. I just don’t think it is correct to lump all republicans into the category of, “ignorant republicans”. Unfortunately, “ignorance” seems to be spreading faster than the Swine Flu and like the Flu, it doesn’t target a specific political group. We need to work together to get our economy going again. JMO
By the way JasonTh, I am a registered Democrat.
Jun 1, 2009 at 12:04 a.m.
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"We oppose welfare for big business and the wealthy in the form of handouts, tax breaks, or tax loopholes. We support tax policies that create long-term economic development, good jobs, and environmentally sound development of affordable housing."
http://www.wisdems.org/release_details.a...
May 31, 2009 at 9:46 p.m.
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As I was reading this story I imagined the comments would be full of ignorant republicans bashing democrats for this. Thanks for being so predictable. Constructive suggestions are always welcome but you whinners need to log off and go review your elected official's voting record and see how they've done.The comments are so rife with blind ignorance and divisiveness that it's almost worth buying the paper so I can avoid glancing at them.
What would you do to encourage more businesses to put roots down here? Are you willing to pay more taxes or lose some services to offset the costs in giving large tax breaks to prospective companies? I am.
May 31, 2009 at 9:20 p.m.
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Unfortunately Governor Doyle has saved them all for the Indian tribes.
May 31, 2009 at 5:59 p.m.
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Democrats are against businesses and corporations and then complain because there are no jobs! Dumbest bunch of people on the planet.
May 31, 2009 at 5:39 p.m.
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Tax credits are well and good as are other business incentives, but there does need to be a cost-benefit analysis.
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What can happen is that a growth state (say in the Sun Belt) has a job surplus, meaning it collects more in tax revenues from all sources, and has a lower public burden on services such as food stamps or medical care. That can put a state such as Wisconsin at a disadvantage because not only is the budget squeezed for income from taxes and other revenue sources, it has a higher public service burden to pay for as well. This makes tax credits a double-edged sword.
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Ultimately it isn't always clearly just the tax credits or other incentives. The Sun Belt has been growing for decades, which is attributed largely to two things -- room for growth (Houston and Phoenix being prime examples of sprawl), and air conditioning. The Midwest has a climate that some people hate. The advantages here such as low-cost transportation are less important than they used to be. Business incentive programs didn't really exist in the sense we talk about today and yet the Sun Belt was growing like you wouldn't believe.
May 31, 2009 at 4:34 p.m.
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Funny how democrats always trash "big business" and then cry when they dont locate in their districts. What? The evil corporations provide jobs and revenue to communities. Lest trash them and tax them into oblivion then ask them to build in our town
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