By Ryan Ekvall | Wisconsin Reporter
MADISON — What’s $3 million between friends?
Friends, in this case, being Wisconsin’s taxpayers and the Wisconsin Economic Development Corporation, a quasi-governmental agency charged with “supporting economic development and job creation through bold initiatives” — such as granting corporations tax credits, cheap financing or seed money.
WEDC on Friday revealed that of the $56 million loan portfolio it had previously lost track of, borrowers were late on $2.7 million worth of past due payments.
Another $2.4 million have been written off, $2.6 million have been forgiven and performance reports are pending for $392,000 more in state-forgivable loans, as of June 30. Many of the loans in question were made by the old Department of Commerce, which was replaced by WEDC, one of the first acts of Gov. Scott Walker’s administration.
Friday, the Milwaukee Journal Sentinel reported that as of Nov. 2, a total of $12.2 million in loans were past due, $3 million more than previously uncovered by the newspaper.
“I don’t want to point any fingers at this point, but there’s definitely room for improvement,” said Rep. Dale Kooyenga, R-Brookfield.
Kooyenga, a certified public accountant and recent appointee to the Legislature’s powerful Joint Finance Committee, which is partially responsible for WEDC oversight, added the corporation has had both successes and shortcomings closing in on its first two years of business.
“Just like any new organization there’s going to be growing pains and issues to deal with, but by no means are they firing on all cylinders,” he said. “We need to look at where they can be better stewards of loans given out in Wisconsin and review why companies are asking for loans and their ability to repay those loans.”
Some of WEDC’s woes are systemic, according to Kooyenga. He called it a “Catch 22” where growing businesses with positive cash flow and assets don’t have the same financing problems as start-up companies with potential. “Business ideas are different than operational businesses,” he said.
“We need to drill down what is the cause of companies not paying back the loans. First of all, why are they coming to the state for loans instead of the private sector, and do they have a way to pay back the loans?”
WEDC displaced the Department of Commerce. It was supposed to be quicker and more flexible in attracting or retaining business in the state. Critics blasted the shakeup at the time.
“(I)n WEDC’s single-minded focus to drive job creation through new initiatives, the organization made some missteps, which we fully acknowledge,” WEDC’s interim CEO Reed Hall and Chief Operating Officer Ryan Murray wrote to the board of directors in a memo Friday.
Murray and Hall say WEDC is attempting to clean up its oversight lapses, pointing to its search for a new executive leadership team, a forthcoming independent audit by Financial Institution Products Corp, a wholly-owned subsidiary of the Wisconsin Bankers Association, and accounting firm Schenck SC, and a review by the nonpartisan Legislative Audit Bureau.
Several attempts to reach WEDC representatives by phone and email went unreturned. Several Democratic lawmakers did not return requests for comment.
Wisconsin Reporter has filed multiple records requests with WEDC, including the organization’s loan balance, the terms and status of its loans, types of loans and who the loans were made to.
“The buck starts and stops with us,” said Rep. John Nygren, R –Marinette, recently appointed co-chair of the Joint Finance Committee. “We’ll take a look to see what things we can do in terms of accountability for WEDC. They definitely have some damage control and some repairs to do as far as a credibility standpoint, but I’m not willing to give up on the idea.”
Nygren said “the economic development people” he’s talked to in his district have been impressed with WEDC and its departure from bureaucratic slothfulness since its inception in July 2011.
“The idea has been successful. We need to correct the problems,” he said. “We will have meetings with them and expect for them to answer to problems that will be public and should be. They need to have the trust of the people who fund them.”
While WEDC executives took a somber tone accounting for WEDC’s apparent lack of oversight for its loan, in a previous meeting with the Joint Finance Committee, former CEO Paul Jadin joked he would return on Christmas Eve to claim another $25 million.
At the time, outgoing JFC co-chair Rep. Robin Vos, R-Burlington, argued the committee allocate $50 million to the corporation, rather than grantit $25 million at the August meeting and have it come back for $25 million more in December.
Jadin left WEDC two months later for Thrive, a Madison-based economic development corporation, after it was reported WEDC had not accounted for $9 million in past-due loans.
From July 1, 2012 to Sept 30, 2012, WEDC awarded nearly $6.5 million in grants and loans, $66 million in economic development tax credits and allocated six bonds worth $50 million, according to the quarterly report it filed with the JFC.
The memo released Friday detailed 70 of 187 state-funded business loans were past due, 64 of which were initially administered by the Department of Commerce. The memo states 44 of these loans had been authorized for amendments — or loan adjustments or payment deferrals.
Kooyenga said he was satisfied with the steps WEDC leadership was taking and that more oversight may be required to prevent similar future episodes.
“There’s a way to be reactive and work with businesses, and be better stewards of taxpayer dollars,” Kooyenga said. “As legislators, we need to ask questions that lead to changes to make a more effective agency.”
Contact Ekvall at [email protected]
— Edited by John Trump at [email protected]