By M.D. Kittle |Wisconsin Reporter
MADISON – Two-hundred-thirty-eight dollars.
That’s how much every man woman and child in Wisconsin effectively spends each year on incentives to lure businesses to or keep them in the Badger State.
Through a variety of public funding sources at the state and local levels, Wisconsin spends at least $1.53 billion per year on economic incentive programs, according to a data base assembled by the New York Times.
That $1.5 billion is a conservative number, according to Louise Story, the investigative reporter who led the comprehensive NYT series, United States of Subsidies, examining business incentives and their impact on jobs and local economies.
As Wisconsin Reporter and other news outlets have learned, Wisconsin, like so many other states, and its local governments, do not keep thorough records on all of its economic development initiatives.
“There are a number of things I couldn’t get figures for,” Story, who filed open records requests with more than 100 entities nationwide for the investigation, told Wisconsin Reporter.
The state does collect information on three big incentives programs — the personal property exemption for machinery and equipment, incentives for computer and technological equipment, and assistance for waste treatment facilities.
“But those aren’t the property tax abatements that cities and towns and counties give out,” Story said.
Nationally, the Times review found more than $80 billion in freebies are annually handed out to companies — from tax breaks to zero-interest loans to walking around money.
“The beneficiaries come from virtually every corner of the corporate world, encompassing oil and coal conglomerates, technology and entertainment companies, banks and big-box retail chains,” notes the series first piece, published on Sunday and headlined “As Companies Seek Tax Deals, Governments Pay High Price.”
The Times investigation paints a picture of a Wild West-style shoot-out between states, throwing an ever-increasing pile of taxpayer money at businesses in pursuit of the economic development brass ring.
Many times it is state pitted against state. At times, it is region devouring region or nearby communities fighting each other for a piece of the economic development action. Missouri and Kansas, which splits Kansas City, are caught in a standing feud over retailers, and the people who lead the economic development programs there know the ultimate costs to communities and taxpayers.
“I just shake my head every time it happens, it just gives me a sick feeling in the pit of my stomach,” Sean O’Byrne, vice president of the Downtown Council of Kansas City told the Times. “It sounds like I’m talking myself out of a job, but there ought to be a law against what I’m doing.”
And in many high-profile incidents, when the economy turned south, so did the businesses — or at least elsewhere. Case in point: Janesville and General Motors. GM, having been awarded at least $1.77 billion since 2007 from 200-plus grants in 16 states, tops the list of the Times reports’ $100 Million Club, a list of 48 companies pocketing $100 million or more in economic incentives.
Janesville and the state of Wisconsin chipped in, too. But when tough times hit, GM shut down its Janesville plant. The automaker, like its brethren, has closed a lot of plants in recent years, keeping most of the incentives it claimed for a promise of creating or maintaining jobs.
In some cases, the risk may be considerably higher than the reward.
In Kenosha, Chrysler left town and left the city with considerable pollution damage, according to the city’s mayor. The state Department of Natural Resources makes a passing reference to the environmental problems in a Brownfield lands report.
“Potential contamination issues associated with the plant may be similar to other contamination found at former automobile properties in Kenosha, properties that were eventually cleaned up and redeveloped,” the DNR notes.
Redevelopment and a host of other initiatives that work for the betterment of communities drive economic development, Jeff Fleming, spokesman for the Milwaukee Department of City Development, told Wisconsin Reporter.
He pointed to the key tool municipalities have in their economic development tool boxes — real estate. Tax incremental financing and abatement programs have become their own industry in the suite of business incentives.
“A good example is the Monominee Valley in the city of Milwaukee. That’s a prime area of redevelopment,” Fleming said.
A number of businesses are locating in the valley, buying redeveloped land at market price, he said.
“Is that a subsidy of some kind? I would argue not because the benefit inures to the city for the investment to put the land to better use,” the official said.
The region has had its share of high-profile incentives flops, Fleming readily acknowledges. A failed hotel deal in Mononinee Falls, and several nonperforming TIF agreements in West Bend top the list of taxpayer burn.
But Fleming asserts the bad and botched deals are the exceptions not the rule. He said Milwaukee and its partner counties have stopped competing against each other, working together for the betterment of the region. Still, he acknowledges what plenty of economic development officials have — that the business of developing business would be easier without the incentives chase.
Companies in pursuit of lucrative development deals often say they are only looking out for the best interest of their shareholders. If the money is there, why not grab it? And, they say, at the end of the day it’s all about choices — and job creation is a choice.
Here’s another stark choice noted by the free-market research group the Manhattan Institute for Policy Research: The amount of money New York spends on film credits could cover the cost of hiring 5,000 public-school teachers.
The problem, too, is accountability.
The Wisconsin Economic Development Corp., the quasi-private group charged with business incentives in the state, was found to have not accounted for millions of dollars in business loans in less than two years in operation.
Experts say ignorance clouds the debate over the rewards of incentives.
“How can you even talk about rationalizing what you’re doing when you don’t even know what you’re doing?” Timothy J. Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich., told the Times.
So what’s Story’s takeaway after months of investigation? Are taxpayers getting their money’s worth? She said the jury still is out.
“I think that more work needs to be done … More information is needed.”
Contact M.D. Kittle at [email protected]
— Edited by Kelly Carson, [email protected]
What it costs
Wisconsin spends $1.53 billion annually on business incentive programs, according to a New York Times investigation. Here’s what it costs and where the money goes:
- $268 per capita
· Top Incentives by type
- $957 million in Sales tax refund, exemptions or other sales tax discounts
- $416 million in Property tax abatement
- $107 million in Corporate income tax credit, rebate or reduction
· Top Incentives by industry
- Mercury Marine – $65 million
- Kohl’s Department Stores, Inc. – $62.5 million
- Quad Graphics – $46 million
- Oshkosh Corp. – $35 million
- (tie) W Solar Group, Kestrel Aircraft Co. – $28 million
Get the full report here