The Wisconsin Economic Development Corporation will now have an additional $8 million available for a tax credit program in its first year, but it comes at the expense of money earmarked for startups and not without concerns from Democrats.
WEDC officials say there has been significant demand for the Business Development Tax Credit and there is still enough money for early stage companies. The Legislature’s Joint Committee on Finance approved the transfer Monday in an 11-4 vote.
But Democrats on the committee questioned whether it was an appropriate use of the money and would potentially give money to companies with no tax liability.
WEDC requested the transfer from the Early Stage Business Investment program after contracting or committing to $10.6 million in credits through the beginning of June. The 2015-17 budget allocated $17 million for the Business Development Tax Credit. WEDC said it has another $8 million in projects in the pipeline and would run out of tax credits by the beginning of July.
“In general, we think the numbers are pretty compelling,” said Mark Hogan, WEDC chief executive officer. “It’s been very successful.”
The program was created to replace the Economic Development Tax Credit and the Job Tax Credit offered by WEDC. The former was a non-refundable program, while the latter was refundable, allowing businesses to claim credits even if they had no tax liability.
Democrats took issue with the Business Development Tax Credit also being refundable. They pointed to a 2015 Legislative Fiscal Bureau paper that indicated 95 percent of money claimed under the jobs and enterprise programs was sent to companies as a refund.
“The state has spent a tremendous amount of money on some of these tax giveaways,” said Rep. Gordon Hintz, D-Oshkosh. “So far, these investments have not paid off.”
WEDC representatives were not at Monday’s JFC executive sessions and Legislative Fiscal Bureau staff answered lawmakers’ questions about the program.
Hogan told BizTimes ahead of the JFC vote that others may have a different view of the program, but he did not want to get into a debate over those issues.
“It’s been very attractive,” Hogan said.
He highlighted the investments the program has leveraged from companies. WEDC estimated the tax credits had led to $314 million in investments, creating 1,885 jobs and retaining 2,729 between both the committed and contracted credits.
In southeastern Wisconsin those awards have included $200,000 in credits for Sussex IM to build a new 150,000-square-foot facility in Sussex, create 40 jobs at an average of $13.21 per hour and retain 243 jobs at an average of $16.70 per hour. Gardner Pet Group, Inc. is receiving $185,000 in credits to improve its leased facility, create 53 positions with an average starting wage of $16.94 per hour, and retain five existing positions. Healthcare Business Insights, LLC will receive $750,000 in credits to lease new office space in the Milwaukee area and create 5 new positions with an average starting wage of $20.73 per hour and retain 101 positions paying an average of $23.84.
WEDC is also committed to two additional awards each in Milwaukee, Sheboygan and Kenosha counties.
Hogan said the program has generally trended toward attracting manufacturing companies and is usually used for retention of a company as opposed to attracting new ones.
State Rep. John Nygren, R-Marinette, said the program is important as other states look to attract businesses from Wisconsin.
“A lot of states are being very, very aggressive in seeking our strong manufacturing base here in Wisconsin,” he said.
State Sen. Lena Taylor, D-Milwaukee, questioned why the agency wanted to take money away from startup funding when the state has ranked poorly on measures of entrepreneurship. She also said the program should do more to target businesses in areas with a lack of jobs.
With the transfer there would be $22 million available in the Early Stage program.
“We think at $22 million, we’ve got a good cushion there,” he said.
WEDC estimates it will issue between $16 million and $20 million credits for the Early Stage program this year.
The transfer will commit the state to $6 million in spending in 2017-18, which Hintz and state Sen. Jon Erpenbach, D-Milwaukee, said will limit the money available for investments in infrastructure or education.
“You can have the business tax breaks, but if we don’t have the infrastructure here, the business tax breaks are pointless,” Erpenbach said.
