March 28, 2018

In This Edition… 

• President’s Message
• Executive Director’s Corner
• WEDA Legislative Update
• WEDC Bulletin
• Guest Column: State Representative Mike Rohrkaste on the Historic Tax Credit
• Guest Column: State Senator Roger Roth on Wetland Regulatory Reform
• WEDI Update: Economic Development News and Views
• 2018 WEDA Executive Committee and New Board Members
• State Announces Process for Companies to Bid on Foxconn Construction Work
• Federal Tax Reform Law Treats Economic Development Incentives as Taxable Income
• Welcome New WEDA members

President’s Message: Heather Wessling

Thank you for taking the time to read through this March 2018 edition of the WEDA Wire. Our Governor’s Conference in February was a great success, and we want to thank everyone who attended and sponsored the event in Madison. Next year (2019) we plan to host again in Milwaukee for a second time.
As chair of WEDA, I hope to advance the association’s efforts to build membership, roll out WEDA Academy trainings during upcoming conferences, and come door to door to our communities throughout Wisconsin to foster economic development priorities. My focus is set on bringing Economic Development professionals throughout the state in contact with one another and finding ways to encourage and follow through with opportunities that elicit private sector involvement. I hope to see a private sector focus group set in place soon that will provide feedback on legislative priorities. I am also excited about the recent unveiling of WEDA’s Community Reinvestment Act Network (CRA-Network), the growth of which is another priority for 2018.

Thank you for your time, and please let us know if you’d like to contribute to the WEDA mission or have feedback to share. Talk soon…

 

Executive Director’s Corner – Brian Doudna

Initiative Funding Network Launched – Applications Now Being Accepted!

The Wisconsin Economic Development Association (WEDA) has launched a new program to match its financial institution members with organizations, initiatives and projects involved in housing, small business, community, workforce and economic development. It’s called the CRA Network of Wisconsin.

The program will break down barriers between financial institutions (large, intermediate and small) and community organizations driving initiatives that meet Community Reinvestment Act (CRA) strategies of the various financial institutions.

The CRA Network is a method to close the information gap between the people who had CRA-qualified projects and the organizations who are interested in financing those projects or
initiatives.

Applications are now being accepted for regional meetings that will be held in June and July. These regional meetings will have a closed session component to hear presentations and to review potential funding decisions that could be a collaboration of multiple financial institutions.

Other states have similar efforts, but the one that is closest to the CRA Network is operated by the Federal Reserve Bank of Kansas City. Since forming in 2011, the Investment Connection has helped to place and track $30 million in CRA eligible projects. There are some video testimonials on its service, where members tell their stories of working with the network – www.kansascityfed.org/community/investmentconnection.

Ultimately, WEDA wants CRA Network members to use this platform to get projects done, to support their companies’ missions, and to grow communities across Wisconsin.
Here’s how it works:

  • Developers, municipalities and organizations, who have project proposals apply to www.cranetwork.org to present those projects at a closed session during one of the CRA Network’s regional meetings.
  • The project(s) must be in the area of affordable housing, community services, revitalization or stabilization, or economic development for small business or farms. This typically provides
    services to or are located in an LMI eligible area.
  • CRA Network member financial institutions attend presentations and connect with representatives of those projects they feel meet their investment criteria.
  • CRA Network members, its partners and WEDA will vet the applications to determine if they will meet the eligibility criteria for the member banks located in the region. Applications will be reviewed prior to the meeting to confirm eligibility or to restructure the project for greater appeal.

WEDA Legislative Update

The current session of the Wisconsin Legislature has effectively come to an end. While lawmakers still need to wrap-up a few miscellaneous items, as far as economic development-related legislation is concerned, they have completed their work for the year.

WEDA began the 2017-18 legislative session with an aggressive legislative agenda that included numerous statewide policy proposals to advance economic prosperity in Wisconsin. WEDA ended the session with a number of successes, a handful of disappointments, and a few close calls.

One bill that didn’t quite make it over the goal line was the Rural Economic Development Bill (AB 912), which would have provided $1 billion over twenty years for rural economic development programs. Although the legislation was proposed by Gov. Scott Walker and passed unanimously out of the Assembly, the bill hit a roadblock in the Senate. Senators were concerned about the large price tag and the bill’s lack of specifics on how the funding would be spent to boost economic growth in rural Wisconsin.

Unfortunately, the concerns were enough to “kill” the bill this session. However, the economic development challenges faced by rural communities are real, and it’s likely the Legislature will address the issue next session.

The “dark store” bill (SB 292), which would have closed the dark store property tax loophole in Wisconsin to ensure tax fairness and continued TIF viability, is another bill that failed to pass, but will almost certainly be revisited when the Legislature reconvenes in 2019.

But as mentioned above, there was plenty of good news for economic development and WEDA coming out of the 2017-18 legislative session, from long-overdue wetland regulatory reform (AB 547) and preservation of the state historic tax credit program (SB 668), to reestablishment of WEDC’s capital lending program (AB 64 / state budget bill), which has been reimagined as the Business Development Loan Program.

In the coming weeks, WEDA will be publishing a detailed 2017-18 Legislative Update to provide members with in-depth information on the legislative session and how recently passed legislation with impact economic development in Wisconsin. In the meantime, please feel free to visit the WEDA Bill Tracker and review our Legislative Scorecard for greater insight into WEDA’s legislative efforts this session.

WEDC Bulletin

WEDC names new vice president of sector strategy development

Vincent A. Rice has been named WEDC’s vice president of the Sector Strategy Development Division. Rice comes to WEDC from the Wisconsin Department of Workforce Development (DWD), where he had been a program manager for the Division of Employment and Training since 2012. In that role, he evaluated the talent requirements of different industries and created targeted training programs to meet those needs. He also led efforts to improve collaboration and communication between business community and the agency.
Previously, Rice served as division vice president and general manager for RMT Inc. (formerly a division of Alliant Energy Corp.) from 2006 to 2009; as a business director for the Aerospace Division of Honeywell International Inc. from 2001 to 2006; and as a product development manager and a product line manager for Corning Inc. from 1995 to 2001.

ATI Announce $95 Million Expansion in Cudahy

Allegheny Technologies Incorporated (ATI), a global manufacturer of technically advanced specialty materials and complex components, is expanding its operations in Cudahy with a $95 million project expected to create about 125 jobs and help the company meet the growing demand from the aerospace jet engine market.

ATI now has three iso-thermal presses at its Cudahy iso-thermal forging center of excellence and is adding a fourth, along with additional heat-treating capacity, to meet growing aerospace market customer demand. The project will take about three years to complete and fully qualify for aerospace-related production.

To help ensure that the expansion occurs in Wisconsin, the Wisconsin Economic Development Corporation (WEDC) is awarding the company up to $7 million in state income tax credits over the next seven years under its Enterprise Zone Tax Credit Program. The actual amount of tax credits ATI will receive is contingent upon the number of jobs created and retained, and the amount of capital investment over that time.

United Alloy expands operations in Janesville

United Alloy Inc. (UAI), a serial production metal fabrication and powder coating company, is expanding its operations in Janesville, a project expected to create up to 66 jobs over the next three years.

The new 100,000-square-foot facility will be located on a 17-acre lot adjacent to the company’s existing building on Kennedy Road. The $15 million project also includes a 7,500-square-foot addition to the current facility and the installation of new equipment at both buildings. The new facility will include an entirely new painting system that would occupy about one-fourth of the building, while the rest of the facility would be use for assembly and loading areas for trucks. Construction on the expansion will begin in March and is expected to be completed by January 2019.

WEDC is supporting the project by authorizing up to $560,000 in state income tax credits over the next three years.

South Pointe Business Park in Sparta earns Certified In Wisconsin designation

A portion of the South Pointe Business Park in Sparta has been designated as a Certified In Wisconsin® development-ready site, a move that will help the city better compete for corporate expansion and attraction projects.

The 114-acre site at the park, located just off Interstate 90 and State Highway 27 in Monroe County, is the state’s 18th Certified Site. Certified In Wisconsin designation gives site selectors and business owners confidence that building plans will not be held up by costly delays in permitting and approvals.

The Certified In Wisconsin Program, which is overseen by WEDC, provides potential tenants with all the information needed to make quick decisions about whether that site is right for their needs, such as utility and transportation infrastructure, environmental assessments, quality of available labor force and more. WEDC is utilizing Deloitte Consulting to help evaluate sites potential Certified Sites. WEDC markets each Certified Site through its Locate In Wisconsin website.

Sheboygan, Manitowoc regions rank nationally for corporate facility projects

Two regions of Wisconsin – Sheboygan and Manitowoc – have received national recognition for their economic development successes in Site Selection magazine’s annual ranking of top metro areas in the U.S. for corporate facility investment projects in 2017.

The Sheboygan area, which had 11 projects last year, is ranked No. 6 nationally among metro areas with populations of less than 200,000, a dramatic jump from its No. 31 ranking in 2016. Manitowoc, which had eight corporate investment projects in 2017, was tied for seventh place in the magazine’s 2017 ranking of the top micropolitan areas in the U.S. A micropolitan statistical area is one or more adjacent counties that have at least one urban core area of at least 10,000 but less than 50,000 population.

To determine the rankings, Site Selection focuses on corporate facility projects with significant impact to the state, such as corporate headquarters, manufacturing plants, R&D operations and logistics sites. These new business facilities and expansions are chosen based on specific criteria, which include capital investment, job creation and square footage.

Wisconsin Exports Up 6% in 2017

Wisconsin businesses exported $22.3 billion in goods and services to 202 countries in 2017, a 6.1 percent increase over 2016.

Wisconsin’s export growth in 2017 was generated by significant increases in shipments to Canada, Mexico and China, the state’s three largest export destinations. Exports to Canada grew by 4.3 percent to $6.9 billion, driven by increases in the export of miscellaneous mineral products and electrical machinery. Exports to Mexico were up 4.8 percent to a record $3.2 billion, mostly because of an increase in the export of electrical machinery and oil seeds (primarily soybeans). Exports to China jumped by 21.6 percent to $1.7 billion in 2017 – also a record for exports to that country. Driving the growth in exports to China were increases in the shipments of aircraft and parts; industrial machinery; dairy products; wood and wood products; and raw hides and skins.

Representative Mike Rohrkaste: Preserving the Historic Tax Credit

Economic development continues to play a very significant role in Wisconsin’s strong economy. As a state, we need to do all we can to ensure that various tools promoting economic development are on the table. One of these tools is the Wisconsin Historic Tax Credit Program, which has been successfully used hundreds of times across the state.

During the 2017-19 biennial budget, Wisconsin’s historic tax credit program was capped at $500,000 per project. Knowing how important this tax credit is to economic development across the state, I worked with my colleagues in the Legislature, Governor Walker, local officials and economic development groups around the state to address the cap. Through legislation which has been approved by both the State Assembly and State Senate, the cap on the program would be raised to $3.5 million per project. The new cap would help ensure the viability of countless projects across the state, while still being fiscally responsible.

The historic tax credit program is a vital tool for the redevelopment of historic areas throughout Wisconsin. Developers and local municipalities have successfully used it to help reinvigorate hundreds of historic structures. These structures have often been turned into affordable apartments and vibrant local businesses. This is a low-risk, high-return program that has spurred hundreds of great projects in both urban and rural areas.

In 2014, 60% of all projects using the tax credit were vacant for more than 20 years. A recent study by Baker Tilly has shown that over a 10-year period the historic tax credit has created an $8 to $1 return on investment for the state. The study has also shown that the credit generated over $600 million in total economic output between 2014 and 2016.

Without this credit, many of these abandoned historic structures will continue to remain vacant and will likely decay, causing blight in our local communities. The historic tax credit provides an opportunity for communities, often small, to breathe new life into old and often vacant historic structures. I am honored to have authored legislation that will ensure the historic tax credit remains viable into the future, and I thank the many supporters who have moved this bill forward.

Representative Rohrkaste represents Wisconsin’s 55th Assembly District, which includes the City of Neenah. He currently serves on the Legislature’s Joint Finance Committee.

Senator Roger Roth: Wetland Regulatory Reform Wins Legislative Approval

Wetlands are a significant part of Wisconsin. They provide habitats for fish and wildlife, retain storm water, offer recreation and serve as purifiers for lakes, rivers and groundwater. In Wisconsin, there are about five million acres of wetlands, which comprise 15% of the state.

When a landowner or business decides to develop a property, it must be determined whether that activity could impact wetlands. Currently, impacts to wetlands are subject to a complex set of regulations, making it difficult for permit applicants to navigate the process – often costing the applicant tens of thousands of dollars and months of lost time in order to comply.

AB 547 is a bill I have been working on with Assembly Majority Leader Steineke since the beginning of last year after hearing about difficulties developers and farmers were having in my district and throughout the state.

It’s important to note that in Wisconsin there are federal and nonfederal wetlands. The vast majority of wetlands are adjacent to navigable waters, which fall under federal jurisdiction and are not affected by this legislation. This bill seeks to address difficulties that arise with non-navigable, isolated, intrastate wetlands. These nonfederal wetlands make up about 20% of Wisconsin’s wetlands, and this bill will affect up to 4% of them.

It’s our goal to strike a proper balance between economic forces and our environment by streamlining the permitting process for isolated, nonfederal wetlands; addressing artificial wetlands; and creating a wetlands study council within the DNR.

Prior to this bill, with the delineation process, if developers found they had acres of wetland to mitigate, often times they would walk away from the project because it was cost prohibitive – contributing to urban sprawl and destroying greenspace around our cities and villages.

We are incentivizing development in urbanized areas. Incorporated areas that are serviced by sewer and sanitary districts with storm water management systems will now have a streamlined permitting process for any isolated, nonfederal wetlands.

Artificial wetlands, which are created as a result of human modifications to the landscape and for which there is no prior wetland or stream history or significant functional value or use, are currently exempt from wetland regulations in some cases. This bill exempts them entirely, which has received widespread support.

This bill establishes a mitigation grant program so that money being held by the DNR for the in lieu fee program will be used in a timely manner. The DNR will be able to appropriate that money to nonprofit organizations, specifically to create, restore and enhance wetlands in our state. So the 96% of wetlands in our state that are not affected by this bill will be restored and enhanced to an even higher quality.

A wetlands study council within the DNR will be created which will provide recommendations on future wetland policy. The council will comprise of a wide variety of people across Wisconsin to ensure a comprehensive approach. Bringing stakeholders together is key, and a diverse set of viewpoints should help direct and identify hurdles in wetland regulations.

Finally, the bill authorizes the DNR to seek federal wetlands permitting authority if EPA delegates it to the state. Current federal law allows a state to apply to EPA to make this request, and we believe that exploring this option could create more regulatory certainty.

Wetlands are significant to Wisconsin and the reforms in the new law will not only help curb urban sprawl around our communities, but also enhance the vast majority of wetlands in Wisconsin for generations to come.

Senator Roth represents Wisconsin’s 19th Senate District, which includes the cities of Appleton, Menasha, and Neenah, as well as the Village of Winneconne. He currently serves as the Senate President.

Wisconsin Economic Development Institute Update: Economic Development News and Notes

Information you can use:

Economic Development News:

  • Social Media Use in 2018 – From the Pew Center: “A majority of Americans use Facebook and YouTube, but young adults are especially heavy users of Snapchat and Instagram.”
  • Building Trust: Performance Metrics in Counties – From the National Association of Counties, this report explores a variety of ways in which counties are tracking performance and using performance metrics to improve services for residents.

Economic Opportunity:

  • Follow the Money: How to Track Federal Funding to Local Governments – This guide helps data users navigate the patchwork of primary data sources and online portals that show how the federal government distributes funding to local governments.
  • Small Businesses Perceive Lack of Support – The latest Kaufmann Foundation survey found entrepreneurs at both startups and established firms feel the government does not care about their businesses and that the government does not support small, local businesses. This potentially represents a great opportunity for local ED’ers to demonstrate support.

2018 WEDA Executive Committee and New Board Members

WEDA elected its 2018 Executive Committee and new board at the 2018 annual meeting in February.

2018 WEDA Executive Committee:

  • President: Heather Wessling, V.P. Economic Development, Kenosha Area Business Alliance
  • President-Elect: Matt Mikolajewski, Economic Development Director, City of Madison
  • Treasurer: Jason Monnet, V.P. and Senior Loan Officer, Wisconsin Business Development Finance Corporation
  • Past President: Edward White, Executive Director of Sauk County Development Corporation
  • At-Large Board Member: Bob Dennik, Vice President, VJS Construction Services

2018 New WEDA Board Members:

  • Courtney Berner, Executive Director, University of Wisconsin Center for Cooperatives (second three-year term)
  • Carolyn Engel, Business Finance Manager, Racine County Economic Development Corporation
  • Bryan Gadow, Administrator, Village of New Glarus
  • Dawn Gunderson Schiel, Senior Municipal Advisor, Ehlers, Inc.
  • May yer Thao, Director, Hmong Wisconsin Chamber of Commerce
  • Bon Wikenheiser, State Director, Small Business Development Center/Center for Technology Commercialization

State announces process for companies to bid on Foxconn construction work

The state has unveiled a new website – WisconnValley.wi.gov – to offer information and guidance to Wisconsin companies seeking to provide goods and services during the construction phase of the $10 billion Foxconn advanced manufacturing facility in Racine County.

Foxconn recently announced the selection of a lead construction management firm as well as lead engineering consultants for the project, which is expected to begin in less than two months.

Gov. Scott Walker is encouraging companies to visit the new state website to learn more about becoming a subcontractor, supplier, vendor, or professional services provider during the construction phase. “Construction of the Foxconn campus is expected to create more than 16,000 direct and indirect jobs over the next four years, and it’s estimated that more than $5 billion will be spent on construction and equipment from businesses in every region of Wisconsin during that time,” said Walker.

Please visit WisconnValley.wi.gov for more information on the procurement process, upcoming informational sessions, and bidding notifications.

Federal tax reform law treats economic development incentives as taxable income

The federal Tax Cuts and Jobs Act of 2017, passed by Congress and signed into law by President Trump on December 22, 2017, provided a substantial overhaul of the U.S. tax code. Among the modifications implemented by the new law is the treatment of economic development incentives as taxable corporate income.

Background:

The definition of gross income for federal tax purposes is broad and includes income derived from all sources, unless specifically excluded under the Internal Revenue Code (IRC). One such exclusion includes “a contribution to the capital of the taxpayer” made by a non-shareholder. An economic development incentive provided by a unit of government or civic group for business relocation or expansion purposes was previously considered a “contribution to capital” and therefore exempt from taxation.

Tax Cuts and Jobs Act:

Under the Tax Cuts and Jobs Act, the “contribution to capital” exclusion no longer applies to a contribution made by a unit of government or civic group. Therefore, economic development incentives, including cash grants, no-cost land, and infrastructure improvement projects provided to a business after Dec. 22, 2017 may be considered taxable gross income for the recipient business. However, the law does not apply to development incentives that were included as part of a master development plan approved prior to the enactment of the bill.

What’s clear is the tax law change will diminish the overall value of key economic development incentives, impacting businesses and EDOs across the country and in Wisconsin. These incentives, which were previously tax-free awards, are now taxable. What’s less clear, pending further IRS guidance, is the specific impact of the tax law change, including the effect on tax incremental financing in Wisconsin. Once additional information is made available by the IRS, WEDA will distribute it membership-wide.

Tax Cuts and Jobs Act and Wisconsin Tax Law:

Most states use the IRC as the starting point for determining state taxable income, and they typically incorporate at least parts of federal tax code changes into their own taxation systems. But how each state approaches IRC conformity varies.

Wisconsin is a “fixed-date” conformity state, which means the state incorporates IRC updates as necessary to ensure consistency with federal tax law. Due to passage of the Tax Cuts and Jobs Act, the State Legislature recently acted to conform with most of the federal tax changes created under the bill.

In the waning days of the legislative session, lawmakers amended non-related tax legislation (Assembly Bill 259) to adopt most of the provisions contained in the Tax Cuts and Jobs Act that are relevant for state incomes tax purposes, including the contribution to capital provision. As a result, business relocation and expansion incentives will be treated as taxable income under state law. According to the non-partisan Legislative Fiscal Bureau, the provision will increase state revenues by $900,000 in Fiscal Year 2018 and $1.2 million in the following year.

WEDA will provide members additional information on the impact to state tax law as it becomes available.

Welcome New WEDA members

  • Lori Erschen Bahr
    Owner – Erschen’s Florist
  • Kendra Bishop
    Director of Marketing & PR – The Alexander Company
  • Jim Cleveland
    Director of Outreach and Client Services- Envision Greater Fond du Lac\
  • Patrick Drinan
    Economic Development Manager – Niagara Bottling LLC
  • David Eckmann
    Executive Director – Wausau Chamber of Commerce
  • Cecilia Harry, CEcD
    President & CEO – Envision Greater Fond du Lac
  • Gerald Jacobson
    President – Northwestern Bank
  • Stacy Johnson
    Executive Director – Oneida County Economic Development Corporation
  • Guy Mascari
    Executive Director & CEO – Technology Innovation Center-Milwaukee at Research Park
  • Carol McChesney Johnson
    Executive Director – Mount Horeb Area Economic Development Corporation
  • Josh Miller
    Director of Development Services – City of Marshfield
  • M. Scott Powell, EDFP
    V.P. of Economic Devlopment – Envision Greater Fond du Lac
  • Jack Salzwedel
    Chairman & CEO – American Family Insurance
  • Sarah Spang
    Envision Greater Fond du Lac
  • May yer Thao
    Director – Hmong Wisconsin Chamber of Commerce