State rules put disaster bond use in question

By Paul Snyder

A victim of the 2008 floods in southern Wisconsin, Steve Mickelson says the state’s proposed policy allowing anyone in the damaged region to apply for federal disaster-recovery bonds is wrong.

“They should prioritize it for those that were directly affected,” said Mickelson, the owner of Mickelson’s Market in Gays Mills.

The flood left 6 inches of water standing in Mickelson’s store, he said, and local businesses did not receive as much government assistance as was given to homeowners in the area.

That assistance now is available through the Heartland Disaster Tax Relief Act of 2008. The act gives Wisconsin the authority to distribute $3.8 billion in federal bonds, which are sold on the bond market to raise money for projects.

But businesses such as Mickelson’s still might not be first in line for the assistance.

The state Department of Commerce is writing permanent rules for the distribution of the bonds and will hold a public hearing on those rules Jan. 25. The bonds have not yet been distributed, but when the state last year received the bond authority, Gov. Jim Doyle signed emergency rules dictating the bonds should be used for recovery and rebuilding in areas declared in 2008 to be major disaster areas.

But the emergency rules do not distinguish between new businesses applying for bonds and those that were damaged in the 2008 floods. The bonds come with risk for applicants because they are responsible for paying off the bondholders.

Dave Ryan, bond counsel and partner in the Milwaukee office of Foley & Lardner LLP, said the state broadly interpreted economic recovery to foster as much development as possible.

“The federal government delegated to the governor the decision whether one project replaces one lost or affected by the flooding,” he said.

That means a new development, as long as it is in one of the 30 southern Wisconsin counties eligible for the bonds, could be interpreted as a recovery project even if that development has nothing to do with a business damaged during the 2008 storms, Ryan said.

“You could argue a new business replaces economic activity that was lost,” he said.

For some counties, the economic realities are too dire to nitpick what projects should and should not be eligible for disaster bonds.

“Economic growth is economic growth,” said Ron Leys, Crawford County’s administrative coordinator and County Board chairman. “We need the help.”

Crawford County includes Gays Mills, which was so devastated by the 2008 floods that it could be moved. People, Leys said, are leaving the area at an alarming rate — Gays Mills High School graduated 70 students in 2002 and 32 students in 2009 — and rebuilding an old business is the same as developing a new one.

“We need to help an economy here that was already in trouble before the floods,” he said.

With $3.8 billion in bonds and a Dec. 31, 2012, deadline for applications, Ryan said, all of the requests could be covered.

“The sheer amount is so much,” he said. “Wisconsin is entitled to determine where the help is needed most, but I don’t think there’s anybody who’s going to be wanting.”

Mickelson said a distinction should be drawn between a flood-damaged building and, for example, a new senior-housing project somewhere else in southern Wisconsin.

“There’s not a whole lot out there,” he said, “for businesses that were hit.”