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Democrats don’t trust WEDC to handle Foxconn deal

Associated Press

MADISON, Wis. (AP) — Democrats on the Legislature’s audit committee questioned Tuesday how anyone can trust Gov. Scott Walker’s troubled job creation agency to handle $3 billion in incentives for Foxconn Technology Group in the face of a state report that shows shortcomings continue to plague the agency.

The Wisconsin Economic Development Corp. has been a political punching bag for Democrats since Walker and GOP legislators founded it in 2011. The Legislative Audit Bureau handed Democrats more ammunition when it released a report in May that found the agency is still struggling, failing to accurately track the jobs that its awards are supposed to create and retain, handing out nearly $10 million in bad loans over the past two years and failing to turn over millions in tax-credit repayments to the state.

WEDC officials are currently trying to negotiate a contract with Foxconn to execute a $3 billion state incentives package for a flat-screen plant in Mount Pleasant. During a public hearing on Tuesday, Democrats on the audit committee grilled WEDC Chief Executive Officer Mark Hogan about the agency’s ability to administer the contract.

“Can this agency be trusted to oversee a $3 billion deal with Foxconn?” said state Sen. Kathleen Vinehout, of Alma.

Rep. Melissa Sargent, of Madison, added: “We’ve seen a pattern about concerns of accountability, transparency and accuracy. There’s an awful lot on the line here with this (Foxconn) project.”

Given the recent scandals, should Gov. Walker shut down the WEDC?

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Hogan insisted the WEDC has improved its operations. He noted the agency is trying to carry out auditors’ recommendations to track award applicants’ job numbers using unemployment insurance data from the state Department of Workforce Development.

“(We have) great confidence … that WEDC has made significant progress in addressing administrative issues,” Hogan said.

Vinehout continued to press him, asking how the Foxconn contract will be different from an agreement WEDC reached with the aviation start-up Kestrel Aircraft. The Wisconsin State Journal reported this week that the WEDC had handed the company a $20 million loan in 2012 amid promises it would create 665 jobs. The company has defaulted on its loan payments after creating only 25 jobs and still owes the state $3.4 million, the newspaper reported.

Hogan replied that the WEDC’s board adopted guidelines last week for administering the Foxconn deal. The terms call for a third-party accountant to verify Foxconn’s job creation numbers. Still, Hogan refused to supply the audit committee with a copy of the Foxconn contract, saying it hadn’t been approved yet.

Committee Republicans defended the agency.

Rep. Samantha Kerkman of Salem said it’s difficult to track how many ancillary jobs might have been created because of the WEDC’s awards. Sen. Alberta Darling of River Hills said the administration of the agency has improved. She called on lawmakers to pay more attention to the good, saying whenever the WEDC comes up “we often get smoke in the room and pants on fire.”

The WEDC is a quasi-government agency that hands out grants, loans and tax credits to businesses, local governments and other organizations. Walker and GOP lawmakers set it up in July 2011 to replace the state’s Department of Commerce.

The WEDC has been under fire almost since its inception for failing to recover loans to troubled companies and handing out $126 million without a formal review. The agency’s top ranks have been plagued with turnover as well.

The May report found award administration had improved but the agency hadn’t contractually required recipients to supply enough detailed information to allow it to determine how many jobs were actually being created or retained as a result of its awards.

The agency failed to collect enough information from applications about existing employees and failed to follow state laws requiring it to annually verify jobs-related information that tax credit recipients had submitted. The jobs-related information on the WEDC’s website is thus suspect.

Auditors also reviewed 24 awards that the WEDC had handed out from July 2011 to September 2016 in the hopes of creating or retaining jobs. Three of the awards didn’t require job creation or retention and 13 had ended before the related contract expired, meaning recipients were no longer required to create 183 jobs and retain 1,082 jobs.

The amount of the delinquent loans ballooned from $1.3 million at the end of 2014 to $11 million at the end of 2016, the report said. WEDC officials are now considering taking legal action against Kestrel Aircraft because of its default on loan payments. It owes the state more than $3.4 million, the Wisconsin State Journal has reported.

The agency also spent nearly $41,000 on chauffeurs during the 2014-15 and 2015-16 fiscal years, the report found.

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