Home / Commercial Construction / Audit once again faults state economic-development agency (UPDATE)

Audit once again faults state economic-development agency (UPDATE)

Wisconsin’s economic development agency continues to have troubles with how it tracks job creation and awards given to companies, an audit released Friday found.

The report, from the nonpartisan Legislative Audit Bureau, examined the Wisconsin Economic Development Corporation, a quasi-private agency that was established under former Gov. Scott Walker and is in charge of job efforts in the state.

The agency, known as WEDC, has struggled since its inception in 2011 with a number of tasks, including recovering loans made to companies that later fail to live up to the promises they had made in return for receiving the assistance. The report found that although the agency had corrected some problems found in previous reviews, it’s still failing to properly track job numbers.

State Sen. Rob Cowles, a Republican and co-chairman of the Legislature’s Audit Committee, said it’s disappointing that “new emerging issues” continue to be uncovered by audits, and that the agency had put taxpayer money “at risk.” He suggested that law changes may be necessary.

“This isn’t just an issue of unaccountability, but shows the desired outcomes of these programs have not been consistently achieved,” Cowles said.
WEDC Secretary Mark Hogan said in a detailed letter in response to the audit that his agency has placed a priority on improving, noting that the number of recommendations made by the audit bureau has been steadily decreasing, going from 24 in 2015, to 19 in 2017, to 10 in the latest report. He said all the recommended changes should be “substantially implemented” by the end of the year.

Ongoing troubles

The audit looked at WEDC’s activities from July 2017 through December 2018, just before Evers took office and during the time when the state’s monumental deal to bring Foxconn Technology Group to Wisconsin was brokered. Auditors examined 436 deals, which the agency entered into between 2011 and 2018 and were worth about $130 million in total.

The auditors concluded that it’s unclear if these deals have met their goals because WEDC had not properly kept track of the incentives it awarded.

“WEDC cannot know how many jobs were actually created or retained as a result of the awards that ended, in part, because it did not collect sufficient jobs-related information from recipients,” according to the report.

The audit said that of the jobs that recipients of 68 tax credit and loan awards were required to create, only about 35% were in fact created. It also found that WEDC could have required incentive recipients who failed to meet their goals to repay $4 million worth of loans and $414,000 worth of tax credits. If collected, that money then could contribute to other economic-development efforts.

In one instance, the report found WEDC awarded $462,000 in tax credits to one unnamed recipient that actually lost 17 jobs.

Elsewhere, the audit faulted WEDC for awarding tax credits to companies for creating jobs outside the state. In one example, an unnamed recipient received $61,100 worth of tax credits for creating 261 jobs filled by people who lived in other 36 states, none of which even bordered Wisconsin.

Separately, the audit found that the amount of possibly uncollectable loans with past-due payments on WEDC’s books had decreased from $11 million in December 2016 to $7.6 million two years later. That decrease was largely a result of WEDC’s writing off or forgiving loans, the audit found.

Large awards in latest fiscal year

As is widely known, the $2.85 billion in tax credits that Foxconn stands to receive from WEDC if it meets certain hiring and spending goals was the largest deal the agency entered into in the latest fiscal year.

Other large deals included the $60 million worth of tax credits WEDC awarded to support Green Bay Packaging’s construction of a new $500 million paper mill in Green Bay, a project expected to create 1,000 construction jobs. The agency also kicked in $21 million for a $300 million expansion of Kwik Trip’s operations in La Crosse. Of the 10 largest tax-credit awards in the latest fiscal year, seven went to projects in southeast Wisconsin.

Some big projects were conspicuous for their absence. Not included in the audit bureau’s tally, for instance, was a new $58.5 million headquarters for U.S. Venture in downtown Appleton, which earned $21 million from WEDC. Nor was Haribo’s $220 million manufacturing plant in Pleasant Prairie, which earned $20 million in credits from the agency.

Although WEDC did not publicly announce it would commit tax credits to these companies until December 2017, it had already executed the deals in the previous fiscal year, which ended months before, on June 31.

The period audited also came before new limits were put in place on the state’s issuances of historic tax credits. The limit is now set at $3.5 million per project.

In the latest fiscal year, WEDC awarded $77.5 million worth of historic tax credits to 27 projects throughout the state. That amount was greater than that of the historic tax credit awards in the state’s 2015-2016 fiscal year, when the agency awarded a total of $51.3 million to 34 projects, according to the audit bureau’s previous review of WEDC.

The greatest amount of historical tax credits – $12.4 million – was awarded in the fiscal year to a project to redevelop a group of buildings at the original site of Briggs & Stratton Corp., on Milwaukee’s north side. The $60 million Community Within The Corridor will open 190 apartments at the property, as well as space for businesses and nonprofit groups.

Separately, $11 million worth of historic tax credits went to a renovation of the Milwaukee Symphony Orchestra’s space, $9.5 million to a restoration of the Milwaukee Athletic Club and $8.8 million to an overhaul of Hotel Northland in Green Bay.

– The Associated Press contributed to this story

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