On July 28, Gov. Scott Walker called for a special session of the legislature on economic development. More specifically, the special session was called for the legislature to take up the state’s $3 billion Foxconn incentive package. The day prior, the governor entered a Memorandum of Understanding with Foxconn, with Foxconn committing to investing $10 billion in Wisconsin and creating up to 13,000 jobs. The state would provide up to $3 billion in incentives for the company.
After the call for a special session and the MOU was signed, August 2017 Special Session Assembly Bill 1 (AU7 AB 1) was introduced in the legislature. The Assembly referred the bill to the Committee on Jobs and the Economy and quickly held a public hearing on Thursday, Aug. 3. The bill has not been introduced in the Senate. Senate Majority Leader Scott Fitzgerald (R-Juneau) has stated he plans to route the bill to the Senate Finance Committee. The Senate’s focus remains with finishing the 2017-19 state budget, leaving the two houses at odds over what to do first.
Assembly Committee Hearing
The Assembly hearing on Thursday lasted late into the night. Foxconn was not present, but Committee Chairman Adam Neylon (R-Pewaukee) read a statement from the company expressing its excitement about investing in Wisconsin. Testimony then began with invited speakers, including Department of Administration Secretary Scott Neitzel and Wisconsin Economic Development Corporation (WEDC) Secretary Mark Hogan with several other department secretaries, UW System President Ray Cross with other UW system representatives, Wisconsin Manufacturers and Commerce, and several local government executives. Around eight hours later, public comments began.
Those in favor of the legislation emphasized the economic benefits Foxconn would bring to the entire state, including billions of dollars in capital investment, a statewide supply chain, and thousands of jobs. Some expressed concern about holding Foxconn accountable, protecting the environment, and ensuring that the jobs created are filled by Wisconsinites. Chairman Neylon said at the hearing he would be open to amendments, including language that would give preference to Wisconsin workers. The committee postponed the executive session planned for next Tuesday to Thursday, August 10.
The bill authorizes WEDC to create a single electronics and information technology manufacturing zone (EITM). The business that builds within the zone may receive various tax credits and regulatory exemptions if it maintains employment and capital investment in property at levels agreed upon with WEDC. The Legislative Fiscal Bureau has provided a summary of the bill. Highlights of the bill include:
Tax Credits & Exemptions
Under the bill, WEDC can offer the business operating in the zone up to $2.85 billion in tax credits, including:
- Payroll tax credit for wages paid to full-time employees for operations within and relating to the zone, totaling not more than $1.5 billion.
- Supplemental credits for capital expenditures, not exceeding 15 percent of the business’s capital expenditure in the EITM zone, in the taxable year, totaling not more than $1.35 billion.
- Sales and use tax exemption for the sale of building materials, supplies, and equipment for construction of the facility located in the zone.
- Allows for $252.4 million in general fund- supported bonding for the I-94 North-South highway project, a projected increase of $2.9 million GPR in 2018-19 for debt service.
- Requires that the Department of Transportation not spend the bonds unless the state also receives federal money for the project.
Tax Incremental Financing Provisions
The bill requires that a TIF district created in an area that includes the EITM zone to be an industrial site or mixed-use development. In addition, the bill:
- Exempts TIF districts with an EITM zone from the statutorily-required, “12 percent rule,” which specifies that the equalized value of taxable property of a TIF district plus the value increment of all other TIF districts not exceed 12 percent of the total value of taxable property in the city or village.
- Increases the allowable life of a TIF district with an EITM zone from 20 years to 30 years.
Department of Natural Resources (DNR)
- Waives requirement for environmental impact statements for any permit or approval for a new manufacturing facility in the EITM zone.
- Waives DNR permit requirement for the discharge dredge or fill material into wetlands for any manufacturing facility in the EITM zone.
- In order to receive exemption, the bill requires mitigation of adverse impacts to wetlands in the zone to be compensated at a ratio of two acres per each acre impacted, compared with the minimum ratio of 1.2 acres under current law.
- Waives state permit and water quality certification requirements for discharge into federal wetlands (though a federal permit is still required).
- Waives permit requirement for activities including depositing material on navigable waters, constructing/maintaining bridges and culverts, removing topsoil, enlarging waterways, and changing stream courses
Public Service Commission (PSC)
- Creates exemption from obtaining certificates of authority from PSC for public utility projects.
- Creates exemption from obtaining certificates of public convenience and necessity from PSC for relocating transmission lines.
- Authorizes a city in which the zone is located to use the design-build system for the acquisition of water and sewer systems and wastewater treatment facilities.
In addition to providing incentives for Foxconn, the bill also includes provisions to provide up to $10 million in tax benefits to Fiserv, a company the state is trying to keep in Wisconsin.
- Allows WEDC to create up to 35 enterprise zones (instead of the current cap at 30) in which tax credits may be claimed against income taxes for expenses in increased employment, employee training, and capital investment.
- Creates a new enterprise zone credit for a single business equal to a certain percentage of the business’s payroll for up to five years. This benefit is for Fiserv.