5. The biotechnology company reports sufficient financial data about the project, which may include a periodic audit of the project's financial records, to the biotechnology development finance company;
6. The proceeds of the purchase will be used solely in connection with the costs of the project, which may include planning and design, land purchases, feasibility studies, equipment, and working capital, among other costs; and
7. The biotechnology company is able to manage its project responsibilities.
Commerce is required to enter into contract with the biotechnology company to make use of the company's services and to advise, assist and provide administrative services necessary to the biotechnology development finance company. Commerce could assign employes or contract with private or state agencies to perform administrative services.
b. Delete the Joint Finance provision that would authorize Commerce to make a grant of $100,000 in 1999-00 for pedestrian enhancements in the City of Menasha from the Wisconsin Development Fund and instead authorize the Department to make the grant from the community-based economic development program (CBED).
c. Require Commerce to make an annual grant of up to $100,000 from the Wisconsin Development Fund (WDF) to the Wisconsin Procurement Institute (WPI) if all of the following conditions are met:
1. The Wisconsin Procurement Institute uses the grant proceeds to further its efforts to secure federal government contracts and create jobs in the state.
2. The WPI submits a plan to Commerce for each grant detailing the proposed use of the grant and the Secretary of Commerce approves the plan.
3. The WPI enters into a written agreement with Commerce that specifies the conditions for use of the grant proceeds, including reporting and auditing requirements.
4. The WPI agrees in writing to submit to the Department, within six months after spending the full amount of the grant, a report detailing how the grant proceeds were used.
The WPI provides marketing, education and consulting services to state businesses.
d. Authorize Commerce to make grants from the Wisconsin Development Fund (WDF) to municipalities and nonprofit organizations to fund costs related to conducting public retail markets. Require Commerce to promulgate rules to administer the program.
e. Require the Department of Commerce to provide an additional $250,000 GPR annually from the Wisconsin Development Fund (WDF) to the Southeast Wisconsin Technology Training Initiative. In addition, require that the written agreement between the consortium and Department include a provision that requires 60% of the grant proceeds to be awarded to Racine County and 40% of the grant proceeds to be awarded to Kenosha County.
f. Require the Department of Commerce to make a loan of $1.5 million from the WDF to City Brewery in the City of La Crosse if all the following apply:
1. The proposed recipient submits a plan to the Department of Commerce detailing the proposed use of the loan and the Secretary of Commerce approves the loan;
2. The proposed recipient enters into a written agreement with the Department of Commerce that specifies the loan terms and conditions for use of the loan proceeds, including auditing and reporting requirements; and
3. The proposed recipient agrees in writing to submit to the Department of Commerce, within six months after spending the full amount of the loan, a report detailing how loan proceeds were used.
No loan proceeds could be paid under these provisions after June 30, 2001.
Under these provisions, total annual funding for the WDF would be $10,003,800 ($7,503,800 GPR and $2,500,000 PR).
Veto by Governor [B-18 thru B-21]: Veto provisions as follows: (a) delete authority to provide grants for Main Street Program municipalities and public retail markets; (b) limit the grant to the Wisconsin Procurement Institute to a one-time grant of $100,000; (c) delete the required grant of $1,000,000 in 1999-00 and authority for establishing and administering a biotechnology development company; (d) delete provisions that establish the total amount of the grant for the Racine-Kenosha consortium at $1,500,000 and that limit disbursements to $750,000 annually and request Commerce and the consortium to reach a financial assistance agreement that meets the fundamental goals of the Governor's initial proposal; and (e) delete the requirement that the loan to City Brewery in La Crosse be $1,500,000 and request Commerce to work with brewery owners to develop a financial assistance agreement that will ensure job creation and retention in La Crosse.
[Act 9 Sections: 196, 204, 2931 thru 2933, 2980m, 9110(4),(5),(6e)&(7bt)]
[Act 9 Vetoed Sections: 196, 204, 2937d, 2937f, 2980m, 2983c and 9110(5)&(7bt)]
9. WISCONSIN DEVELOPMENT FUND -- ADMINISTRATIVE PROVISIONS [LFB Paper 287]
Governor: Make the following modifications to Wisconsin Development Fund (WDF) administrative provisions:
a. Authorize the Department to charge the 1.5% loan origination fee on all WDF awards of $100,000 or more. The Department indicates that applying the loan origination fee to more WDF awards and reducing the threshold amount at which it would be imposed would have raised an additional $23,500 over the past year.
b. Authorize the Department to expend up to 1% of the moneys appropriated under the WDF GPR appropriation for (1) evaluations of proposed technical research projects that apply for technology development grants and loans; and (2) evaluation costs, collection costs, foreclosure costs and other costs, excluding staff salaries, that are associated with administering the WDF loan portfolio. Current law provisions, which give authority to the Development Finance Board to use this funding for certain evaluations and grants, would be deleted.
c. Change the definition of job used for the WDF to mean a position providing full-time equivalent employment.
The WDF currently consists of eight programs: (1) technology development grants and loans; (2) customized labor training grants and loans (CLT); (3) major economic development grants and loans (MED); (4) Wisconsin trade project; (5) employe ownership assistance grants; (6) manufacturing assessment grants; (7) revolving loan fund capitalization grants; and (8) rapid response fund loans. Commerce is authorized to charge a 1.5% loan origination fee on CLT and MED awards over $200,000. Fees are used to fund administrative expenses.
The Development Finance Board is currently authorized to expend or encumber up to 1% of the amount appropriated for the WDF GPR appropriation for: (1) evaluations of proposed technology development grant or loan projects; and (2) grants to small businesses for preparing proposals for the federal small business innovative research program. Under WDF provisions, a job is defined to mean a regular, nonseasonal full-time position in which an individual, as a condition of employment, is required to work at least 2,080 hours per year, including paid leave and holidays.
Joint Finance: Delete provision "a." lowering the award threshold for the origination fee. Rather, increase from 1.5% to 2.0%, the current origination fee that applies to MED and CLT grants and loans in excess of $200,000. Estimate additional revenues at $32,500 annually.
Senate: Delete Joint Finance provisions that would have increased, from 1.5% to 2.5%, the loan origination fee applied to Wisconsin Development Fund (WDF) major economic development and customized labor training grants and loans. Instead, restore the Governor's recommendation to apply the current 1.5% origination fee to most WDF grants and loans of $100,000 or more. This provision would reduce program revenues by $10,600 annually.
Conference Committee/Legislature: Include Joint Finance provisions.
[Act 9 Sections: 2985, 2993, 2996 and 2998]
10. WISCONSIN DEVELOPMENT FUND -- MANUFACTURING EXTENSION CENTER GRANTS [LFB Paper 286]
PR $2,000,000
Governor/Legislature: Repeal the manufacturing assistance grant program, including the manufacturing assessments, customized supplier training and technology transfer subprograms, and create a manufacturing extension center grant program under the Wisconsin Development Fund (WDF). The new manufacturing extension center grant program would provide grants to technology-based nonprofit organizations to provide support for manufacturing extension centers. A technology-based nonprofit organization would be defined as a nonprofit corporation as defined under state law or an organization that is exempt from federal taxation under the federal Internal Revenue Code (IRC) and that has a mission to transfer technology to businesses in the state. Technology would include biotechnology, which would mean technology related to life sciences. Business would be defined to mean a company located in the state, that has made a firm commitment to locate a facility in Wisconsin or a group of companies of which at least 80% are located in Wisconsin.
In order to obtain a manufacturing extension center grant, the technology-based nonprofit organization would be required to submit a plan to Commerce that detailed its proposed expenditures and performance measures related to the project and the Secretary of Commerce would have to approve the plan. A technology-based nonprofit organization that received a grant could not receive any other grants or loans under the WDF. Grant recipients would be required to provide a cash match of at least 25% of the cost of the project.
Annual expenditure authority of $1,000,000 would be provided under the WDF repayments appropriation. Commerce could not award more than $1,000,000 in manufacturing extension center grants in a fiscal year.
Commerce could not encumber any funds for manufacturing extension center grants after June 30, 2001.
Currently, the manufacturing assistance grants program consists of three subprograms—the manufacturing assessments, customized supplier training and technology transfer programs. The total amount of grants awarded through all three subprograms cannot exceed $750,000 in a fiscal biennium.
The manufacturing assessment grant program provides funds to small businesses for manufacturing assessments and plans. The maximum grant amount is $2,500. Grants must be used to fund manufacturing assessments and related plans that are designed to assist eligible businesses in adopting readily available and reasonably standardized new manufacturing processes and techniques. The assessments help a company define a basic course of action, recommend strategies and improvements and identify resources to assist in the implementation of actions. Assessments can include: (1) employe attitude surveys, descriptions of basic job skills and identification of potential training needs; (2) review of the current use of technologies; (3) review of order placement, manufacturing and distribution processes; (4) analysis of marketing activities; and (5) identification of financial needs.
The supplier training program provides funding to manufacturers or consortiums of manufacturers of original equipment to fund customized training for employes of supplier businesses. Grants are used to fund costs incurred to have the employes of Wisconsin-based suppliers trained to meet the specific needs of manufacturers of original equipment. Grant funds can be used to cover 50% of the costs of trainers, training materials and related facilities. To be eligible for funding the training must: (1) focus on new technology, industrial skills or manufacturing processes; and (2) be customized to meet the specific needs of the manufacturers of original equipment and the Wisconsin-based suppliers. The maximum amount of a grant that can be awarded to an original equipment manufacturer is $100,000. Each member of a consortium of such businesses is eligible for a grant of $100,000. The maximum amount of a grant that can be used to train employes of any single Wisconsin-based supplier is $20,000. The total amount of grants made through this subprogram cannot exceed $500,000 in a fiscal biennium.
The manufacturing extension grant program provides funds to nonprofit technology-based organizations to provide support for manufacturing extension centers that transfer state-of-the-art technological advances to small- and medium-sized Wisconsin businesses using innovative training methodologies. Financing is provided as grants. Grants can only fund up to 50% of the costs directly related to technology transfer activities between businesses and the organizations that receive the grants. A maximum of $250,000 in total technology transfer grants can be made in a biennium. Grants can be used to fund costs directly related to technology transfer activities. Eligible costs include capital equipment and operating costs for teaching factories, training in new technologies and related services.
[Act 9 Sections: 204, 2979, 2984, 2986 thru 2992, 2994, 2995 and 2997]
11. WISCONSIN DEVELOPMENT FUND -- URBAN EARLY PLANNING GRANT PROGRAM
Governor/Legislature: Create an urban area early planning grant program under the WDF to provide grants to persons for early planning projects. An early planning project would be the preliminary stages of considering and planning the expansion or start-up of a business that is or will be located in an urban area in the state. An urban area would be: (a) a city, village or town that is located in a county with a population density of at least 150 persons per square mile; or (b) a city, village or town with a population of more than 6,000.
In order to receive a grant, a person would be required to submit an application to Commerce, in a form determined by the Department, which contained or described all of the following:
a. The location of the new or expanding business.
b. The ownership structure of the new or expanding business.
c. The product or service provided by the new or expanding business.
d. The market for the product or service provided.
e. Competition within the market.
f. Any competitive advantages of the new or expanding business.
g. The person's estimate of the gross revenue of the new or expanding business over a period specified by Commerce.
h. The process for manufacturing the product, or providing the services, of the new or expanding business.
i. The person's experience or training.
j. An estimate of the number of jobs that will be created by the new or expanding business.
k. The person's estimate of the capital required to complete the early planning project.
l. The person's estimate of the profit that will be generated by the new or expanding business over a period specified by the Department.
m. Potential sources of financing for the early planning project.
n. Any other information requested by the Department.
The maximum grant that could be awarded to any one person would be $15,000 in a biennium. Grant recipients would be required to provide a cash match that equaled at least 25% of the total cost of the project. Grant proceeds could only be used to: (a) perform a business feasibility study; (b) prepare a detailed marketing plan; and (c) prepare a detailed business plan. The maximum total amount of urban early planning grants that could be awarded would be $250,000 in a biennium. Funding for urban early planning grants would be from the WDF.
Under current law, early planning grants may be made to eligible applicants under both the Minority Business Development Finance (MBDF) and Rural Economic Development (RED) programs, which are administered by Commerce. Under MBDF, eligible applicants are minority group members or minority-owned businesses. RED early planning grants may be awarded to small businesses that are located in a city, village or town with a population of 6,000 or less or located in a county with a population density of less than 150 persons per square mile.
[Act 9 Sections: 196, 204 and 2956]
12. STATE OPERATIONS BASE LEVEL FUNDING REDUCTION
GPR - $71,800
Governor/Legislature: Delete $35,900 GPR annually in base level supplies from the Commerce state operations appropriation to make permanent a lapse required in the 1997-99 biennial budget.
13. DEVELOPMENT AND ENTERPRISE DEVELOPMENT ZONE PROGRAM AND TAX CREDIT MODIFICATIONS [LFB Paper 115]
Governor: Modify the development and enterprise development zones programs and tax credits as follows:
a. Limit on Total Tax Credits. The current limit on the total amount of tax credits that can be claimed under the development zone program of $33.2 million would be eliminated. Instead, a maximum limit on the total amount of tax credits that could be claimed under both the development and enterprise development zone programs would be established at $300 million. The enterprise development zone program currently has no overall cap, though each zone is limited to no more than $3 million in tax credits.
b. Enterprise Development Zones. Commerce would be authorized to designate up to 100 enterprise development zones. The current requirement that the Department obtain approval from the Joint Committee on Finance to designate more than 50 zones would be eliminated (64 are currently authorized).
In addition, the Department would be authorized to designate enterprise development zones for environmental remediation projects. Environmental remediation would be defined as removal or containment of environmental pollution and restoration of soil or groundwater that is affected by environmental pollution in a brownfield if that removal, containment or restoration began after the area that contains the site was designated as an enterprise development zone. The Department would be required to determine that the project would likely provide for significant environmental remediation and that other current law criteria were met. Of the total number of enterprise development zones designated, at least 10 enterprise development zones would have to be designated for environmental remediation projects.
c. Development Zones Tax Credit -- Jobs Component. The full-time jobs component of the development zones tax credit would be modified to: (1) increase from $6,500 to $8,000 the maximum credit that could be claimed for each a full-time job that was created and filled by a member of a targeted group; (2) eliminate the credit for retaining a job that is filled by a member of a targeted group; (3) provide a maximum tax credit of $8,000 for retaining a full-time job in an enterprise development zone if Commerce determines that a significant capital investment was made to retain the full time job; (4) increase from $4,000 to $6,000 the maximum tax credit that could be claimed for each full-time job created or retained and filled by an individual who is not a member of a targeted group. In addition, at least one-third of job creation credits claimed would have to be based on jobs created and filled by members of a targeted group. Currently, the credits must be based on jobs created or retained for targeted group members. These modifications would first apply to tax years beginning on January 1, 2000.
d. Administrative Provisions. The requirement that targeted group members for whom tax credits are claimed must be certified within 90 days after the first day of employment would be eliminated. Commerce would be also authorized to specify by rule the circumstances under which an exception could be established from the requirement that the development zones tax credit must be based on regular, full-time nonseasonal jobs that are created or retained.
The bill does not include a fiscal effect to this item.
Wisconsin has two programs which provide tax credits to businesses as incentives to expand and locate in designated economically distressed areas -- development zones (currently 20 are designated) and enterprise development zones (currently 42 are designated). The programs are designed to promote economic growth through job creation and investment in the distressed areas. Designation criteria target areas with high unemployment, low incomes and decreasing property values. Businesses which locate or expand in the different zones are eligible to receive various tax credits.
Joint Finance: Delete provisions that would: (a) eliminate the current limit on the total amount of tax credits that can be claimed under the development zone program of $33,155,000 and establish a maximum limit on the total amount of tax credits that could be claimed under both the development and enterprise development zone programs of $300,000,000; and (b) authorize the Department of Commerce to designate up to 100 enterprise development zones.
Instead, the following modifications would be made: (a) increase the maximum amount of tax credits that can be claimed under the development zones program by $5 million, from $33.155 million to $38.155 million; (b) authorize Commerce to create an additional 15 enterprise development zones to make the total number of zones authorized 79 (up to 100 could be designated with Joint Committee on Finance approval), including at least 10 of which would be for environmental remediation; (c) specify that development zone credits could only be used to offset income from the claimant's business activities in the development or enterprise zone; and (d) delete the requirement that 25% of all development zone tax credits claimed must be based on creating or retaining full-time jobs for development zone environmental remediation tax credits and provide that environmental remediation tax credits claimed in development and enterprise development zones would not have to be based on activities that created or caused to create jobs.
Conference Committee/Legislature: Include Joint Finance provisions and, in addition, designate an area in the City of Kenosha as a development opportunity zone. The Kenosha development opportunity zone would exist for seven years. Any corporation that conducted economic activity in the zone and that, in conjunction with the local governing body of the City of Kenosha, submitted a project plan by July 1, 2000 would be eligible to claim the development zone credit and a development zone investment credit. The maximum amount of tax credits that could be claimed by businesses in the Kenosha development opportunity zone would be $7 million. (This provision is designed to provide assistance to Daimler Chrysler Company for expansion of its Kenosha engine plant.)
As noted, a corporation that conducts economic activity in the Kenosha development opportunity zone must submit a project plan to Commerce, in conjunction with the city's governing body. The project plan would be required to include:
a. The name and address of the corporation's business for which the tax benefits will be claimed.
b. The Wisconsin tax identification number of the business.
