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.
c. The names and addresses of other locations outside of the development opportunity zone where the corporation conducts business and a description of the business activities at those locations.
d. The amount the corporation proposes to invest in a business, or spend on the construction, rehabilitation, repair or remodeling of a building located in the development opportunity zone.
e. The estimated total investment of the corporation in the development opportunity zone.
f. The number of full-time jobs that will be created, retained or substantially upgraded as a result of the corporation's economic activity in relation to the amount of tax benefits estimated for the corporation.
g. The corporation's plan to make reasonable attempts to hire employes from the targeted population.
h. A description of the commitment of the local governing body of the city to the corporation's project.
i. Any other information required by Commerce or the Department of Revenue (DOR).
Commerce would be authorized to revoke the entitlement for tax credits of a corporation that: (a) supplied false or misleading information to obtain the tax benefits; (b) left the zone to conduct substantially the same business outside the development opportunity zone; and (c) ceased operations in the zone and did not renew the same or similar operations within 12 months.
Annually, Commerce would be required to estimate the amount of revenue that would be forgone due to tax credits claimed by businesses in the development opportunity zone. The zone would expire 90 days after the day on which Commerce determined that the amount of forgone revenue equaled or exceeded the tax credit limit. Commerce would be required to notify the local governing body of Kenosha of any change in the expiration date. Commerce would also be required to notify DOR of the corporations entitled to claim the tax credits and to verify information submitted by claimants.
Businesses in the Kenosha development opportunity zone would be eligible to claim a development zone investment credit and the development zone credit provided under current law.
Investment Tax Credit. Eligible corporations could claim a credit against income taxes due of 2.5% of the purchase price of depreciable tangible personal property or 1.75% of the purchase price of depreciable tangible personal property that was expensed under section 179 of the Internal Revenue Code (IRC). Only taxes due on income generated by or directly related to business activities in the development zone could be offset by the credit. The credit would not be refundable but unused credit amounts could be carried forward fifteen years to offset future tax liabilities on income generated by activities in the development zone. However, if the corporation ceased business operations in the development zone, unused credit amounts could not be carried forward.
Development Zone Tax Credit. A consolidated development zone tax credit can be claimed by businesses in development and enterprise development zones, under both the individual and corporate income and franchise taxes. The credit is based on amounts spent on environmental remediation and the number of full-time jobs created or retained. (See General Fund Taxes -- Individual and Corporate Taxes.)
Veto by Governor [B-25]: Change the effective date of the provision related to certification of target group members from January 1, 2000, to January 1, 1999.
[Act 9 Sections: 1707g, 1707h, 1707j, 1707k, 1707L, 1707m, 1708, 1708g, 1709, 1709b, 1709bb, 1741n, 1741o, 1741p, 1741pm, 1741pn, 1741pp, 1742, 1742g, 1743, 1743b, 1743bb, 1754g, 1754h, 1754j, 1754k, 1754L, 1754m, 1755, 1755g, 1756, 1756d, 1756e, 2998g, 2999, 3000, 3000n, 3001 thru 3004, 3004m, 3005, 3005m, 3006, 3006h, 3006j, 3006L, 3006n, 3006p, 3008, 3009, 3010, 3011, 3012, 3013, 9310(1)&(2) and 9343(1g)(a)&(b)&(22d)]
[Act 9 Vetoed Section: 9343(2)]
14. JOBS SPECIALIST POSITION
Positions
GPR 0.05
Governor/Legislature: Provide 0.05 jobs specialist position in the Bureau of Enterprise Development to increase the Bureau's 0.95 jobs specialist position to full-time. The person works with businesses in development and enterprise development zones to increase the number of target group members hired by businesses in the zones.
15. CONSOLIDATION OF GPR APPROPRIATIONS [LFB Paper 288]
Governor: Delete the main street and technology-based economic development programs GPR appropriations and transfer $659,000 GPR in 1999-00 and $659,700 GPR in 2000-01 and 6.5 GPR positions each year to consolidate the funding and position authority in the economic and community development general program operations appropriation. The amounts transferred would be as follows: (a) main street program--$460,700 in 1999-00, $461,400 in 2000-01 and 4.5 positions annually; (b) technology-based economic development--$198,300 and 2.0 positions annually.
Joint Finance/Legislature: Delete provision. The separate Main Street and technology-based economic development appropriations would be maintained.
16. SAFETY PROGRAM FUNDING TRANSFER
Governor/Legislature: Transfer the funding and position authority ($484,400 FED and 7.5 FED positions) from the Division of Safety and Buildings to the Division of Marketing, Advocacy and Technology to align the funding and positions for the WiSCon safety consultation program with the division that has administrative responsibility for the program.
17. MAIN STREET PROGRAM -- FEES FOR SERVICES
Governor/Legislature: Authorize the Department to charge reasonable fees for services and information provided to communities that are not participants in the Main Street Program.
The Wisconsin Main Street program provides technical assistance to help communities plan, manage and implement programs to revitalize their downtown business areas through comprehensive economic redevelopment and historic preservation. Up to five municipalities are selected annually for the program based on review and ranking of applications. Municipalities include cities, villages and towns. Commerce staff provide and coordinate intensive training workshops, and on-site consulting related to downtown revitalization and historical preservation to local programs. Commerce also contracts with the National Main Street Center for business area revitalization services and coordinates state and local participation in the programs offered by the National Center.
Commerce provides technical assistance and information on the revitalization of business areas to municipalities not participating in the program. Limited training is provided through an annual, two-day statewide conference and occasional on-site visits to communities. This provision would permit the Department to charge reasonable fees for these services.
