Amendment AU7 ASA1-AB1

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LRBs0103/1

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August 2017 Special Session

2017 - 2018 LEGISLATURE

ASSEMBLY SUBSTITUTE AMENDMENT 1, TO ASSEMBLY BILL 1

August 11, 2017 - Offered by Representatives Neylon, Vos, Steineke and Nygren.

AB1-ASA1,2,10 An Act to renumber 196.192 (2) and 238.399 (4); to renumber and amend 30.195 (7), 61.57, 62.155, 196.192 (1), 196.192 (3) (a), 196.192 (3) (b) and 196.192 (4); to amend 30.123 (6m) (intro.), 66.1105 (2) (f) 1. (intro.), 66.1105 (4) (gm) 4. c., 67.05 (10), 71.05 (6) (a) 15., 71.08 (1) (intro.), 71.10 (4) (i), 71.21 (4) (a), 71.26 (2) (a) 4., 71.30 (3) (f), 71.34 (1k) (g), 77.70, 84.0145 (2), 180.0622 (2), 183.0304 (1), 196.491 (1) (f), 238.12 (1), 238.399 (3) (a), 238.399 (5m), 281.346 (4) (c) 2m., 281.36 (3b) (b) and 281.36 (3m) (a); and to create 16.297, 20.395 (6) (ad), 20.445 (1) (bg), 20.505 (1) (fr), 20.835 (2) (cp), 20.866 (2) (uuz), 30.12 (1g) (m), 30.123 (6) (f), 30.19 (1m) (h), 30.195 (7) (b), 61.57 (1) and (2), 62.155 (1) and (2), 66.0203 (2) (bm), 66.0203 (10), 66.0215 (1m), 66.02162 (1m), 66.1105 (20), 67.05 (10m), 71.07 (3w) (bm) 5., 71.07 (3wm), 71.28 (3w) (bm) 5., 71.28 (3wm), 73.0300, 77.54 (65), 84.585, 106.271, 196.192 (1) (b), 196.192 (2m), 196.49 (5g) (ar) 3., 238.03 (5), 238.396, 238.399 (3) (e), 238.399 (4) (b), 238.399 (5) (f) and 281.36 (4m) of the statutes; relating to: authorizing the creation of an electronics and information technology manufacturing zone and, in connection with that zone, authorizing certain tax benefits, creating special provisions for tax incremental districts, creating exemptions from wetland and waterway permits and Public Service Commission certificates; making changes to the enterprise zone tax credit program; authorizing limited use of the design-build construction process; authorizing certain counties to issue debt backed by sales and use tax revenue; facilitating a worker training and employment program; making changes to town incorporation procedures; granting contingent highway bonding authority; and making appropriations.

Analysis by the Legislative Reference Bureau

Electronics and information technology manufacturing zone

This substitute amendment authorizes the Wisconsin Economic Development Corporation to create not more than one electronics and information technology manufacturing zone.

Tax credits

Under the substitute amendment, WEDC may certify certain businesses to claim income and franchise tax credits if a business begins operations in the electronics and information technology manufacturing zone. WEDC may certify such a business for additional income and franchise tax credits, subject to certain limitations, if the business makes a significant capital expenditure in the zone. If the amount of the credit exceeds the taxpayer's tax liability, the taxpayer receives a refund equal to the excess amount. The total amount of all tax credits WEDC may certify under the substitute amendment is $2,850,000,000. WEDC may seek repayment of tax credits under circumstances specified in the substitute amendment, and WEDC must revoke a certification to claim tax credits if a certified business does any of the following:

1. Supplies false or misleading information to obtain the tax credits.

2. Leaves the electronics and information technology manufacturing zone to conduct substantially the same business outside the zone.

3. Ceases operations in the electronics and information technology manufacturing zone and does not renew operation of the business or a similar business in the zone within 12 months.

Sales and use tax exemption

The substitute amendment creates a sales and use tax exemption for the sale of building materials, supplies, and equipment used to construct facilities located in an electronics and information technology manufacturing zone if the capital expenditures for constructing the facilities may be claimed as income and franchise tax credits as certified by WEDC.

Tax incremental financing districts

The substitute amendment creates special provisions that apply to certain tax incremental financing districts (TIDs) if WEDC creates an electronics and information technology manufacturing zone, and a city or village creates a TID that includes the zone.

Under the current tax incremental financing program, a city or village may create a TID in part of its territory to foster development under certain conditions. Currently, towns and counties also have a limited ability to create a TID under certain limited circumstances. Before a city or village may create a TID, several steps and plans are required. These steps and plans include public hearings on the proposed TID within specified time frames, adoption of a resolution, submission of documents to the Department of Revenue within specified time frames, and the preparation and adoption by the local planning commission of a proposed project plan for the TID.

Generally, if a resolution creating a TID is adopted between January 2 and September 30, the TID is considered to have been created on the previous January 1, and if a resolution creating a TID is adopted between October 1 and December 31, its creation date is considered to be the following January 1. In addition, forms required by DOR must be submitted to the department by October 31 of the year in which the TID is created.

Also under current law, once a TID has been created, DOR calculates the “tax incremental base" value of the TID, which is the equalized value of all taxable property within the TID at the time of its creation. If the development in the TID increases the value of the property in the TID above the base value, a value increment is created. That portion of taxes collected on the value increment in excess of the base value is called a “tax increment" and is placed in a fund that may be used only to pay back the project costs of the TID.

The project costs of a TID, which are initially incurred by the creating city or village, include public works such as sewers, streets, and lighting systems; financing costs; site preparation costs; and professional service costs. DOR authorizes the allocation of the tax increments until the TID terminates or, generally, 20 years, 23 years, or 27 years after the TID is created, depending on the type of TID and the year in which it was created. Also under current law, a city or village may not generally make expenditures for project costs later than five years before the unextended termination date of the TID. Under certain circumstances, the life of the TID, the expenditure period, and the allocation period may be extended.

Generally, under current law, expenditures for project costs must be spent within the boundaries of the TID, although limited exceptions allow expenditures to be made within a one-half-mile radius of the TID's boundaries. Also, with regard to TIDs created after September 30, 2004, the territory of which is mostly suitable for industrial sites or mixed-use development, the TIDs must generally terminate not later than 20 years after their creation.

Subject to a number of exceptions, under current law, the equalized value of taxable property of a new or amended TID plus the value increment of all existing TIDs may not exceed 12 percent of the total equalized value of taxable property in the city or village.

Under this substitute amendment, for TIDs that are created in an area that includes an electronics and information technology manufacturing zone (zone), a number of exceptions apply to the normal provisions governing TIDs, including the following:

1. The TID that is created must be an industrial site or mixed-use TID.

2. If the resolution creating the TID is adopted between January 1 and December 1, the creating city or village may decide if the TID is considered to have been created on the January 1 of the year in which the resolution is adopted or on the following January 1, and the forms required by DOR must be submitted before December 31 of the year in which the resolution is adopted or between the following April 1 and the following December 1, depending on the TID's creation date.

3. The 12 percent rule regarding the total equalized value for taxable property in the city or village does not apply to the creation of the TID that includes a zone, and if the creating city or village then creates another TID, the value increment of the TID that includes the zone is not included in the calculation under the 12 percent rule for that new TID.

4. Subject to a number of limitations, the city or village creating the TID may incur expenditures for project costs for any territory that is located in the same county in which the TID is located, provided that the expenditure benefits the TID, and may incur project costs for fire stations, police and fire equipment, and general government operations.

5. Instead of limiting to 20 years the period during which DOR may allocate positive tax increments, the allocation period is 30 years.

6. Instead of requiring the TID to terminate no later than 20 years after creation, the TID must terminate within 30 years after it is created.

7. Instead of limiting the time period during which expenditures may be made to no later than five years before the termination date of the TID, expenditures may be made up to the termination date.

County bonding

The substitute amendment authorizes a county in which a zone is located to issue bonds whose principal and interest are paid only through sales and use tax revenue. Currently, such county debt may be paid only by property tax revenue. Also under current law, county sales tax revenue may be used only for the purpose of directly reducing the county property tax levy.

Town incorporation as a city or village

Once residents of a town file with the circuit court, or the town clerk, a petition to incorporate as a city or village, and once certain town boards initiate a procedure to incorporate as a village, the substitute amendment prohibits any city or village from annexing any of that town's territory until 30 days after the petition is dismissed, all appeals of the petition dismissal are exhausted, or an incorporation referendum is held in the town.

The substitute amendment also authorizes a town that is adjacent to a city or village that contains a zone to incorporate as a city or village if the town approves an incorporation referendum. None of the current law procedures, including hearings, circuit court review, and incorporation review board analysis, apply to such a town's incorporation procedure.

Environmental impact statements

Under current law, all state agencies are required to prepare environmental impact statements for every recommendation or report on proposals for legislation and other major actions significantly affecting the quality of the human environment. A state agency is required to consider an environmental impact statement in its decision-making process, but the statement has no regulatory consequence. Current federal law under the National Environmental Policy Act also requires federal agencies to prepare an environmental impact statement for any major federal action, including for federal permits that are necessary for actions in the state. Under the substitute amendment, a determination regarding the issuance of any permit or approval for a new manufacturing facility within an electronics and information technology manufacturing zone is not a major action for the purpose of the environmental impact statement requirement.

Wetlands and waterway permits exemption

Under federal law, activities involving the discharge of dredged or fill material into “navigable waters” must comply with certain guidelines contained in regulations promulgated by the federal Environmental Protection Agency in order for a discharge permit to be issued by the U.S. Army Corps of Engineers (ACE). Before ACE may issue a permit, the Department of Natural Resources must determine that the project complies with state water quality standards, including those for wetlands (water quality certification). Federal law defines “navigable waters” to be “the waters of the United States.” Generally, courts have interpreted “the waters of the United States” to exclude nonnavigable, isolated, intrastate waters (nonfederal wetlands).

Under current state law, subject to exceptions, no person may discharge dredged material or fill material into a federal or nonfederal wetland unless the discharge is authorized by a wetland general permit or individual permit or the discharge is exempt from permitting requirements. Current law requires DNR to issue wetland general permits for discharges of dredged or fill material into certain federal and nonfederal wetlands. For a discharge into a wetland that is not authorized under a wetland general permit, current law requires a person to apply for and obtain a wetland individual permit. Before DNR may issue a wetland individual permit, it must require the restoration, enhancement, creation, or preservation of other wetlands to compensate for adverse impacts to a wetland resulting from the discharge, also known as mitigation. Under current law, a wetland general or individual permit issued by DNR constitutes water quality certification.

Under this substitute amendment, a person may, without a permit, discharge dredged material or fill material into a nonfederal wetland that is located in an electronics and information technology manufacturing zone if the discharge is related to the construction, access, or operation of a new manufacturing facility that is also located in the zone. With respect to a federal wetland located in an electronics and information technology manufacturing zone, the substitute amendment provides that no state permit is required and that the state waives water quality certification. Under the substitute amendment, a federal permit for such a discharge is still required. The substitute amendment requires any adverse impacts to functional values of federal or nonfederal wetlands in an electronics and information technology manufacturing zone to be compensated at a ratio of two acres per each acre impacted through the purchase of credits from a mitigation bank, participation in the in lieu fee subprogram or escrow subprogram administered by DNR, or completion of mitigation within this state. Under current law, the general minimum ratio is 1.2 acres for each acre affected by the discharge. If compensation occurs through participation in the in lieu fee subprogram, the substitute amendment requires DNR to identify and consider mitigation that could be conducted within the same watershed and authorizes locating mitigation outside the watershed only upon agreement of DNR and the person exempt from wetland permitting.

Under current law, subject to exceptions, no person may do any of the following without a permit issued by DNR: 1) deposit any material or place any structure upon the bed of any navigable water where no bulkhead line has been established or beyond a lawfully established bulkhead line; 2) construct or maintain a bridge or construct, place, or maintain a culvert in, on, or over navigable waters; 3) construct, dredge, or enlarge any artificial water body that connects with an existing navigable waterway; 4) construct or enlarge any part of an artificial water body that is or will be located within 500 feet of the ordinary high-water mark of, but that does not or will not connect with, an existing navigable waterway; 5) grade or remove topsoil from the bank of any navigable waterway where the area exposed by the grading or removal will exceed 10,000 square feet; or 6) change the course of or straighten a navigable stream.

Under the substitute amendment, DNR generally may not require a permit for any of these activities if they relate to the construction, access, or operation of a new manufacturing facility located in an electronics and information technology manufacturing zone. However, the substitute amendment provides that DNR may require a permit for the construction or maintenance of bridges and the construction or placement and maintenance of culverts in a zone if DNR determines that conditions specific to the site require restrictions in order to prevent significant adverse impacts to the public rights and interests, environmental pollution, or material injury to the riparian rights of any riparian owner.

Department of Natural Resources oversight

Except as otherwise specifically provided, the substitute amendment requires DNR to ensure that the conditions of applicable permits, licenses, and approvals under DNR's jurisdiction are met for all activities related to the construction, access, or operation of a new manufacturing facility within an electronics and information technology manufacturing zone, including permits, licenses, and approvals required under current law and any associated rules promulgated by DNR.

Public Service Commission certificates and market-based rates

This substitute amendment exempts public utility projects that primarily serve a new customer within an electronics and information technology manufacturing zone from obtaining a certificate of authority from the Public Service Commission, which current law generally requires for construction, improvement, and other projects of public utilities. The substitute amendment also exempts transmission line relocations within such a zone from obtaining a certificate of public convenience and necessity from the PSC, which current law generally requires before beginning construction of high-voltage transmission lines and associated facilities.