• A fee equal to the lesser of the following amounts:
• 0.175 cents per bushel of producer grain that the grain dealer procured in this state during the grain dealer's last completed fiscal year (the grain dealer must report the number of bushels of grain procured).
• $15,000.
• $100 per business location in excess of one location (regardless of the grain dealer's annual grain purchase amount).
• A surcharge of $500 if the grain dealer operated without a license at any time during the preceding year (same as current law).
• A surcharge of $100 if the grain dealer, during the preceding year, failed to file a required financial statement by the required filing deadline (same as current law).
• A surcharge of $100 if the grain dealer failed to file a license renewal application by the license expiration date of August 31 (same as current law).
This rule eliminates the following current grain dealer fees and surcharges:
• $45 fee per truck.
• $425 surcharge for submitting a required financial statement that is not an audited financial statement.
Grain Dealer Fund Assessments
Current Assessments. Under current law, a contributing grain dealer must pay the following annual fund assessments:
• A basic assessment, based on a formula that considers the total dollar value of Wisconsin grain purchased in the grain dealer's last completed fiscal year, the grain dealer's current ratio, and the grain dealer's debt-to-equity ratio. Other things equal, the formula yields declining basic assessments over time.
• A deferred payment assessment, if the grain dealer uses deferred payment contracts (which carry higher financial risk). The assessment equals total deferred payments for Wisconsin grain in the grain dealer's last completed fiscal year, multiplied by the following rate:
• 0.0035 if the grain dealer has contributed to the fund for less than 5 years.
• 0.002 if the grain dealer has contributed to the fund for 5 years or more.
Under current law, there is a minimum total assessment of $20 (basic assessment plus deferred payment assessment).
Proposed Assessments.
• Basic assessment. This rule does not change the calculation of a grain dealer's basic fund assessment (the formula continues to generate declining assessments over time), except that this rule creates a new minimum assessment based on volume (applies only to basic assessment):
• $20 for grain dealers who procured less than $500,000 worth of Wisconsin grain in the preceding license year.
• $200 for grain dealers who procured at least $500,000 but less than $3,000,000 worth of Wisconsin grain.
• $500 for grain dealers who procured Wisconsin grain worth $3,000,000 or more.
• Deferred payment fund assessment. Under this rule, the deferred payment assessment equals the grain dealer's total deferred payments for Wisconsin grain in the grain dealer's last completed fiscal year, multiplied by 0.0035 (regardless of how long the grain dealer has contributed to the fund). There is no minimum deferred payment assessment.
Grain Warehouse Keeper License Fees
Current fees. Under current law, a grain warehouse keeper must pay the following annual license fees and surcharges:
• A nonrefundable license processing fee of $25, plus an additional nonrefundable processing fee of $25 for each separate warehouse in excess of one warehouse.
• An inspection fee based on the combined capacity of the grain warehouse keeper's warehouses:
• A supplemental inspection fee of $275 for each grain warehouse that the grain warehouse keeper operates in excess of one warehouse.
• A surcharge of $500 if the grain warehouse keeper operated without a license at any time during the preceding year.
• A surcharge of $100 if the grain warehouse keeper failed to file an annual financial statement by the applicable deadline.
• A surcharge of $100 if the applicant fails to renew a license by the license expiration date of August 31.
Proposed Fees. This rule changes the calculation of grain warehouse inspection fees, but makes no other changes to current grain warehouse keeper license fees or surcharges. The current inspection fee schedule (see above) is replaced by a formula. Under the new formula, a grain warehouse keeper pays an annual inspection fee equal to the lesser of the following amounts:
• The warehouse keeper's highest daily grain obligations to depositors (in bushels) in the preceding license year, multiplied by 0.3 cent per bushel.
• $15,000.
Grain Warehouse Keeper Fund Assessments
Current Assessments. Under current law, a grain warehouse keeper must pay an annual fund assessment based on a formula that considers the warehouse keeper's licensed storage capacity, current ratio and debt-to-equity ratio. Other things equal, the formula yields declining assessments over time. There is a minimum assessment of $20.
Proposed Assessments. Under this rule, a grain warehouse keeper must pay an annual fund assessment that is 50% higher than the assessment generated by the current formula (the formula does not change, and continues to yield declining assessments over time). There is a new minimum assessment based on storage volume:
• $20 for grain warehouse keepers whose storage capacity is less than 300,000 bushels.
• $100 for grain warehouse keepers whose storage capacity is at least 300,000 but less than 500,000 bushels.
• $250 for grain warehouse keepers whose storage capacity is 500,000 bushels or more.
Milk Contractor License Fees
This rule makes no changes to current milk contractor license fees.
Milk Contractor Fund Assessments
Current Assessments. Under current law, a contributing milk contractor must pay an annual fund assessment based on a formula that considers the milk contractor's total Wisconsin milk payroll obligations for the contractor's last completed fiscal year, the milk contractor's current ratio, and the milk contractor's debt-to-equity ratio. Other things equal, the formula yields declining assessments over time. There is a minimum assessment of $20.
Proposed Assessments. This rule does not change the calculation of milk contractor fund assessments (the current formula continues to generate declining assessments over time), except that this rule creates a new minimum assessment based on the contractor's total Wisconsin milk payroll obligations in the contractor's last completed fiscal year:
• $20 for milk contractors with annual Wisconsin milk payroll obligations of less than $1,500,000.
• $200 for milk contractors with annual Wisconsin milk payroll obligations of at least $1,500,000 but less than $6,000,000.
• $500 for milk contractors with annual Wisconsin milk payroll obligations of $6,000,000 or more.
Vegetable Contractor License Fees
Current Fees. Under current law, vegetable contractors must pay the following annual license fees and surcharges:
• A nonrefundable license processing fee of $25.
• A fee of $25 plus 5.75 cents for each $100 in Wisconsin vegetable procurement contract obligations (to vegetable producers) that the contractor incurred during the contractor's last completed fiscal year. This fee does not apply to “nonparticipating processing potato buyers."
• A $500 fee if the vegetable contractor is a “nonparticipating processing potato buyer."
• A $500 surcharge if the vegetable contractor operated without a license at any time during the preceding year.
• A $100 surcharge if, during the preceding year, the vegetable contractor failed to file a required financial statement by its due date.
• A $100 surcharge if the vegetable contractor failed to file a license renewal application by the license expiration date of January 31.
Proposed fees. This rule increases the license fee component that is based on annual Wisconsin vegetable procurement contract obligations. It increases that fee component to $25 plus 8.75 cents (currently 5.75 cents) for each $100 in contract obligations.
This rule replaces the current $500 fee for “nonparticipating potato buyers" with a fee equal to the lesser of the following amounts:
• $25 plus 8.75 cents for each $100 in annual contract obligations (same as other vegetable contractors).
• $2,000.
This rule makes no other changes to current vegetable contractor license fees or surcharges.
Vegetable Contractor Fund Assessments
Current Assessments. Under current law, a contributing vegetable contractor must pay an annual fund assessment based on a formula that considers the contractor's total vegetable procurement contract obligations during the contractor's last completed fiscal year, the contractor's current ratio, and the contractor's debt-to-equity ratio. Other things equal, the formula yields declining assessments over time. There is a minimum assessment of $20.
Proposed Assessments. This rule does not change the calculation of vegetable contractor fund assessments (the current formula continues to generate declining assessments over time), except that this rule creates a new minimum assessment based on contract volume:
• $20 for vegetable contractors with contract obligations of less than $500,000.
• $200 for vegetable contractors with contract obligations of at least $500,000 and less than $4,000,000.
• $500 for vegetable contractors with contract obligations of $4,000,000 or more.
Business Impact
Agricultural Producers
This rule will benefit Wisconsin producers of grain, milk and vegetables, by preventing the erosion of the producer security program that helps protect them against catastrophic financial defaults by grain dealers, grain warehouse keepers, milk contractors and vegetable contractors (collectively “contractors").
This rule will generate enough license fee revenue to continue critical financial security monitoring activities, such as grain warehouse inspections and review of contractor financial statements. Without this rule, DATCP would have to curtail key monitoring activities that help control potentially catastrophic financial risks to producers and to the producer security fund.
This rule will also reverse the current diversion of fund assessment revenues from the agricultural producer security trust fund (to subsidize operating deficits in the grain and vegetable sectors). That will yield a slightly increased rate of fund growth which will, in turn, provide greater protection for producers in the event of a catastrophic contractor default.
This rule will not increase costs for agricultural producers, or have any significant impact on commodity prices paid to producers.
Contractors
This rule affects license fees and fund assessments paid by grain dealers, grain warehouse keepers, milk contractors and vegetable contractors, but does not change other contractor regulations.
Current Cost to Contractors. Current license fees and fund assessments represent a very small share of overall contractor costs. For example:
• Current grain dealer license fees and fund assessments represent only about 11 hundredths of one percent of the grain dealers' annual Wisconsin grain procurement costs ($672,000 in fees and fund assessments, compared to $599 million in grain purchased from Wisconsin producers in FY 2005-06).
• Current grain warehouse keeper license fees and fund assessments represent less than 2 hundredths of one percent of the grain warehouse keepers' annual Wisconsin “cost of sales" ($210,000 in fees and fund assessments, compared to about $1.7 billion in “cost of sales" for FY 2005-06).
• Current milk contractor license fees and fund assessments represent only about 3 hundredths of one percent of the contractors' annual Wisconsin milk procurement costs ($1.2 million in producer security license fees and fund assessments, compared to about $3.5 billion paid for milk produced by Wisconsin farmers in FY 2005-06).
• Current vegetable contractor license fees and fund assessments represent only about 8 hundredths of one percent of the contractors' annual vegetable procurement costs ($138,000 in producer security license fees and fund assessments, compared to $170 million in procurement contract obligations to Wisconsin producers in FY 2005-06).
Current contractor license fees and fund assessments represent an even smaller share of overall contractor costs (including costs for labor, buildings, equipment, debt service, overhead, etc., in addition to commodity procurement costs).
Declining Costs. Total contractor license fees and fund assessments will actually decline over the next few years, because of fee credits and declining formula rates built into the producer security law itself. This rule will reduce the rate at which overall contractor fees and fund assessments decline. But even with this rule, the total of all contractor license fees and fund assessments will be about 5% lower in FY 2009-10 than in FY 2005-06 (other things equal).
Total license fees and fund assessments will decline in every business sector except the grain dealer and grain warehouse sector, where license fees and assessments will increase to pay a proportionate share of administrative costs and to provide a proportionate contribution to the producer security fund.
The following table shows
combined total license fees and fund assessments by business sector for FY 2005-06. It also compares projected totals for FY 2009-10
with and
without this rule:
Total Contractor License Fees and Fund Assessments
(Net of Credits)
|
|
FY 2005-06
|
FY 2009-10*
Without this rule
|
FY 2009-10*
With this rule
|
Grain Dealers
|
$672, 000
|
$395,000
|
$674,000
|
Grain Warehouse Keepers
|
$210,000
|
$169,000
|
$428,000
|
Milk Contractors
|
$1,272,000
|
$1,018,000
|
$1,027,000
|
Vegetable
Contractors
|
$138,000
|
$42,000
|
$48,000
|
TOTAL
|
$2,292,000
|
$1,624,000
|
$2,177,000
|
* Projection assumes constant procurement volumes, commodity price levels and contractor financial strength.
The projected decline in total license fees and fund assessments (with or without this rule) results from the following features built into the current producer security law (this rule will not change those features):
• License fee credits. If the fund balance contributed by an industry sector reaches a specified statutory threshold, a portion of the balance is returned to contributing contractors in that sector (as a credit on their license fees). Contributing vegetable contractors are already enjoying credits that significantly reduce their license fees, and milk contractors began receiving credits in May, 2007. Those credits will dramatically reduce fees for contributing contractors, even when this rule is in effect.
• Falling assessment rates. Under the producer security law, fund assessment rates decline after a contractor has contributed to the fund for a specified number of years (4 to 6 years depending on contractor type and financial condition). Because the producer security fund is about five years old, most contributing contractors are now beginning to pay significantly lower fund assessments than they were a short time ago. That trend will continue, regardless of this rule.
Effects Vary Between Contractors. The impact of this rule may vary considerably between individual contractors within a business sector. License fees and assessments may be affected by a number of variables, including contractor size, contractor financial strength, contractor risk practices and commodity prices.
