SB357: Bill Text

2005 - 2006 LEGISLATURE

2005 Senate BILL 357

October 4, 2005 - Introduced by Senators Miller, Hansen, Carpenter, Risser and Wirch, cosponsored by Representatives Musser, Lehman, Molepske, Pocan, Shilling, Black, Zepnick and Berceau. Referred to Committee on Job Creation, Economic Development and Consumer Affairs.

SB357,1,12 An Act to amend 20.001 (intro.), 66.1105 (13), 71.07 (2dx) (a) 4., 71.28 (1dx) (a) 4., 71.47 (1dx) (a) 4., 560.70 (2m) and 560.785 (2) (b); and to create 13.94 (12), 20.926, 20.9265, 560.765 (3) (br) and 560.96 (3) (a) 4. of the statutes; relating to: requiring state agencies, political subdivisions, and housing, redevelopment, and community development authorities, as well as subsidy recipients, to report on subsidies provided to businesses; requiring certain disclosures by business subsidy applicants; prohibiting business subsidies under certain circumstances; requiring the Legislative Audit Bureau to publish a report on business subsidies and to evaluate their effectiveness; defining a full-time job for purposes of development zone tax credits; altering eligibility requirements for development zone and technology zone tax credits; and providing a penalty.

Analysis by the Legislative Reference Bureau

This bill creates reporting and other requirements related to subsidies that are provided to businesses by state and local government agencies. Under the bill, a state agency is any office, department, agency, institution of higher learning, or other body in state government. A local government agency is any political subdivision, any housing, redevelopment, or community development authority, or an entity created by any of them. A business includes a nonprofit business if it has at least 100 full-time employees and the ratio of highest-paid employee to lowest-paid employee exceeds ten to one. A subsidy is defined as public improvements that cost at least $25,000 and that exclusively benefit a single business or a defined group of businesses; a grant or contribution of personal or real property if the grant or contribution has a value of at least $25,000; a transfer of property to a business for at least $25,000 below the property's acquisition cost or fair market value; and a loan of at least $75,000 in value. Subsidies do not include tax credits, housing assistance, assistance provided by the University of Wisconsin System, assistance for the sole purpose of providing job readiness and training services, and certain other benefits.

The bill requires an agency that awards or provides a subsidy to a business to develop criteria for awarding business subsidies and prohibits awarding a subsidy to a business before the criteria are developed. Although no approval of the criteria is required, the criteria must be submitted to the Legislative Audit Bureau (LAB). The criteria must set minimum requirements for a business to meet to be eligible for a business subsidy. If job creation is the public purpose of a subsidy, the criteria must require that all jobs created as a result of the subsidy pay compensation that is equal to at least 200 percent of the federal poverty line for a family of two. Health insurance premiums paid by an employer may be counted toward meeting the compensation amount.

The bill requires an agency that awards a subsidy to enter into an agreement with the business receiving the subsidy. The agreement must contain specified information, including a description of a public purpose for the subsidy (other than expanding the property tax base), measurable goals for the subsidy, the time by which the goals are to be achieved, any financial or other obligation of the business if it does not achieve the goals by the time set in the agreement, and, if the public purpose is job creation or retention, the number of jobs to be created or retained. In the agreement, the business must commit to continuing operations at the location where the subsidy is to be used for at least five years after the full amount of the subsidy is received and generally must commit to using certain equipment purchased through the subsidy in this state for at least five years.

A business that receives a subsidy is required to submit a report to the agency that awarded the subsidy as required by that agency, but not later than 24 months after first receiving the subsidy. Thereafter, the business must submit a report annually until the time that was set in the subsidy agreement for achieving its goals. The information contained in the reports generally addresses the requirements set out in the subsidy agreement. In addition, the business must report on its progress toward achieving its goals and on the wages and cost of health care benefits for each job created or retained as a result of the subsidy. Granting agencies must keep the reports in centrally located and easily accessible files. An agency's file must contain the application, subsidy agreement, and all other documents related to the subsidy and must be open to public inspection. An agency may utilize its public Web site to satisfy this requirement. If a business fails to submit a report by the time it is due, the granting agency must notify the business within 30 days. If the report remains delinquent for six months after the due date, the granting agency must notify the Department of Administration (DOA) and take action for the recovery of the subsidy as specified in the subsidy agreement. In addition, the business may not apply for another subsidy and an agency may not award another subsidy to the business. If the business eventually submits the report, however, it may apply for and be awarded another subsidy with the approval of the secretary of administration.

Annually, by April 1, every agency that received a report during the previous calendar year from one or more businesses that received subsidies must submit a report to LAB that summarizes the information submitted to the agency in the businesses' reports. In addition, the Department of Commerce (Commerce) must annually, by June 1, file a report with LAB that provides specified information about the development zone and technology zone programs. Under these programs, administered by Commerce, businesses located in areas of the state designated as development or technology zones receive tax credits for certain activities, such as job creation. Also, an agency that provides assistance under a statute that specifies the recipient or the amount of assistance must file a report with LAB that identifies the recipient, the amount, and the statute under which the assistance was provided. Annually, by August 1, LAB is required to publish a report for the previous calendar year that: 1) compiles and summarizes the reports received from the agencies that granted business subsidies; 2) includes a report received from Commerce on the development and technology zone programs; 3) includes the reports or specific assistance provided under statutes; and 4) every other year, summarizes Commerce's biennial report on the social, economic, and financial effects of tax incremental financing projects. The report published by LAB must provide information about: 1) the total amount of business subsidies awarded in each county; 2) the distribution of business subsidies, categorized by various characteristics, such as type, amount, and public purpose; 3) the number and percentage of subsidy recipients that achieved their goals within the time set; and 4) the number of jobs created as a result of business subsidies, shown by wage bands. In the report, LAB must compare and evaluate the effectiveness of each business subsidy or program under which business subsidies are provided and must include recommendations for improving the programs.

In addition to the reporting requirements, the bill imposes other requirements related to business subsidies. The bill requires an applicant for a business subsidy to reveal in the application whether the applicant has been found in a court or administrative proceeding to have violated any federal or state environmental or labor law. With certain exceptions, the bill requires that, before a business subsidy is awarded, the agency awarding the subsidy must hold at least one public meeting on the subsidy in the political subdivision in which the applicant proposes to conduct the project for which the subsidy is to be awarded. The bill prohibits an agency from awarding a business subsidy in the form of a grant, loan, or contribution of personal or real property if the applicant intends to use the subsidy to subsidize any portion of the cost of moving its business operations within the state from one political subdivision to another, unless the political subdivision from which the business will be moved consents to the move, or to this state from another state with which this state has entered into an agreement related to businesses moving from one state to another.

Under the development zone programs under current law, Commerce may certify a business for tax credits on the basis of, among other things, the number of full-time jobs that are created in a development zone. A full-time job is defined as a regular, nonseasonal full-time position in which an individual is required to work at least 2,080 hours per year and for which the individual receives a wage equal to at least 150 percent of the federal minimum wage and benefits that are not required by federal or state law. The bill raises the wage requirement in the definition of full-time job under the development zone programs to an amount equal to the wage requirement under the bill for business subsidies that have job creation as the public purpose. Instead of 150 percent of the federal minimum wage, a full-time job must pay compensation that is equal to at least 200 percent of the federal poverty line for a family of two. Health insurance premiums paid by the employer may be counted toward the compensation amount. The bill also imposes a requirement, similar to that imposed under the bill with regard to business subsidies, that certain equipment for which a development zone or technology zone tax credit is claimed generally must be used in this state for at least five years.

For further information see the state and local fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB357, s. 1 Section 1. 13.94 (12) of the statutes is created to read:

SB357,4,3 13.94 (12) Business subsidies report; compilation and summary. (a) In this subsection:

SB357,4,4 1. "Business" has the meaning given in s. 20.926 (2).

SB357,4,5 2. "Business subsidy" has the meaning given in s. 20.926 (3).

SB357,4,6 3. "Grantor" has the meaning given in s. 20.926 (4).

SB357,5,7 (b) Annually, by August 1, the legislative audit bureau shall publish a report that summarizes the business subsidies awarded in the preceding year. The report shall include any information and analysis that the legislative audit bureau determines is relevant and will assist the legislature in evaluating the cost, effectiveness, and equity of investing public moneys in businesses and economic development. The report may include any information and data that is available to the legislative audit bureau and shall include the reports filed under s. 20.9265 (4) (b) and (c) and a compilation and summary of the reports filed under s. 20.9265 (4) (a). In each year after the year in which the legislative audit bureau receives the report under s. 66.1105 (13), the legislative audit bureau shall include a summary of that report in the report under this subsection.

SB357,5,10 (c) The portion of the report under this subsection that is the compilation and summary of the reports under s. 20.9265 (4) (a) shall include at least all of the following information:

SB357,5,11 1. The total amount of business subsidies awarded in each county of the state.

SB357,5,12 2. Distribution of business subsidies, categorized by subsidy amounts.

SB357,5,14 3. Distribution of business subsidy amounts, categorized by the length of time over which the subsidy is provided.

SB357,5,16 4. Distribution of business subsidies, categorized by type of subsidy, amount of subsidy, and public purpose.

SB357,5,18 5. The percentage and number of recipients that reached their goals by the times specified in their subsidy agreements under s. 20.9265 (2) (a) 6.

SB357,5,20 6. The percentage and number of recipients that reached their interim goals, if any.

SB357,5,22 7. The percentage and number of recipients that did not reach their goals by the times specified in their subsidy agreements under s. 20.9265 (2) (a) 6.

SB357,5,25 8. The total dollar amount of business subsidies provided to recipients that did not reach their goals by the times specified in their subsidy agreements under s. 20.9265 (2) (a) 6.

SB357,6,2 9. The number of jobs created as a result of business subsidies, shown in separate wage bands, as defined in s. 20.926 (10).

SB357,6,4 10. Fringe benefits paid or otherwise provided as a result of business subsidies, shown in separate wage bands, as defined in s. 20.926 (10).

SB357,6,10 (d) The compilation and summary of the reports under s. 20.9265 (4) (a) shall be presented in a manner that allows for comparisons across time periods and among grantors and, in addition, shall include sufficient information to enable comparisons between wages paid and fringe benefits provided by new jobs created as a result of business subsidies and wages paid and fringe benefits provided by comparable jobs in each area in which the new jobs are created.

SB357,6,17 (e) In addition to summarizing and compiling the reports under s. 20.9265 (4) (a), the legislative audit bureau shall include in the report under this subsection a comparison and evaluation of the effectiveness of each business subsidy, or program under which business subsidies are provided, in achieving a public purpose and recommendations for improving the programs. The legislative audit bureau is not required to compare and evaluate under this paragraph the programs included in the reports filed under s. 20.9265 (4) (b) and (c).

SB357,6,21 (f) The legislative audit bureau may develop a report form for the manual or electronic submission of the report required under s. 20.9265 (4) (a) to ensure that the appropriate data is collected to enable the legislative audit bureau to satisfy the requirements under this subsection.

SB357,6,22 (g) The report under this subsection is open to public inspection.

SB357, s. 2 Section 2. 20.001 (intro.) of the statutes is amended to read:

SB357,6,25 20.001 Definitions and abbreviations. (intro.) In Except as otherwise provided, in this chapter terms and abbreviations have the following meanings:

SB357, s. 3 Section 3. 20.926 of the statutes is created to read:

SB357,7,3 20.926 Definitions for business subsidy awards and reports. In this section and s. 20.9265:

SB357,7,4 (1) "Agency" means a state agency or a local government agency.

SB357,7,5 (2) "Business" means any of the following:

SB357,7,6 (a) A person engaged in a business enterprise for profit in this state.

SB357,7,10 (b) An organization or enterprise operating not for profit in this state that has at least 100 full-time employees with a ratio of highest-paid to lowest-paid employee that exceeds 10 to one, determined on the basis of full-time equivalent positions.

SB357,7,12 (3) (a) Except as provided in par. (b), "business subsidy" means any of the following:

SB357,7,15 1. Public improvements that cost at least $25,000, that are made to buildings or lands owned by the state or a political subdivision, and that exclusively benefit a single business at the time that the improvements are made.

SB357,7,17 2. Any of the following that has a cost to an agency or the state of at least $25,000 and that is given to a business by an agency:

SB357,7,18 a. A grant.

SB357,7,19 b. A contribution of personal or real property or infrastructure.

SB357,7,22 2m. A transfer of property to a business by an agency for consideration that is at least $25,000 below the property's acquisition cost or fair market value, whichever is greater, at the time of the transfer.

SB357,7,23 3. A loan of at least $75,000 that is given to a business by an agency.

SB357,7,24 (b) "Business subsidy" does not include any of the following:

SB357,8,2 1. Assistance for the sole purpose of providing job readiness and training services.

SB357,8,3 2. Housing assistance.

SB357,8,4 3. Energy conservation assistance.

SB357,8,7 4. A reduction or deferral of any tax or fee, including tax credits under ch. 71, general tax reductions, and tax reductions resulting from conformity with federal law.

SB357,8,9 5. General changes in the tax incremental financing laws and other general tax law changes.

SB357,8,10 6. Worker's compensation and unemployment compensation.

SB357,8,11 7. Payment to a person from an agency for the purchase of goods or services.

SB357,8,12 7m. Payments made under ch. 32.

SB357,8,15 8. Funds from bonds issued for the benefit of any institution, facility, or organization described in section 501 (c) (3) of the Internal Revenue Code that is exempt from federal taxation under section 501 (a) of the Internal Revenue Code.

SB357,8,16 9. Assistance for a consortium, as defined in s. 560.60 (3).

SB357,8,17 10. Any assistance provided by the University of Wisconsin System.

SB357,8,19 11. Assistance provided by the department of transportation, except for assistance provided under s. 84.185 or any similar programs.

SB357,8,21 12. Federal loan funds provided through the U.S. economic development administration.

SB357,8,23 13. Assistance provided by an agency under a statutory provision that identifies the specific recipient or the specific amount.

SB357,8,24 14. Loans and investments made by the investment board.

SB357,9,3 (3m) "Development zone" means a development zone under ss. 560.71 to 560.78, a development opportunity zone under s. 560.795, or an enterprise development zone under s. 560.797.

SB357,9,4 (4) "Grantor" means an agency that awards or provides a business subsidy.

SB357,9,8 (5) "Local government agency" means a political subdivision, housing authority created under ss. 66.1201 to 66.1211, redevelopment authority created under s. 66.1333, or community development authority created under s. 66.1335, or an entity created or authorized by any of them.

SB357,9,9 (6) "Political subdivision" means a city, village, town, or county.

SB357,9,11 (7) "Recipient" means a business that benefits from a business subsidy under sub. (3) (a) 1. or that receives a business subsidy under sub. (3) (a) 2., 2m., or 3.

SB357,9,16 (8) "State agency" means an office, department, agency, institution of higher education, association, society, or other body in state government that is created or authorized to be created by the constitution or a law, including an authority created under ch. 231, 233, 234, or 237. "State agency" does not include the legislature or the courts.

SB357,9,17 (9) "Technology zone" means a technology zone under s. 560.96.

SB357,9,23 (10) "Wage band" means a range of wages, with the lowest range beginning with the federal minimum wage and ending with the wage reflected by rounding the federal minimum wage up to the nearest whole dollar and subtracting one cent, and with each subsequent range beginning with the nearest whole dollar that is greater than the highest wage included within the previous range and ending with the wage reflected by adding 99 cents to that whole dollar.

SB357, s. 4 Section 4. 20.9265 of the statutes is created to read:

SB357,10,10 20.9265 Business subsidies; awarding and reporting requirements. (1) Developing criteria; application requirements; public hearings; prohibitions. (a) Every grantor shall develop criteria for awarding business subsidies. The criteria shall set minimum requirements that a business must meet to be eligible for a business subsidy. The criteria shall provide that, if the public purpose for the subsidy is job creation, all jobs created as a result of the subsidy must provide compensation that is equal to at least 200 percent of the federal poverty line, as defined under 42 USC 9902 (2), for a family of 2 persons. Compensation may include health insurance premiums paid by the employer on behalf of the employee, for purposes of determining whether this requirement is met.

SB357,10,12 (b) A grantor may not award a business subsidy until the grantor has developed the criteria required under par. (a).

SB357,10,20 (c) A copy of the criteria developed under par. (a) shall be submitted along with the first annual report filed by the grantor under sub. (4). A copy of any changes to the original set of criteria developed under par. (a) shall be submitted along with the first annual report that is filed by the grantor after the changes are made. If in awarding a business subsidy a grantor deviates from the criteria developed under par. (a), the grantor shall document the reason for the deviation in writing and submit a copy of that documentation along with the first annual report that is filed by the grantor after the deviation occurs.

SB357,11,2 (cm) 1. A business that applies for a business subsidy shall reveal in the application whether, in the preceding 5 years, the business has been determined by an administrative proceeding, civil action, criminal action, or other legal proceeding to have violated any federal or state environmental or labor law. For purposes of this paragraph, issuance of an order or acceptance of an agreement requiring corrective action or a stipulated fine, forfeiture, or other penalty constitutes a determination of a violation, regardless of whether there is a finding or admission of liability.

SB357,11,5 2. For a violation described in subd. 1. that resulted in a finding, the business shall describe the finding and the penalty assessed and shall specify the entity that made the finding and the location of the public records relating to the matter.

SB357,11,11 3. For a violation described in subd. 1. that resulted in an agreement for corrective action or a stipulated fine, forfeiture, or other penalty, the business shall provide a summary description of the violation that led to the agreement or stipulation and, if the agreement or stipulation is a public record, a summary description of the agreement or stipulation and the location of the agreement or stipulation as a public record.

SB357,11,20 (d) 1. Except as provided in subds. 2. and 3., before awarding a business subsidy of $500,000 or more, a grantor shall hold at least one public meeting in the political subdivision in which the business proposes to conduct the project for which the subsidy will be used. The public meeting must be held not less than 30 days before a final decision is made on whether to award the subsidy. The purpose of the meeting shall be to provide information and receive public comment about the subsidy. The grantor shall give notice of the meeting in a manner that is likely to give notice in the political subdivision in which the business proposes to conduct the project for which the subsidy will be used.

SB357,11,23 2. Subdivision 1. does not apply if, under another process that is separate and distinct from the process under this section, at least one public hearing has been held with respect to the project for which the subsidy will be used.