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Tue December 13, 2011
State of Business
From the beginning, Gov. Scott Walker said once he took office his focus would be on creating jobs. During the 2010 campaign, he vowed to create 250,000 private sector positions during his first term. To help, he converted the commerce department into a public-private entity called the Wisconsin Economic Development Corporation, and instructed it to focus exclusively on fostering business growth, rather than also regulating the private sector. Walker also instituted a number of tax breaks for companies that create jobs here. In this installment of Project Milwaukee: State of Upheaval, WUWM’s LaToya Dennis explores the impact the changes are having on business growth. Things are bustling at Cree Ruud Lighting in Sturtevant. Until earlier this year, it had been just Ruud - a firm making commercial and energy efficient lighting. Then, Cree, a company based in North Carolina, specializing in LED lighting bought the Wisconsin operation for $525 million. Construction crews have since broken ground for a gigantic addition.
“Majority of this is going to be a warehouse for the existing products.”
Marty Organ works in marketing.
“What’s basically going to happen is, that’s going to move into here to create more space for manufacturing. So there will be more assembly going on in our existing facility,” Organ says.
The new Wisconsin Economic Development Corporation offered Cree three-quarters of a million dollars in tax credits, plus more than three million dollars for the 470 jobs it expects to add over the next few years. Christopher Ruud is president of Ruud Lighting. He says while the expansion is due to demand for the company’s products, the tax credits ensured the expansion happened here.
“There are other places around the world we could have put these jobs and these assembly capabilities. But the state of Wisconsin was able to put some incentives behind our ability to grow and expand this location. And they made, what I’ll call the most attractive offer for us to finalize on putting the jobs here locally in Racine,” Ruud says.
The company is one of several receiving Wisconsin’s new tax credits for expansion. Paul Jadin is secretary of the state’s reconfigured development agency. He says he understands the concerns people have expressed about the amount of tax credits the state is awarding versus the number of jobs created, but he says you have to keep one thing in mind.
“Credits are earned. In other words if you don’t create the job you don’t get the credit. So it’s something that’s available to you after you’ve performed. Whether it’s on a loan or a tax credit,” Jadin says.
Jadin says he would prefer not to have to give tax credits to companies so they do business here, but that is just today’s competitive reality. Wisconsin is putting a lot more money toward the strategy. WEDC gets around $83 million state dollars to offer businesses incentives, up from $48 million under former Democratic Governor Jim Doyle. Republican leaders have also eliminated income taxes for two years for companies that relocate to Wisconsin and are reducing taxes on manufacturers and agricultural businesses that produce things here. The rate will gradually decline from 7.9 percent to .4 percent. Jadin believes the incentives, plus the fact the GOP has slashed the state’s deficit, are paying off.
“I probably sign about five or six documents a week that address job creation, the investment opportunities and job retention,” Jadin says.
The Small Business Entrepreneur Network now ranks Wisconsin 24th when it comes to states friendly to entrepreneurs. That’s up from 30th. And Wisconsin moved up three places from 43rd to 40th on the Forbes’ list of best states for business. It’s estimated that all in all, the business incentives will cost the state $2.3 billion over the next decade. Abdur Chowdhury, chair of Marquette University’s Department of Economics, questions the trade off.
“We have created very little jobs,” Chowdhury says.
According to the U.S. Department of Labor, Wisconsin has only gained around 20,000 private sector jobs over the past year. Chowdhury says the administration should focus on small businesses, instead of large corporations. Wendy Baumann is president of a small business incubator – the Wisconsin Women’s Business Initiative Corporation. It provides business education and lends money to people looking to venture out on their own. Baumann says she’s excited about what’s in the works for small businesses, especially the expanded role for WHEDA - the Wisconsin Housing and Economic Development Corporation.
“WHEDA actually has guaranteed our loans, WWBIC loans. So if one of our micro-loans meets the specs of WHEDA, the state if you will, will guarantee those dollars. And our dollars might be private dollars we’ve borrowed from banks, they might be other quasi government dollars or public dollars. So for us, that’s very helpful. That allows us to do more lending to small and micro businesses and get that needed capital out on the streets,” Baumann says.
Baumann says starting in January, WHEDA will be able to team with organizations like hers to offer loans to entrepreneurs. While she’s excited about the intensified focus on business growth, right now large businesses are the ones reaping the benefits of Gov. Walker’s policies. The small ones, the majority of job creators, are still waiting.