Sunday, November 10, 2013

More empty job promises and WEDC failures

Bad jobs news this week, as APAC Customer Service Inc., in Green Bay announced they were laying off 282 employees by the end of the year, citing "a loss of client business". It is great contrast to what APAC was saying at the end of 2012, as they were in the news at that time planning a huge expansion in GB.
The termination notification comes less than a year after APAC announced plans to add 275 jobs, mostly handling inbound customer service calls at the downtown office, 301 N. Adams St. At the time, those staff increases were seen as a positive sign of revitalization efforts in downtown Green Bay.

APAC is listed as the No. 23 largest private employer in the Green Bay area with 725 employees, according to a recent list from Advance, the economic employment division of the Green Bay Area Chamber of Commerce.
One additional item to note in this APAC story is that it also received $250,000 in WEDC tax credits since 2011 (as shown on page 13 of this LFB report), as an incentive to have APAC retain 800 jobs in the Green Bay area. One has to wonder what kind of information WEDC had that made them decide APAC was on solid enough ground to deserve that $250,000 write-off.

WEDC was in the news this week for another reason, as the Joint Finance Committee canceled a meeting to discuss whether to release $44 million to the organization. This money was held back pending an examination of WEDC's procedures to see if they had made progress in tracking loans to corporations and improved other oversight duties. JFC Co-Chair John Nygren indicates that the JFC needs more time to take a look at WEDC's plans to make sure it is meeting the oversight goals, and that the JFC won't give WEDC the money until they have more confidence in what they are doing. Sounds like someone's a little worried in WisGOP land about WEDC getting more negative publicity with an election looming less than a year away- but if it leads them to do the right thing, I suppose that's not so bad.

Keep these developments in mind when " you look at the $7 million in tax credits WEDC is giving to to locate its new warehouse in Kenosha. This is in addition to the $18 million TIF the City of Kenosha is giving to the corporation, and WEDC felt Amazon's warehouse was worth taking the gamble on.
The $7 million tax credit can be used over 10 years and only will be applicable to the company’s state income tax liability, said Mark Maley, spokesman for the Wisconsin Economic Development Corporation. The company can decide to use it all at once or spread the tax credit over multiple years, he said

Use of the tax credit by the online retail giant is contingent upon two criteria: that the company deliver the 1,100 jobs promised and that the company invest about $140 million in capital investments, including the purchase of equipment and other tools necessary for the development....

Maley said the project — which will require the building of a massive warehouse near Interstate 94 — will be close to a $200 million development. The $7 million tax credit is a wise investment on the state’s behalf because of the project’s scope, he said.
Of course, I'm curious to know just how heavily WEDC will keep Amazon to its promises if the jobs or warehouse development doesn't end up paying off, and if it's a long-term investment, or just something that goes up for a few years and goes away once the economy has a downturn or Amazon decides it can deliver its product in a different way.

In addition, the TIF means local property taxpayers, and not Amazon, will be the ones to shell out for the new roads, infrastructure and services required to run such a huge warehouse over the next 2 years. For example, it would seem that Kenosha Area Transit might need to service this part of town more, given the need to get a large amount of people to the job site, so has KAT's schedule or funding been adjusted appropriately to deal with this, either now, or for when the new facilty opens?

Yes, Amazon is claiming it'll add 1,000 jobs as a result of the new warehouse, possibly as soon as next Fall, but take a look at how APAC was also promising big things this time last year, and contrast it to the layoffs that are happening there now. You also should wonder what kind of promises were made by Amazon in return for this major tax write-off. Is it linked to future campaign contributions or GOP support for laws that keep wages down at the Kenosha plant? Was the WEDC part of the package given to Amazon hastily put together in reaction to Mary Burke entering the race for governor (as we know the $100 million property tax giveaway was), and has the short-term financing and long-term ramifications been adequately analyzed? And is Amazon going to be pressured by WEDC and Walker Administration officials to get the warehouse open in time for the 2014 elections, even if it's not ready to go?

I'm not saying it's a bad thing that this huge warehouse is going to be built in Kenosha, and it certainly could be a stimulator for other economic activity in the area by attracting a larger pool of talent and other businesses to the stateline area near I-94. But as we saw with APAC in Green Bay, promises of job creation and future growth don't always match up to the reality, and the results should be monitored well after the pictures of the Chamber of Commerce types pose with their shovels. Expect more of these big promises and large giveaways in the near future, especially from a Walker Administration desperate to show job growth and "improved business conditions" ahead of November 2014.You should be skeptical that any of these job promises can be kept, or that it'll be worth the increased cost to communities and taxpayers in the short term to make up the difference.

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