First, let's go into detail about what Walker's ad is about. Wispolitics has a good summary page, complete with source documents. In the Kenosha case, the U.S. Department of Housing and Urban Development (HUD) is complaining that the state misused its Community Development Block Grant funds, and now wants their money back. The Commerce Department used over $12.5 million in CDBG funds to purchase a 40-acre plot of land in the Village of Pleasant Prairie in 2006, and then handed it over to the Kenosha Area Business Alliance (KABA) to work on locating Abbott Labs' new headquarters at the site, as well as a hotel and conference center nearby. Well, given that it was right before the Bush Recession, the deal fell through, and nothing was developed as a result.
By 2013, the Inspector General's Office was complaining to the state that not enough was going to be done and they wanted their money back. Interestingly, Walker’s own administration responded in May 2013 that another major job creation had happened because of the purchase Burke signed off on in 2006, and that they still held out hope that Abbott Labs would one day relocate to the site. As DOA Administrator Lisa Marks wrote
The illustration provided illustrates the development and job creation which has occurred near this site that would have not occurred if this land would not have been acquired and controlled with KABA with the CDBG funds. An example of the positive impact is the investment Uline made in constructing a new corporate headquarters and corporate campus that currently employs 852 persons. Uline plans to construct an additional 1.2 million sq. ft distribution facility that will employ another 400 persons.The Uline part of the letter is especially interesting, as it contradicts the claims of the CEO at ULine. In fact, Gov Walker was just in Pleasant Prairie with CEO Richard Uihlein and his wife Liz 2 months ago for a "building expansion" announcement, with Liz Uihlien talking up the state's "spirit of entrepreneurship." So why would the Uihleins say one thing when Walker’s own administration is telling the feds the Burke land deal should be given some credit for this expansion? It wouldn’t have to do with the $300,000+ that the Bradley heirs in the Uihlein family have given Walker’s campaign over the last 3 years, would it? Naaah, these CEOs can’t be that cynical and full of shit…
The information provided strongly demonstrates the positive effect this CDBG investment has made in Pleasant Prairie and the jobs that have been created. It has allowed the Village to remove slum and blight from the area and has created an environment in which Abbott Laboratories will want to move forward and construct their campus, which will create hundreds of additional jobs.
But I digress. HUD wants $12.3 million back from the original 2006 CDBG grant that Burke signed off on for the Pleasant Prairie site. They also want to get back $2.66 million that was related to an entrepreneurship center run through the UW-Extension in Juneau County. This center did result in business plans that led to an estimated 3,753 jobs being created, but only about 8% of the participants were discovered to be defined as "low and moderate-income," and therefore it caused an improper use of the funds.
There also was a $225,000 grant to the Village of Kronenwetter that was to go to the Woods Equipment Company, but again, it didn't serve the low and moderate-income people, so it has to be paid back. Lastly, there's a $1 million stimulus grant from 2009 that was for a “green technology training and enterprise center” in the Sauk County village of Plain. That building in Plain has been up and hosting classes since 2012, and the architects who built the project are clearly proud of their work on it.
AEI’s holistic system design of basic, energy-saving features for the 11,000 sf facility was so fully integrated with the preliminary architectural composition that the building design remained virtually unchanged through construction. Energy loads were significantly reduced through optimal building massing, operable windows, a high performance envelope, high-efficiency lighting, and daylight harvesting. As a result, radiant heating and cooling and a 14-well geoexchange field became feasible to further reduce energy consumption. Other energy-efficient features include: a dedicated outdoor air system for ventilation and humidity control with a total energy wheel; a condensing boiler; low-flow plumbing fixtures; and, a 20+ kW photovoltaic system. Dedicated to training local workers in green technologies, the G-TTEC serves as a practical demonstration of sustainable design for local industries. The facility is anticipated to reduce overall energy usage by an estimated 74 percent versus an ASHRAE 90.1-2007 baseline.The problem is that 31% of the people who received this training and work on the project were from low and moderate-income backgrounds, which means it fell short of the 51% threshold for the CDBG goal, and therefore shouldn't have been done under a low-income-geared CDBG grant.
In all these cases, there was actually economic activity generated from these grants, but props to the feds for doing their due diligence and trying to recover taxpayer dollars that were misused. And on the subject of CDBG abuse, the Walker folks may not want to push this “Mary Burke and the Doyle Administration wasted taxpayer dollars" angle too much, because it leads right back to a scandal involving our old friends at the Wisconsin Economic Development Corporation (WEDC).
Because WEDC was accused of misusing CDBG funds in 2011 and 2012. Badger Democracy’s Scott Wittkopf did great work uncovering this story in late September 2012, which showed that WEDC was being used as the agency to send money out from with CDBG grants, when HUD said the state had no right to do so, because of WEDC’s lack of accountability. It led HUD to block state officials from accessing its grants management technology, and HUD threatened to remove all CDBG funds from the state if the Walker Administration didn’t clean its act up.
Wittkopf then followed up with HUD’s findings in early October 2012. among other things, HUD said
1. The state fails to follow its own program guidelines. In one case, a loan for Kapco corporation in Polk County was approved with a per job benefit of $20,000; in spite of a state plan maximum of $10,000. The loan to Kapco was eventually forgiven, in spite of written state policy that “loans are only forgivable under extraordinary circumstances.” Since 1/1/11, eleven of twenty loans under this plan were forgiven. As part of interview comment, WEDC staff told HUD officials:In fact, this screw-up had repercussions in the next budget, as the Legislative Fiscal Bureau described in its paper on the state's CDBG programs in Spring 2013.
Certain jobs were considered more valuable to the state, so limits were exceeded, projects received forgivable loans. The HUD report was scathing, saying the process had no documentation where there should be a “transparent and defensible process.”
2. Underwriting – Two CDBG awards received no underwriting, bringing into question a wide range of accountability issues. Gilman Corp in Grafton was “skipped to accommodate the business timeline” according to interviewed state staff. Morgan Aircraft in Sheboygan County was claimed to have been performed by WEDC, but as of the report date, no underwriting had been submitted to HUD.
3. Administration and financial management – From 7/1/11 – 3/7/12, WEDC awarded $9,634,470 in CDBG funds that were unauthorized – as it was not recognized as a state agency and oversight by DOA had not been approved by HUD.
6.The Legislative Audit Bureau (LAB) is required by law to conduct the following biennial audits of WEDC, beginning in 2013: (a) a financial audit of WEDC; and (b) a program evaluation audit of the economic development programs administered by WEDC under Chapter 238 of the Wisconsin Statutes. In addition, as part of its annual financial and compliance audit of the State of Wisconsin, the LAB reviews the finances of DOA. In its 2011-12 single audit of the State of Wisconsin (released March, 2013), the LAB identified a number of concerns relating to WEDC's administration of CDBG funds and issued recommendations to correct the deficiencies.And oh yeah, the Walker Administration didn't account for these positions when it took pre-written ALEC legislation in 2011, abolished the jobs at the Department of Commerce that handled these duties, and moved the responsibilities to WEDC. So we are now shelling out another $250,000 a year in taxpayer dollars to hire people that will adequately handle these CDBG grants. The DOA has had this oversight of Wisconsin's CDBG since July 2013, so at least WEDC isn’t abusing more CDBG dollars today (that we know of).
7. According to DOA, a complete evaluation of the CDBG economic development and community development programs will be conducted by the Department, and changes will be made to the program administration to meet the requirements of HUD and the recommendations of the LAB. The administration indicates that several items identified by the evaluating agencies should be addressed. The administration acknowledges that DOA should: (a) hire an administrator for the CDBG non-housing programs (a Bureau Director for the Bureau of Economic and Community Development); (b) review projects dating back to 2004 to confirm that documentation maintenance has been properly performed and demonstrates compliance with citizen participation and environmental oversight and review requirements; (c) address any lack of required documentation; (d) review the federal Integrated Disbursement and Information System data entries to verify proper documentation for projects dating back to 2004; (e) establish accounting record accuracy (grant and loan balances and WEDC account close-out); (f) conduct monitoring visits of CDBG fund recipients to establish that funds are expended for allowable activities only; (g) provide for accurate submittal and collection of program income; (h) adequately track loans; and (i) review current application, implementation, and program management documents.
8. In addition to the above, DOA indicates that the transfer of CDBG responsibilities from WEDC will also require commitment of staff. The positions would identify all projects to be transferred, verify that project documentation is complete, and transfer paper and electronic documents and data. The positions would also perform day-to-day duties relating to the administration of the program funds...
But you have to wonder why WEDC was even given those CDBG federal taxpayer dollars in the first place. Was it to allow certain favored companies to get their hands on it, and use it for purposes other than what the grant was intended for? It also makes me wonder what kind of kickbacks or other promises were made to make them a favored company to be “trusted” with these funds. Bottom line: the Walker boys made mistakes that drew the ire of HUD, and jeopardized future state funding under the CDBG. It's similar to the mistakes that is leading the state to have to pay back up to $16 million in CDBG money from the Doyle years, except the Walker finding comes with a lot more sketchiness and even less oversight!
I understand that sometimes administrations feel they have to take risks in order to try to grow the economy, and sometimes those risks don’t work out, or work out in a different way than imagined. Especially with the feds dangling money in front of the state to use, it’s probably a worthwhile bet. But maybe it’s time we stop using these grants to as carrots for companies, and instead use money for poverty programs as direct aid to people and actually have the government be the ones that hire folks for projects. This would take out the middleman, and reduce the short-term burden on the taxpayers who have to pay for all this corporate welfare before the jobs materialize (if they ever do).
Perhaps that’s something we all can learn from the mud being slung on this issue during the 2014 election campaign- that we need strict oversight of government programs instead of WEDC-style handouts, and that we should stop being at the mercy of businesses who won’t do the right thing until they’re able to extract a sizable ransom from people who actually work and pay taxes.