May 31, 2015

Most northern counties left behind by Gov. Scott Walker’s jobs agency

WEDC programs steer money to prosperous Dane County while little aid goes to areas with greater economic needs, records show

In Hurley, Wis., a truck passes a mural depicting iron ore miners in July 2012. Some residents of Iron and Ashland counties residents hoped a planned iron ore mine would bring more than 700 jobs to the area, but Gogebic Taconite pulled its plan in February 2015.

Lukas Keapproth/Wisconsin Center for Investigative Journalism

In Hurley, Wis., a truck passes a mural depicting iron ore miners in July 2012. Some residents of Iron and Ashland counties residents hoped a planned iron ore mine would bring more than 700 jobs to the area, but Gogebic Taconite pulled its plan in February 2015.

Dale Kupczyk, executive director of the Ashland Area Development Corporation, has a system for dealing with applications from Gov. Scott Walker’s job-creation agency, the Wisconsin Economic Development Corp.: “We have to throw them in the trash.”

Kupczyk says WEDC assistance is not of much value to his community. One problem is that companies courting state incentives often require access to a four-lane highway. But Highway 2, which runs through Ashland County, has only two lanes.

He and other critics also say the agency’s tax credit programs “don’t work” because companies in his region are so small that the application process is not worth the effort.

Officials in other northern Wisconsin counties, saddled with high unemployment rates and poverty levels, have similar tales of being ineligible for economic development programs offered by WEDC, a public-private agency created in 2011 by Republican Walker.

In contrast, Dane County, home to economic powerhouse Madison, is receiving a higher amount of assistance  — more than a quarter of total incentives given by WEDC, while it has the lowest unemployment rate in the state at 3.6 percent as of March 2015, and just 9 percent of the total population.

Zamira Simkins, a University of Wisconsin-Superior economics professor, calls the northern region’s economy a “classic underdevelopment situation.” She says an economy based on natural resources, like northern Wisconsin, leads to less valuable industries with lower-paying jobs.

“It’s sort of a vicious cycle,” Simkins says.

Northern counties are also receiving proportionally less help. For WEDC purposes, northern Wisconsin includes Ashland, Bayfield, Burnett, Douglas, Florence, Forest, Iron, Oneida, Price, Rusk, Sawyer, Vilas and Washburn counties.

Collectively, these 13 counties account for about 3.9 percent of the state’s population and 2.7 percent of WEDC incentives.

Chanel Youngs mans an empty store in Hurley, Wisconsin in July 2012. With more young people leaving northern Wisconsin because of the lack of job opportunities, local economic development leaders are trying to find solutions to keep their workforce.

Lukas Keapproth / Wisconsin Center for Investigative Journalism

Chanel Youngs mans an empty store in Hurley, Wisconsin in July 2012. With more young people leaving northern Wisconsin because of the lack of job opportunities, local economic development leaders are trying to find solutions to keep their workforce.

The disparity might not seem dramatic. But a Wisconsin Center for Investigative Journalism analysis shows that three-quarters of the total WEDC investment in the region from July 2011 to December 2014 has been poured into a single project, which appears to be at a standstill.

Kestrel Aircraft, which received $22 million in incentives, promised to hire 665 people by 2017, according to WEDC contracts from 2012. Three years in, the company employs 40 people in Superior and has not yet broken ground on a planned manufacturing plant. It recently merged with New Mexico aircraft company Eclipse.

The Center examined WEDC’s awards in conjunction with three metrics commonly used to gauge economic health — median household income, percentage of people unemployed and percentage of people living in poverty — and found that the agency appears to have disproportionately awarded the most money to one of the least troubled counties in the state, Dane County.

In the other five regions defined by the agency, WEDC generally gave out incentives proportionally with the share of population, the Center found.

The state’s 10 poorest counties — including Menominee County, where 31 percent of residents live under the poverty line and 11 percent are unemployed — garnered no more than an average share of WEDC awards per capita.

WEDC has drawn fire since its inception, with three legislative audits revealing mismanagement of loans and performance reports, and failing to follow state statutes and internal policies. As a result, Walker called for an end to WEDC’s loan program, including a planned $55 million revolving loan fund, and a proposed merger of WEDC with the state’s housing development agency. A Wisconsin State Journal story in May detailed a questionable $500,000 loan given to a top campaign donor whose company was failing.

Both liberals and conservatives have spoken out against the agency. Chief Executive Officer Reed Hall has defended it, saying he strongly disputes the audit’s findings.

However, officials from the northern region say the agency’s current programs and policies are simply not set up to serve the area’s economic needs.

For example, the agency’s Capital Catalyst program offers grants between $50,000 to $500,000 with a one-to-one matching grant requirement to companies dedicated to entrepreneurship.

Myron Schuster, executive director of Visions Northwest, a regional economic development partner of WEDC, says that is too high a threshold for many small businesses and local partners in northern Wisconsin.

“The community has to invest, and we can’t get $25,000 to invest,” Schuster says. “We are not a Waukesha, Racine, Kenosha. You know, it’s a whole different ballgame.”

Schuster says WEDC is “geared for urban projects in more metropolitan areas.” The agency has requirements and conditions that his group cannot meet. “We do the best we can to make their programs work.”

Kelly Klein, coordinator of the Iron County Development Zone, says adding 10 employees would benefit his northern county, but incentives from the state “wouldn’t benefit them, and (it’s) not even worth it even to explore it.”

While other parts of the state are growing in population and business, northern Wisconsin is struggling. Between 2000 and 2014, Iron County has lost nearly 14 percent of its population, which local economic development leaders say hurts economic growth in the area.

Kate Prengaman / Wisconsin Center for Investigative Journalism

While other parts of the state are growing in population and business, northern Wisconsin is struggling. Between 2000 and 2014, Iron County has lost nearly 14 percent of its population, which local economic development leaders say hurts economic growth in the area.

Northern counties have seen a sharp downturn in population: Iron County lost 14 percent of its residents between 2000 and 2014. A smaller population often leads to fewer people able to work and contribute to a local economy.

Mark Maley, spokesman for WEDC, says the agency does not advocate for one region over another in job creation or business expansion.

“All WEDC programs are open to any area, but we recognize that the needs are different in the northern and more rural areas of Wisconsin,” Maley says. He cites a range of programs such as the Wisconsin Main Street program, to assist communities of all sizes in building or maintaining strong downtowns, and the Northern Wisconsin Economic Development Summit that Walker hosts every year.

In fiscal year 2014, WEDC distributed nearly $157 million in financial assistance to companies across the state.

Too small to succeed?

In February, residents of northern Wisconsin flocked to the state Capitol for an annual grassroots lobbying campaign known as Superior Days. County officials and residents expressed disappointment with state programs and incentives.

Scottie Sandstrom, executive director of the Bayfield County Economic Development Corporation, complained that many companies in need are unable to pay the $10.88 an hour wage state law requires.

“A lot of companies don’t even start at that, and it leaves them out,” Sandstrom said. He urged the state to base its wage requirement on county-level wages. Such a change would require legislative approval.

In response, Hall offered his assurance that his agency wants to help create jobs in northern Wisconsin, a “critical part of the state.”

A Superior Days representative holds a sign advocating for an expansion of Highway 2 from a two-lane to a four-lane highway. Local economic development leaders say businesses interested in the region often require a four-lane highway in the area, which hurts economic growth.

Madeleine Behr / Wisconsin Center for Investigative Journalism

A Superior Days representative holds a sign advocating for an expansion of Highway 2 from a two-lane to a four-lane highway. Local economic development leaders say businesses interested in the region often require a four-lane highway in the area, which hurts economic growth.

“I grew up in Tomah so I understand the needs of rural areas,” he said.

Many northern county officials cited the need for highway expansions to make their communities attractive to manufacturers. Hall agreed that transportation is a hot topic with companies looking to move to Wisconsin, adding the highway system was a reason e-commerce giant Amazon opened a facility in Kenosha.

However, when Superior Days representatives met with Department of Transportation Secretary Mark Gottlieb, he shot down the residents’ hope for an expansion of U.S. Highway 2, a span of a national highway that runs from Superior to Hurley in Wisconsin.

“I don’t think it’s going to happen anytime soon,” Gottlieb said. “We have to be ruthless in deciding projects because of the fiscally constrained environment.”

Driver industries

State law and WEDC policies exclude retail, tourism and hospitality businesses from participating in some of the incentives WEDC offers, which Klein says hurts northern Wisconsin industries.

“The state does not want to work with tourism or retail business,” Klein says. “They would end up hiring more people, but the state’s policy is that they won’t help these types of businesses.”

In the 2013 Wisconsin Economic Future Study sponsored by WEDC, northern Wisconsin is the only region that includes recreation as an economic driver — a sector with the greatest potential for national and global prominence. Recreational industries brought in more than $51 million to the area in 2011.

“To know what our key driver industries are provides crucial direction for various public and private entities to improve the state’s overall performance,” WEDC says about the study on its website. “It is important to note that these driver industries represent Wisconsin’s economic future.”

A study released by the state Department of Tourism shows a rise in traveler spending from $10.8 billion in 2013 to $11.4 billion in 2014.

Andrew Harvey plays with his daughter in Lake Superior in July 2012. Economic development leaders in northern Wisconsin say tourism is an economic boost to the area, but the state does not offer financial assistance to tourism, retail, or hospitality businesses.

Lukas Keapproth / Wisconsin Center for Investigative Journalism

Andrew Harvey plays with his daughter in Lake Superior in July 2012. Economic development leaders in northern Wisconsin say tourism is an economic boost to the area, but the state does not offer financial assistance to tourism, retail, or hospitality businesses.

This spending also supports 133,000 jobs in restaurants, lodging, recreation and entertainment, and retail statewide, according to the study.

Tommy Cafcas, a research analyst with national research and advocacy group Good Jobs First, says many tourism and service-oriented jobs do not have high enough wages to boost local economies. Good Jobs First recommends subsidies for industries with above average wages, which is often not the case for hospitality and tourism sectors, he says.

According to the Bureau of Labor Statistics, jobs in mining have an average annual salary of $51,920. Forestry and logging employees on average earn $38,570, in comparison with employees in entertainment and recreation sectors earning $34,500 a year on average.

In March, WEDC began a stewardship program with the U.S. Forest Service to harvest timber in the Chequamegon-Nicolet National Forest. The agency says the ability to harvest more timber could create or retain more jobs in the region by increasing employment in harvesting timber, as well as increasing the wood supply for Wisconsin companies.

Small legislative representation

While residents of Waukesha, Milwaukee and the Fox Valley area see strong legislative support on economic committees, a Center review found that northern Wisconsin residents have only one representative on the Legislature’s critical economic committees.

Sen. Jerry Petrowski, R-Marathon, whose district extends into Rusk and Sawyer Counties, serves on the Senate Committee on Economic Development and Commerce. No legislators north of Wausau serve on the Assembly Committee on Jobs and the Economy.

“That probably hurts us a little bit because we don’t have the number of representatives and senators in the Capitol that Madison or Milwaukee would have,” Klein said.

The Assembly committee includes representation for parts of Kenosha, Milwaukee, Pewaukee, Green Bay, Beloit, Appleton and more.

However, first-term legislator Rep. Romaine Quinn, R-Rice Lake, whose district extends into Washburn County, says legislators from northern counties still have input through party caucuses on economic policies affecting the region.

“If we don’t have a seat at the initial table, it doesn’t mean it makes a difference,” Quinn says. “We don’t have to write ourselves off.”

Moving northern Wisconsin forward

Having more state dollars in the area for investments in companies or loans for new businesses “would be a blessing,” says Schuster, of Visions Northwest. “One of the huge things that are lacking in the rural areas for these startup companies is the money that doesn’t have 100,000 strings attached to it and has some flexibility to get these companies started.”

During a Superior Days meeting, participant Neil Klemme said forestry and timber jobs are critical for economic growth in the area.

“Those (jobs) aren’t Wal-Mart or fast food, they are good paying jobs that support families,” Klemme, a 4-H leader in Hurley, said, adding the jobs could bring new families, as well as retain the young people leaving for greener pastures.

“When I ask a new kid at school why they moved here, it’s forest products. ‘Cause believe it or not, people do move to Hurley,” Klemme said.

Neil Klemme, a youth development agent with the University of Wisconsin-Extension in Iron County; and Autumn Campbell, a high school student from Douglas County, discuss the quality of forestry and timber jobs in northern Wisconsin with staff of Rep. David Bowen (D-Milwaukee) and Rep. Jonathan Brostoff (D-Milwaukee). Klemme and Campbell participated in Superior Days, which brought northern Wisconsin citizens to the Capitol in February to lobby state legislators.

Madeleine Behr / Wisconsin Center for Investigative Journalism

Neil Klemme, a youth development agent with the University of Wisconsin-Extension in Iron County; and Autumn Campbell, a high school student from Douglas County, discuss the quality of forestry and timber jobs in northern Wisconsin with staff of Rep. David Bowen (D-Milwaukee) and Rep. Jonathan Brostoff (D-Milwaukee). Klemme and Campbell participated in Superior Days, which brought northern Wisconsin citizens to the Capitol in February to lobby state legislators.

County forests support 30,000 jobs in the state, with one-third of all county forest land located in Douglas, Bayfield, Ashland and Iron counties. Iron County has more than 500 forestry jobs, which account for about a tenth of its total population.

Many of the youngest participants at Superior Days say they are ready to move away from their small towns.

“I love the area, but I wouldn’t be able to support myself,” says Rachel Fedora, 18, a senior at Hurley High School.

John Klopatek, 17, recalls speaking with his mother about staying in his hometown of Mercer in Iron County to run a small business.

She told him, “You’ve got to get out of here.”

  • KittenChow

    Madeleine Behr is a democrat partisan hack who personally signed a 2011 petition calling for Walker’s recall as the state’s governor. Do not call her a reporter!