I-TEAM investigates how "job creation agency" spends your tax money

Posted at 10:28 PM, Oct 25, 2016
and last updated 2016-11-17 14:47:00-05
The I-TEAM has uncovered the Wisconsin Economic Development Corporation has wasted millions of tax dollars they are now trying to get back. 
We found at least $4 million was wasted after the WEDC gave money to more than half a dozen businesses that either left the state or went bankrupt and closed. 
In 2011, Governor Scott Walker created the WEDC. The agency gives money to companies that promise to bring jobs to the State of Wisconsin. 
Darrol Gibson, program director for "Wisconsin Jobs Now," an agency that advocates for job equality, is raising serious concerns about how WEDC operates. 
"They (WEDC) have all these numbers of where and when and how they are investing in the community, but where's the proof in the pudding?" Where are these jobs? Where's the industry?" he asked.
WEDC takes in about $70 million in funding each year. 
According to Mark Maley, the agency's spokesperson, 95 percent of WEDC's funding comes from taxpayers. The remaining 5 percent is from interest earned on loans. 
"Nobody knows how many jobs WEDC is supposed to be creating," said Robert Kraig with the government watchdog group "Citizen Action". 
After the unrest and protests in the Sherman Park neighborhood in August, Kraig looked at how many jobs WEDC created in that area. 
"WEDC is claiming to have impacted 483 jobs there in 3 companies," Kraig said. 
WEDC's own website showed it gave $1.6 million to three companies the agency initially showed were located at Sherman and Meineke, right in the Sherman Park. 
As it turned out, none of the three businesses are located in Sherman Park. 
The I-TEAM learned one company's headquarters is based out of Johnson Creek. Another is based in Hartland and the last company awarded money left Wisconsin. 
When we contacted WEDC about the inaccuracies, Maley blamed it on a "mapping error" that occurred when businesses provide a P.O. Box. 
After following up, Maley then said they were never given a street address for any of the three businesses that were plotted in the Sherman Park area. 
"You would think that if you're creating hundreds of jobs at a location that you would know where those jobs are located," Kraig added. 
We discovered WEDC also awarded millions to companies that failed. 
In 2013, WEDC gave the company "North American Finishing" $1 million, but the business shut its doors the next year. 
WEDC also gave more than $1 million to troubled businessman Ron Van Den Heuvel for a new company called "Green Box NA." Federal officials are now investigating whether the business was legitimate. 
Court records reveal Van Den Heuvel already owed millions in legal judgments prior to getting WEDC money. 
The I-TEAM confirmed WEDC is suing "Green Box NA" and "North American Finishing" to get their money back. 
Maley denied our requests for an interview, but did send us the following statement: 
"The contention by Citizen Action of Wisconsin is false and misleading, and is an attempt by the group to generate headlines based on a cursory review of WEDC’s online economic development impact map. WEDC is fully committed to seeing the city of Milwaukee succeed economically and has committed more than $250 million to the city since 2011, and has never “claimed” to have created a specific number of jobs in the Sherman Park neighborhood, as Citizen Action falsely contends. As part of our mission to be fully transparent in all aspects of our operations, WEDC, in partnership with the University of Wisconsin-Whitewater and the University of Wisconsin-Madison, developed an interactive map on its website that lists more than 1,300 awards throughout Wisconsin that the organization has made from July 1, 2011, to Dec. 31, 2015. WEDC’s online impact map uses standard Geographic Information System (GIS) technology to visually represent the physical address of award recipients. When the physical address data cannot be precisely plotted, such as when a PO Box is provided, the system generates an approximate location. That is what happened with the companies identified by Citizen Action, an issue that has since been resolved. The impact map is one of many ways in which WEDC provides detailed information about loans, tax credits, grants and other awards—such as the amount of the award, the number of jobs expected to be created from the award, and the value of capital investment associated with the award. In addition to the map, that information is available in a searchable database and downloadable spreadsheet on our website, in WEDC’s Annual Report on Economic Development, and in quarterly reports submitted to our Board of Directors. WEDC will continue to modify and upgrade those tools as part of an ongoing effort to be as transparent and accountable as possible. In the meantime, WEDC is engaged with the city of Milwaukee and others about the possibility providing assistance to the businesses that were affected during the disturbances in Sherman Park. In addition, WEDC is working with its many partners who serve the city of Milwaukee, including the minority chambers of commerce and the Wisconsin Women’s Business Initiative Corporation (WWBIC) to identify programs available to assist small businesses and entrepreneurs. What cannot be overlooked is that WEDC, along with numerous Milwaukee-area partners, is taking a long-term, strategic approach to help create jobs, assist entrepreneurs in starting and growing their own businesses, revitalize distressed buildings and areas, and generate capital investment in those communities. Just two weeks ago, WEDC provided incentives to Direct Supply Inc. that will ensure that the company will continue to grow its corporate campus on Milwaukee’s north side – an expansion expected to create more than 800 jobs over the next seven years. The project also is expected to directly and indirectly create more than 500 additional jobs in the region." 

Maley also sent TODAY'S TMJ4 a list of specific initiatives he says WEDC has undertaken in Milwaukee: 

  • Investing $1 million to work with the City of Milwaukee to revitalize the former Tower Automotive plant (Century City). WEDC also provided $800,000 in funding to launch the Energy Innovation Center at Century City, which aims to make Milwaukee a hub of energy innovation and also will help revitalize the 27th Street corridor.
  • Acting as a key partner in the Transform Milwaukee Initiative, a public-private partnership to restore economic prosperity to five core areas of the city of Milwaukee, including the 30th Street Industrial Corridor. The corridor encompasses an 880-acre area within the city, and includes a range of distinct neighborhoods with different issues and opportunities. WEDC’s investments in the Transform Milwaukee Corridor are expected to help create nearly 700 jobs.
  • Providing $350,000 in annual support to the Wisconsin Women’s Business Initiative Corporation (WWBIC), which delivers loans, education and consultation to small businesses and entrepreneurs. In FY16, WWBIC closed 66 loans totaling over $4.1 million in the greater Milwaukee area.
  • Providing nearly $2 million to help the American Indian, African American, Hmong and Hispanic Chambers of Commerce establish revolving loan funds, and we will continue to provide leadership and technical assistance to those programs through the Ethnically Diverse Business Coalition.
  • Awarding a $147,00 Brownfield Grant to the St. Ann Center for Intergenerational Care on West North Avenue to transform a 7.5-acre lot that has been vacant for over 20 years into an intergenerational care facility.
  • Working with Local Initiatives Support Corporation on a redevelopment planning project to revitalize five targeted commercial districts in central Milwaukee. Those areas include the neighborhoods of Clarke Square, Harambee, Layton Boulevard West, Lindsay Heights and Washington Park.
  • Awarding a $413,000 grant to the City of Milwaukee to help finance the new Innovations & Wellness Commons, a redevelopment project on Milwaukee’s north side. The successful development, which includes an Outpost Natural Foods store and other retailers, provides a healthy food oasis and a gathering place for the community.

Update: After our story aired, Mr. Maley sent the following updated statement:

As the lead economic development agency for the state of Wisconsin, the Wisconsin Economic Development Corporation has a wide-ranging strategy that centers on working closely with businesses and other partners to spur economic development and job growth in Wisconsin.
One of the tools WEDC uses to accomplish that goal is to provide loans to businesses that have demonstrated the potential to succeed but may be unable to secure traditional financing. All loans go through a thorough underwriting process before they are approved and require the borrowers to provide collateral.
As is the case with any lender, there are risks associated with making loans and a small percentage of WEDC’s loans have fallen into default, which is what happened with the two companies mentioned in a recent TMJ4 story. However, when a loan is in default, WEDC vigorously pursues all avenues to collect on that loan – up to and including litigation.
While there are some loans that are uncollectable, they represent less than 7 percent of WEDC’s total loan portfolio. What is much more important, however, is that WEDC’s loan programs have resulted in numerous success and have helped companies create more than 3,300 jobs throughout the state and generate more than $800 million in capital investment."