WisBusiness: Doyle unveils economic stimulus plans in lead-up to State of the State address

By Brian E. Clark

WisBusiness.com

Gov. Jim Doyle’s announcement this week of an $86 million “Next Generation Manufacturing” plan – a combination of new and existing programs – is the fourth leg of an expanded Grow Wisconsin economic stimulus package.

The overall effort – which also includes aid for the state’s agriculture and high-tech industries – is intended to spur economic development. It will be a key part of his State of the State address set for next Wednesday evening.

Observers say the boost is needed because Wisconsin’s economy is churning, with both layoffs and job gains announced every week.

On Wednesday, NewPage announced it will shut down paper making operations in Niagara and Kimberley, laying off 440 workers; and Midwest Air said it will furlough 380 employees.

Earlier this month, however, the Illinois-based Uline packaging company announced it would move its headquarters to Pleasant Prairie in Kenosha County, hire 1,000 workers and build a million-square-foot distribution center. The relocation will be aided by $6 million in state and local grants.

Doyle, praising both medical researchers and Harley-Davidson, said he wants the state’s traditional and cutting-edge industries to expand.

“Grow Wisconsin is investing in our strengths – from agriculture and manufacturing to emerging industries like bio-technology,” he said via e-mail today.

“It is creating new incentives for innovation and investment. It is giving business fertile ground to flourish here in Wisconsin.

“Now we’re at the forefront of stem cell technology and have built leading research institutions. We have the hardest workers around, and we win when we compete for the high end of the economy.”

As part of the Doyle manufacturing plan outlined Tuesday, five existing tax credit programs would be rolled into one to help companies that are creating new jobs and training workers.

It also includes $1.2 million in new funding for the Wisconsin Manufacturing Extension Partnership, a group that emphasizes lean manufacturing and other strategies to help manufacturers be successful in the global marketplace.

Doyle made the announcement yesterday at General MetalWorks Corp. in Mequon. The company has hiked its sales from $3 million eight years ago to $12 million in 2007. During that time, its workforce has grown from 50 to 80 and is seeking an additional 12 welders.

If successful, Doyle said the package would leverage $1.6 billion in private investment, create 5,000 jobs and train 4,000 new workers.

Earlier this month, Doyle went before the board of Thrive, an eight-county economic development group centered around Madison to unveil a two-part program to stimulate research-and-development investment and aid start-ups.

Dubbed “Innovate Wisconsin,” and “Accelerate Wisconsin,” the proposals would build on the success of Act 255 and offer incentives – including a cut in capital gains tax – for individuals and private businesses to focus on technological breakthroughs.

They also would double to $5 million state funding for high-tech grants and loans, give companies that increase spending on R&D new tax credits and grant both sales and property tax exemptions for R&D equipment.

The boost is needed, he said, because Wisconsin spends less than the national average on R&D.

Doyle said R&D spending in Wisconsin was $2.7 billion in 2005, or 1.23 percent of the state’s gross domestic economy in 2005. Nationally, states on average invested 1.65 percent of their economies in 2005 to research and development. Minnesota, by contrast, devoted more than twice as much of its economy to R&D than Wisconsin.

“To continue to stay ahead of the competition, Wisconsin’s manufacturers must invest more in research and development to improve existing products and develop new ones,” Doyle said.

“Wisconsin has become a world-renowned center for research, particularly in the public sector. The next phase of Grow Wisconsin will do more to foster research in the private sector as well,” he added.

In the past five years, he said the state has committed to build some of the world’s leading public research institutions, including the translational research facility at the Medical College of Wisconsin and the Wisconsin Institutes for Discovery at UW-Madison.

But Doyle said he wants to see more investment going into spinoffs coming out of the universities. To do that, Doyle’s plan would permit individuals, partnerships and limited liability companies to skip paying taxes on up to $10 million of their capital gains if they are used to aid qualified Wisconsin start-ups.

Tom Still, president of the Wisconsin Technology Council and a member of Thrive, praised the Doyle plan and said his group had advocated for some of the changes Doyle announced.

He said he was particularly pleased with the Doyle proposal to boost the tax-creditable angel investment cap from $1 million to $4 million from any combination of backers, including venture capitalists.

“For most high-tech entrepreneurs, it doesn’t matter if they are getting angel or venture capital investment,” he said. “What counts is that they are getting investments, period.”

In addition, Still said he’s enthusiastic about the proposed capital gains tax break on profits that are reinvested in qualified Wisconsin companies.

“That is one of the largest sources of untapped funds — people who have made gains,” he said. “This will encourage them to look close to home at Wisconsin companies.”

Republican legislators also have endorsed the capital gains cut plan and increased investment in private companies, but Senate Majority Leader Russ Decker has said he needs more details.

“We need to see some numbers and find out what this will cost,” said his spokeswoman, Carrie Lynch.

Doyle spokesman Lee Sensenbrenner said Doyle analysts believe new investment would offset the tax credit, which has been the state’s experience with Act 255.

Sensenbrenner said Act 255 credits have leveraged $39 million in private investment from angel and venture investors. By 2015, Accelerate Wisconsin tax credits would reach $100 million, and are expected to leverage a minimum of $400 million in private investment.

The remaining piece of Doyle’s stimulus plan – for farmers – was laid out in November, when the governor spoke to the Dairy Business Association.

In that speech, Doyle said his $33 million “Next Generation Agriculture” proposal would move the state’s dairy and agriculture industry forward by providing more money to modernize, innovate “capture new markets and seize new green opportunities.”

The plan targets whey exports to China – a country with little appetite for cheese – but where Doyle said there is a huge market whey because it is a key source of protein.

Doyle said he’s launching a $10 million “whey initiative” to help Wisconsin plants invest in new equipment and other upgrades to increase shipments abroad.

Since 2006, he noted, whey exports have increased from $13 million to $37 million. In the first half of 2007 alone, he said dairy exports from Wisconsin have increased by 90 percent.

“The door is opening wide for us in China,” he said. “They have discovered the value of whey and protein is in great demand. The possibilities are limitless.”

The agriculture stimulus plan also would provide farmers with $13 million in funding for what Doyle said would be the most comprehensive manure nutrient management system of its kind.

The advisory system will help farmer reduce runoff pollution, explore new ways to manage wastewater, and make better and safer working conditions.

Other aspects of the agriculture plan:

— A Grazing Lands Conservation Initiative would provide $800,000 to help Wisconsin farmers manage their resources, becoming more efficient producers and better stewards of the land.

— Dairy Plant Investment Tax Credits would include $1.3 million in new tax credits for dairy farms to buy much-needed equipment and implement new technologies to become more efficient and enhance quality. Credits would be available for 10 percent of modernization or expansion costs, with up to $200,000 per facility.

— Meat Modernization Credits would provide up to $1 million in tax credits to modernize meat processing plants through new investment and technical assistance. The credits will help more plants become efficient and productive, strengthen partnerships between meat processors and technical colleges, and move plants toward leaner manufacturing processes.

— Cheese cooperatives would be eligible for $1.3 million in tax credits that would allow them to work together to invest in new cheese plants and streamline their businesses.