Part 5. Case Study - Wisconsin Transportation Economic Assistance Program

5.1 Program Overview

The Transportation Economic Assistance (TEA) Program is administered by the Economic Development Section of Wisconsin Department of Transportation (WisDOT). The goal of the TEA Program is to attract and retain non-speculative business firms and create or retain jobs in the State. The TEA Program provides 50% funding grants, ranging between $30,000-$1 million, to eligible communities or private businesses for projects that are necessary to help attract employers to Wisconsin, or encourage businesses and industries to remain and expand in the State. Local communities are required to put up the other 50% of the project cost. The 50% local match can come from any combination of local, federal, or private funds or in-kind services.

Grants are for completion of transportation infrastructure improvements serving new and expanding industrial facilities, as well as biotechnology and information technology facilities. Office, retail and tourism-related development is not currently eligible. Funded projects may include roads or railroad segments. (The rules also allow for funding of airport runways or harbor improvements, though no grants have been used for those modes in recent years.) The funding may cover right-of-way development, project engineering, design and construction. Most of the road projects are local roads, but the program also funds improvements to segments of state highways, as well as improvements to interchanges and intersections.

Job creation is an explicit requirement for these grants, and applications are ranked based on cost per job promised, as well as the local unemployment rate and benefits to regional transportation. The new or expanded business activity cannot be speculative. Local communities must assure that the number of jobs anticipated from the proposed project will materialize within three years from the date of the project agreement and remain after another four years.

In recent years, annual TEA projects have totaled around $14.5 million -- $7.25 million from state funds with another $7.25 million from local matching funds.

5.2 History and Evolution of the Program.

Wisconsin's TEA program was established by the state legislature through a statute passed in 1986. It was initiated in response to the establishment of Iowa's RISE program (which supports industrial access roads in that adjacent state). (A further discussion of the RISE program is contained in an earlier report (http://www.fhwa.dot.gov/planning/econdev/taskabjan30.htm) in this study. The TEA program was officially opened for applications in September 1987.

In 1995, the Economic Development Section within WisDOT and the Wisconsin Dept. of Commerce (WisDOC) initiated a process of direct communications to facilitate joint packaging incentive offers to prospective businesses considering locating or expanding in Wisconsin. Today, half of the total leads for TEA applications come from WisDOC and the other half as direct applications from local communities.

Later in the 1990's, eligibility rules were modified to reflect technological changes in the economy. Whereas the program was formerly limited to manufacturing industry, it now allows funding for biotechnology and information technology businesses. However, the program still does not allow funding for office or commercial/retail development. Some inquiries have occurred about tourism development projects, which are currently not eligible for project funding but could be considered for a truly unique state attraction.

In 2001, there was a major change in the project selection process. Up to that time, projects were selected based on a process of ranking applications using a five-point scale, which considered public investment cost per job, local unemployment rate, etc. At that time, the program switched to funding all applications passing the basic eligibility criteria (discussed next), on a "first come, first served" basis. Applications are reviewed and funded three times per year, and if there are more passing applications than funds, then those projects may be rolled over to the next review cycle (if desired by the applicant).

The program has also shifted in recent years from a centralized administration to a more dispersed organization with regional office representatives.

Finally, the program has also evolved in terms of the type of industrial businesses being assisted. Originally, the funded projects were primarily to support the attraction of new industry to locate in Wisconsin. However, in recent years the applications have been largely for business expansion projects. Occasionally projects are funded to enable business retention, but only if a strong case can be made that the project would otherwise move out of the state.

5.3 Program Funding Decisions and Follow-Up.

Applications are considered in three cycles of decisions conducted annually. Applications are first come, first serve, and funded when all eligibility information is complete and satisfactory.

A community may approach WisDOT with an application on behalf of an existing industry wishing to expand, or on behalf of a prospective new industry that has expressed interest in that community as the site for a plant location. However, many of the program applications now start from inquiries by the Governor's Office or the Secretary of Commerce, who approach WisDOT with an initial request for TEA funds to make a local Wisconsin site more competitive for a specific prospective new business. Three quarter of all projects are now part of a package offered along with other state programs (such as local revolving loan funds and tax-increment financing) to further help to promote local community projects.

Eligible projects must meet the following criteria:

• Transportation infrastructure must support a new or expanded manufacturing plant, biotechnology facility or information technology facility;
• Public cost (including both State and local public funds but not private funds) per job promised must not exceed $5000;
• The benefiting industry must provide reliable financial information, showing company instability;
• The local government must agree to repay WisDOT up to the full grant amount if employment within the economic development project fails to achieve the promised jobs within 3 years, and retain them for another 4 years.

Applications are followed by: (1) an environmental review of the project location, and (2) a financial review and background check of the company promising the investment and new jobs. After a positive funding decision, WisDOT district engineers review the project specifications. Approved projects are then implemented, typically, by contractors funded by the city or county agency. The local government agency must front all funds, and WisDOT later provides reimbursement to the local community for its share of the project cost.

WisDOT monitors the results of all grants, in terms of their achievement and retention of the promised number of jobs. Program staff formerly relied on state unemployment filings to observe updated employment figures for benefiting businesses, but that is no longer available to them. Now, WisDOT requests that each benefiting company itself turn in a copy of its own unemployment filings to demonstrate their number of active employees. There was a case in which a new road was built, and the company then moved out within two months. The community then worked hard to find a substitute business for the site, so that it would not have to reimburse WisDOT for the project cost.

The TEA program has had internal audits conducted twice, the most recent being in June 2003. The audits found the following results:

• Total job creation and retention was actually 16% above the level promised on applications.
• The average time for achievement of the promised number of jobs was three years.
• The state average cost to date has been $2,356 per direct job created or retained, significantly better than the $5,000 per job standard required for project funding.
• Jobs supported by the program had an average wage of $14/hour.
• Of the projects funded, 40% were in rural areas (communities under 5,000 population), and the other 60% were in larger communities.
• Most of the projects (78%) were highways and the remaining (22%) were rail projects.

From program inception through the end of 2003, 55,000 jobs have been created through the $56 million invested in grants awarded to 159 communities. Some 247 businesses have benefited from the grants.

5.4 Supplementary Program Information.

The following text is taken verbatim from Wisconsin DOT documents:

5.5 Examples of Funded Projects.

Wisconsin Transportation Economic Assistance Program Projects FY 2002