O’so Brewing and other Central Wisconsin companies are growing with the help of local incentive packages. Why are these any different than the state’s controversial Foxconn deal?
The property value of Micon’s proposed downtown cinema will more than double what’s currently on site, the former Sears building.
In nearly 10 years of business, O’so Brewing Company has made a name for itself. Very quietly, the Plover-based craft brewery became the 12th-largest brewery in Wisconsin. But the next phase for O’so will certainly not be a quiet one.
Earlier this month, the Stevens Point City Council approved O’so Brewing Company affiliate Big Thinker LLC’s purchase of a 20-acre site in the Stevens Point East Park Commerce Center. The company plans to construct a $2 million, 35,000-square-foot facility that will house a production brewery, barrel aging area, taproom, offices and entertainment space. Point Brew Supply, a retail home brewing and winemaking supply outlet adjacent to O’so’s current location in Plover, will be housed in the new building, which company co-owner Marc Buttera says will open in November 2018.
The city of Stevens Point sold the 20 acres to Big Thinker for $1, and provided the company with a $500,000 grant to set up a wastewater pre-treatment facility. The brewery will use much of its treated wastewater for irrigating on-site gardens, and will save approximately 1.3 million gallons from going into the city’s wastewater treatment plant.
Such a land giveaway is in line with many packages other municipalities, including Wausau, have given to private companies to develop industrial sites.
This year, Wausau is transferring a combined total of 55 acres in its business campus to Great Lakes Cheese and Wausau Chemical for $1 each. Wausau also approved doing the same with the forthcoming Micon Theater in downtown, when it provided the former Sears building adjacent to Wausau Center mall.
Why do cities give businesses these incentive packages to either move in or build a new facility? To increase their property tax base and encourage best-possible land use.
“It’s not unusual for a city in a larger project to help facilitate development, especially if it’s in a business campus,” says Chris Schock, Wausau Planning, Community and Economic Development Director.
Business incentives have been a hot topic in Wisconsin as the $3 billion Foxconn deal goes through the Wisconsin Legislature. The O’so, Micon, Great Lakes Cheese and Wausau Chemical projects are quite a bit different from the Foxconn deal though.
Whereas the Foxconn deal involves weighing a lot of indirect, hoped-for variables—such as the estimated spinoff jobs created from entities supplying goods and services to Foxconn and its workers—the value of local incentives is much easier to predict.
That’s because local projects are gauged largely on property value—a municipality’s main source of tax revenue. Other considerations are weighed, too, such as quality of life, re-energizing an aging or underutilized area, and, yes, even jobs.
“Each development is different. Other projects we’ve looked at, we’ve looked at job creation and the value a development would bring to the area,” says Michael Ostrowski, director of Stevens Point’s Community Development Authority. “We’ve looked at what kind of traffic generator a user could be as well. Development agreements take many different forms depending on what the development is.”
The advantages of city, business partnerships
Both Wausau and Stevens Point have land in business parks that need filling. Stevens Point’s East Park Commerce Center, the largest state-certified business park in Wisconsin, has filled only 60 of the 760 acres available since its creation four years ago. Wausau acquired 205 acres in its business campus for expansion in 2016 and filled nearly a quarter of that with the Great Lakes Cheese and Wausau Chemical developments.
Normally, land in these business parks goes for a pretty penny. Wausau charges $12,500 per acre in its business campus; East Park Commerce Center land goes for $32,000 per acre. Why forgo these sales and give a company multiple acres for $1? The increase of taxable value is one of the big reasons, Schock says.
In the Wausau Chemical terms sheet, its current property along the Wisconsin River, near Athletic Park, is assessed at $400,000. The company will pay taxes on a property assessed at more than $7 million when it moves to the business campus.
The Great Lakes Cheese deal is based on the same idea. At a Finance Committee meeting in June, the company’s Project Manager Matt Wilkinson said GLC pays nearly $46,000 in property taxes at its current location on the east riverfront. It will pay an estimated $800,000 on its new property—a huge increase because it’s expanding from 6 acres to 37 and building a $55 million facility. (*That’s total property taxes, from which around 39% goes to the city, 36% to the school district, 20% to the county and the remainder to the state and technical college.)
The same goes for the Micon property, which the city purchased from Sears last year for $650,000 and is in the process of transferring to Micon. The city also will give Micon a $1 million forgivable loan. The company plans to build a movie theater with an estimated value of $10 million. The Sears building in 2016 had a fair market value of $3.9 million, meaning the city would collect considerably more for its general fund over the years.
Land use considerations also weighed heavily in all three Wausau cases. The city wants to free up the current Great Lakes Cheese and Wausau Chemical properties to continue the new East Riverfront development area. Micon’s theater will help protect the vibrancy of downtown and its highly concentrated property value base.
The city created Tax Incremental Finance District No. 11 for the GLC and Wausau Chemical developments, and is in the process of creating TIF No. 12 for Micon and the East Riverfront Development. Without the city’s assistance, those projects may not have happened.
What a TIF District does is subsidize developments by diverting a portion of a company’s property taxes to help cover the costs of bringing it there in the first place. The reverse TIFs Wausau employs include no up-front borrowing from the city.
“We look at those numbers in the TIF application and they tell us what they’re paying now and what they think they’ll be paying, and that’s how we determine the increment,” Schock says.
The O’so project differs in that it involves even more city participation. From 2020-2033, O’so will pay back its purchase of the land through tax increment. Co-owner Marc Buttera says his company will choose a flat payment of nearly $86,000 per year. That’s on top of the normal property taxes the brewery will pay on its new site.
Like the Foxconn development, it’s harder to predict the exact impact the O’so development will have on the Stevens Point area. What makes the new brewery project exciting is that it includes attractions like a large taproom with outdoor recreation and gardens for the hops and fruits that will go into making the beer.
Ostrowski says with any development, Stevens Point tries to calculate how many tourism dollars are going to be coming in. “We know O’so is a really large draw and they have good marketing throughout the state for their products,” Ostrowski says. “They have a draw to this area that may help to spur additional development.”
Indeed, Stevens Point would reposition some land in the East Park Commerce Center for residential use—craft breweries tend to become neighborhood social center and the city needs more housing anyway. “We recognize there are a significant number of employers in this area and for a lot of employees, their housing is elsewhere,” Ostrowski says. “The closer we can locate housing opportunities for these employees, the better.”
The case against incentives
Wisconsin officials are working hard to bring Foxconn’s proposed electronics manufacturing plant to the state. That means Wisconsin has to offer the best deal to the Taiwanese company here.
States have long played this kind of corporate incentives game that pits states against one another in a bidding war for jobs and growth. This game also happens on the local level, pitting cities like Stevens Point, Wausau, La Crosse, Eau Claire and Appleton against one another in a battle to attract businesses, jobs and tax base.
Schock says the city has to keep providing incentives. Over the past 20 years Wausau has signed 64 development agreements, and has assisted 96 businesses with loans or grants for site work, training, equipment and other improvements.
“The larger concern is (that businesses) don’t invest in this region. I’m less worried about businesses going from Wausau to Weston, but rather that we’re not competitive with Eau Claire or other places,” Schock says. “I’m very confident that if we hadn’t purchased the business campus expansion land and been ready when Great Lakes Cheese decided to make some decisions related to their facility here, they wouldn’t be expanding here.”
But pitting states against states and cities against cities are battles that many, including even the conservative Americans For Prosperity, have criticized. Incentives cost the U.S. $45 billion in 2015, according to a report from Upjohn Institute for Employment Research. The Foxconn deal includes $3 billion of state tax breaks, a number dependent on variables including how many jobs the electronics manufacturer creates.
Schock explains that hard numbers are what differentiates the assistance municipalities gives compared to the Foxconn deal: “We’re striking deals where a business creates an increment (property value increase) and uses it for actual costs on the project, not a tax break,” Schock says. “You’re making improvements and we’re helping you make those improvements.”
But what-ifs and hoped-for scenarios do factor into the equation. The Wausau City Council initially rejected the Wausau Chemical relocation deal in 2015 because the nearly $7 million package caused sticker shock. Opponents called it corporate welfare.
Why did the city approve it this year? The incentives actually grew more expensive, but other development projects around Wausau were settled, plus the private sector showed a huge interest in the East Riverfront area. “It just had to be done,” says Alderman Tom Neal, chair of the city’s economic development committee, referring to both that neighborhood’s potential and removing a potential chemical hazard from the river.
Still, the city’s return on investment will balance out only if that riverfront area really does see millions of dollars in new tax base in the near future. That looks more promising now, but it’s certainly not guaranteed.
And many people do see incentives as government picking winners and losers from the private sector. Among the Stevens Point-area people angered by the O’so Brewing deal was the owner of a business O’so works with.
O’so Brewing Company co-owner Marc Buttera says the brewery’s new $2 million facility will open in November 2018.
Central Wisconsin destination
While the new facility is a natural growth of O’so—now at max capacity in its current space in Plover—it will be much more than just a new brewing plant. The taproom will open up to an outdoor beer garden gazing upon an outdoor recreation space that will include a kickball diamond, disc golf course, outdoor bar, and kids play space.
Although the kickball diamond and disc golf course are firsts for a Wisconsin brewery, what might make O’so’s new venture even more special are the fruit trees and hop plants it plans on growing onsite. Those gardens will include walkways for visitors to stroll through. Buttera has toured other breweries across the country to get ideas, but wineries and vineyards provided the biggest inspiration.
“When you go to a winery, sometimes it feels like you’re driving through a whole orchard, seeing the grapes and the trees growing in the fields,” Buttera says. “You see that when you go to Door County. That’s a really cool feel and that’s what we wanted.”
The brewery’s planned wastewater pretreatment will help eliminate approximately 1.3 million gallons of water from going to the city’s wastewater treatment plant. Instead, that water will irrigate the fruit and hops plants, or go into a lagoon for storage up to 30 days.
Breweries use a lot of water; Buttera estimates O’so uses six barrels of water for every barrel of beer it brews (31.5 gallons in a barrel, so 189 gallons of water). “In this area, the Little Plover River starts to go dry at certain times of the year, and we thought if we can put our water back into the land, that can’t hurt at all,” Buttera says. “Anything you can do to be a good steward to the environment is going to be held in high regard.”
He wishes the company could have stayed in Plover, but the site it had in mind for the village didn’t work out.
“The village of Plover has been awesome and they were great to work with,” Buttera says. “I know they were upset we were moving to Stevens Point, but it all happened so fast. It was a good fit for us and the city worked really hard to get us there.”