JANESVILLE - As they look to create new jobs, economic development officials in Janesville have something their counterparts in most other communities can't offer.
The recently approved state budget designates Janesville as a Development Opportunity Zone.
Janesville officials originally sought $10 million in tax credits over a 15- to 20-year period. The recently passed budget, however, allocates $5 million in tax credits for capital investment and job creation in the next five years. If successful, the allocation can be extended to $10 million over 10 years.
Specifically, the program allows tax credits of $3,000 to $8,000 for each full-time job created for Wisconsin residents in the zone. The higher the annual wage, the higher the tax credit.
It also allows companies that either locate or expand in the zone to recoup up to 3 percent of new capital investments through tax credits.
Taken to the extreme, the Janesville zone could spend its five-year tax credit allotment on a single company that adds 625 high-paying jobs or makes a capital investment of $167 million.
But James Otterstein, Rock County's economic development manager, said the tax credits are more likely to be spread out across several companies.
Designation as a DOZ is significant because it allows a community to promote itself with added incentives and piggyback those incentives with others the state offers through its economic development arsenal, said Zach Brandon, executive assistant for the Department of Commerce.
All other factors being equal, a company might locate in one community rather than another because of the extra tax credits, he said.
DOZs are special geographic areas that offer credits to businesses that expand, locate or start up in economically distressed areas. During recent budget negotiations, Janesville was a popular designee as a DOZ because of the economic devastation caused by the auto industry's downfall.
Zone worked elsewhere
According to the state's Legislative Audit Bureau, Wisconsin has had five DOZs since the program was created in 1994.
Most fizzled and became inactive, with one exception.
The state authorized a Beloit DOZ in 2001 after Beloit Corp. announced its closing. Nearly $5 million in tax credits were targeted to the community's Gateway Business Park. Originally set to expire in 2008, the zone was extended into 2010.
Beloit's project is considered the shining star in the state's DOZ program, Brandon said. It's a 1,600-acre campus of housing, commercial and retail development with a light industrial park at the intersection of Interstates 90/39 and 43.
So far, more than $4 million in tax credits have been allocated to four companies in the Gateway zone: Staples, Kettle Foods, Specialty Tools and Menlo. The four companies have combined to create nearly 400 jobs and $70 million in capital investment in the zone.
There's also speculation that DOZ credits soon will go to another pending project in the Gateway area.
"We've seen the impact of the DOZ at the Gateway Business Park," Otterstein said. "While these tax credits are not the only tool that Beloit is using to attract investment and business, it's imperative to have as many arrows as you can within your economic development quiver."
Elephant in the room
Otterstein and other local economic development officials will meet this week with state officials to discuss the boundaries and specifics of the Janesville zone.
"The boundaries depend on the municipality's goal," Brandon said. "It can be the entire city, or it can be a specific area where they're trying to drive investment."
When Janesville officials arrive in Madison for the meeting, there undoubtedly will be an elephant in the room, and that's the General Motors plant on the city's south side.
GM ended production at the plant earlier this year and recently put the facility in "standby" status in case the automaker ever needs more production capacity.
While there's no guarantee that GM will ever use the plant again, it's likely any new production is years away.
If Janesville officials were certain GM was finished with Janesville, they would likely push for a narrow DOZ boundary that includes the plant property.
But when it comes to GM's plans, local officials aren't certain of anything. If the boundary is drawn too narrowly around the plant, the officials could have their hands tied while GM ponders its future and the clock clicks down on the five-year DOZ program.
In all likelihood, local officials will push for a broader boundary.
"Being too specific and including the GM property in that, I think, would be getting ahead of ourselves," said John Beckord, president of Forward Janesville. "That property is not currently on the market."
That's not to say local officials haven't discussed a possible re-use for the 4.8 million-square-foot plant that sits on 250 acres. But the property's future is too uncertain at this point for local officials to include it in specific development proposals.
"The DOZ was never lobbied for or designated solely for the re-use of the GM property," Beckord said. "There are several areas in the city that are ready for potential development and including those areas in a DOZ would seem logical."
Beckord and Otterstein said it's their understanding that the boundaries of the local DOZ could be amended if the status of the GM plant becomes clearer.
"We want to create as much flexibility as we can given the realities of the marketplace," Otterstein added.
The state's Brandon said the community can start marketing itself as a DOZ as soon as the boundary and other logistics are ironed out.
Brandon said his department will be flexible with the Janesville zone.
"The whole idea here is to create and sustain as many jobs as we can in Janesville," he said.