The devil is in the details

When Mercury Marine reversed course last week and allowed the union an opportunity at a re-do on proposed contract changes the question was why?  Another question thought by many and asked by Jerry Bader on his blog was “did somebody sweeten the pot?”  While it may never be known by the public what changed in the package, Mercury Marine is being offered a pretty sweet deal when it comes to incentives by local officials in Fond du Lac.

Local government is committed to providing a significant amount of financial assistance — up to $50 million from Fond du Lac County and $3 million from the City — as incentive to keep Mercury Marine in Fond du Lac.

Here’s the breakdown:

Following are some details of the incentive packages local leaders unveiled:

  • Up to $50 million will be available in the form of a low-interest, performance-based, collateralized loan from Fond du Lac County with guarantees provided by both the City of Fond du Lac and Fond du Lac County (in the event of default). The loan proceeds are to be used for new engine development; the relocation of some of the Stillwater, Okla., manufacturing positions to Fond du Lac; and a retirement incentive payment to union members.As a performance-based loan, it includes a $500 credit per job retained and a $1,000 credit per job created. There also is a penalty to the company of $500 for each position not retained. If the company does not maintain its presence in Fond du Lac, the loan becomes due immediately, in full.
  • The $3 million from the City of Fond du Lac would be provided to purchase surplus land owned by Mercury Marine and/or in the form of forgivable loans and grants from the City of Fond du Lac and its agencies.
  • So how does Fond du Lac county plan to finance this $50 million?

    The County Board of Supervisors will decide Wednesday night whether to finance a $50 million loan with a new county sales tax or through property taxes. A half-percent sales tax — the first ever for Fond du Lac County — is being proposed as the preferred option by Fond du Lac County Executive Allen Buechel. (Source: City, county officials offer Merc $53 million – FDL Reporter)

    The proposed sales tax would pay for the credits apparently.

    The sales tax would be used to cover the $500 and $1,000 job credits. The loan would be issued by the Fond du Lac County Economic Development Corp., and the life of the loan is 12 years. There is no sunset provision.

    It’s an unusual move.

    “We spend tax dollars on a lot of things that are less important than job creation,” said James Buchen, vice president for governmental relations at Wisconsin Manufacturers & Commerce, a business lobbying organization. “At least in this case, (taxpayers) know what it is going for.” (Source: Half-cent sales tax would help pay for Mercury incentives – JSOnline)

    It’s also a dumb move.

    At least the union had an opportunity to vote on concessions, residents apparently won’t have a say when it comes to the incentive package & likely sales tax increase to fund it.

    Is this large of an incentives package truly needed? The net gain of jobs over the seven years of the contract is minimal.

    Mercury currently employs 850 people in its Fond du Lac factory, with 500-550 on layoff, Fleming said.

    “We anticipate manufacturing jobs in Fond du Lac to grow as high as 1,400 to 1,600 by the conclusion of the seven-year contract we just signed,” he said. (Source: Mercury could add up to 750 jobs in Fond du Lac – JSOnline)

    So folks in Fond du Lac should provide $53 million in incentives to Mercury for what could ultimately be no “new” jobs or at most 200 “new” jobs by 2016?  And yes those numbers of 0 and 200 are correct because recalled workers shouldn’t constitute “newly” created jobs.

    So there are credits for jobs, what qualifies as a $1000 credit?  Does the job have to be newly created?  Or will a “recalled” worker returning to work at Mercury qualify as a “created” job?

    With or without more specifics on the details, $53 million in incentives to Mercury Marine from officials in Fond du Lac is just too much.  The county board and city council should vote down these incentive packages. Why? Mercury said if the union didn’t accept the contract proposal it would leave. It never said incentives were a part of it – at least publicly. Would Mercury break it’s word if the packages weren’t approved? Besides could Mercury afford the public relations nightmare that would ensue?

    One final question – when will the state release details of the incentive package they are still negotiating with Mercury Marine.

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