Kimberly-Clark will receive $28 million from the state of Wisconsin in exchange for keeping open a facility in the Fox Valley that employs 388 people. Gov. Scott Walker was able to strike the deal under a provision of state law that would not be available to his successor if Walker signs a set of lame-duck bills passed last week.
Walker announced the deal with Kimberly-Clark Thursday afternoon at the company's Cold Spring plant. He was joined by Senate President Roger Roth, R-Appleton, and several Kimberly-Clark executives and employees. The facility, located in Fox Crossing, manufactures hygiene products including Depend undergarments and Kotex pads.
"To me, if there is any talk about a legacy, I want this to be my legacy," Walker said, addressing Cold Spring employees.
Walker framed the deal as a win not just for Kimberly-Clark, but for the entire state.
"We have been working diligently over the last few months to ensure that Kimberly-Clark, a company with a long legacy in a key Wisconsin industry, will continue to have a strong presence in the Fox Valley. We are also pleased that Kimberly-Clark is making the commitment to continue to invest and grow in our state for years to come," Walker said in a statement. "Keeping longstanding businesses in our state is just as important as attracting new ones."
To receive the $28 million in state income tax credits, which will be spread out over five years, Kimberly-Clark must retain 388 employees — with an annual payroll of more than $30 million — through 2023 and invest at least $200 million in the Cold Spring facility. Kimberly-Clark can also earn tax credits based on goods and services it purchases from Wisconsin companies.
Kimberly-Clark will be required to carry out the terms of the agreement and provide supporting documentation to the state's economic development agency before it can receive any tax credits, according to information released by the governor's office.
The deal marks a victory for Walker in his final weeks in office. He called on the Legislature 10 months ago to pass legislation offering Kimberly-Clark $100 million in tax breaks similar to the ones the state is giving to the Foxconn technology company shortly after the paper company announced plants in Neenah and Fox Crossing were on a list of planned closures that would cut thousands of jobs worldwide and save the company hundreds of millions of dollars.
"The state of Wisconsin is very near and dear to our hearts. Running a global business often requires us to make difficult decisions," said Kimberly-Clark general counsel Colin Smyser. "We are very grateful for the many proactive efforts to create an economic situation that would help enable us to keep this facility open."
Smyser pledged that Kimberly-Clark will be "reliable stewards of this agreement and … a strong, proud, corporate citizen of the state of Wisconsin."
Kimberly-Clark was founded in 1872 in Neenah. In addition to the Fox Valley facilities, the company also has a plant in Marinette, where Scott and Viva paper products are made. Kimberly-Clark is the third-largest employer in the Fox Valley region.
Since Walker first proposed a deal for Kimberly-Clark, officials have said they don't see a way to keep open the Neenah non-wovens plant, which employs about 100 people. Kimberly-Clark executives have said if the company does not close the Cold Spring plant, it will shutter a similar facility in Arkansas. Cold Spring had originally made the closure list because it's one of the company's higher-cost facilities, officials said.
"This is great news for the workers. Especially this close to Christmas," said Outagamie County Executive Tom Nelson. "But there are still questions that need to be answered. And I am not the only one asking them. What does this mean for the long-term? What does this mean for the rest of the industry? What do we do when the next company threatens to shutter a plant?"
Nelson and some Democratic legislators have called for months for a broader solution that would offer assistance to the paper industry as a whole rather than one specific company. Gov.-elect Tony Evers has made the same argument.
Both Democrats and Republicans have been reluctant to support offering significant incentives to Kimberly-Clark on the heels of the state's deal with Foxconn, raising questions about the precedent it would set.
"This is setting the stage for the state of Wisconsin," state Sen. Luther Olsen, R-Ripon, said during a hearing on the Foxconn-style bill last month, noting that companies like Kimberly-Clark have essentially had their corporate income tax liability erased thanks to existing tax credits for manufacturers. "That isn't enough — now we have to pay them to stay here."
Rick Eseneberg, president and general counsel of the conservative Wisconsin Institute for Law & Liberty, argued in a statement that government should not pick "winners and losers."
"While enterprise zones can be good public policy, using them as a way to give money to influence routine plant closings and expansions raise serious questions," Esenberg said.
But state Sen. Dave Hansen, D-Green Bay, who opposed Walker's original proposal, said the new agreement is a "a victory for the taxpayers, the union workers at Cold Spring and for common sense."
The state Assembly passed the original $100 million proposal in February, but it never made it to the Senate floor. Despite calling an extraordinary session for the Senate to pass the bill in November, the proposal never earned enough support for a Senate vote. That left Walker looking for ways to strike a deal that didn't require legislative approval.
Walker's solution ultimately came in the form of a contract with the Wisconsin Economic Development Corporation, which is authorized through its enterprise zone tax credit program to award tax credits to companies looking to expand an existing Wisconsin business or move their operations to the state.
Walker praised the agency, which he said "twisted and turned and stood on is head" to find a way to make the deal work.
Under current law, WEDC can designate up to 30 enterprise zones without legislative approval. The agency has designated 26. However, a provision included in a set of lame-duck bills passed last week would change the way those credits are administered. Under the new bill, WEDC could exceed the 30-zone limit, but each zone would require approval from the Legislature's Joint Finance Committee. In other words, if Walker had already signed the lame-duck bills into law, he couldn't have struck the Kimberly-Clark deal without the Legislature's support.
In a statement, Evers noted that the bills passed in last week's extraordinary session "would affect the governor's ability to lead on economic development through proposals like the one announced for Kimberly-Clark today."
"Unfortunately, Republicans played politics with this issue for months, leaving Kimberly-Clark workers and their families in the dark and uncertain about their futures," Evers said. "I've said all along that we need a long-term, industry-wide solution to the challenges facing the paper industry — the governor of our state shouldn't be hamstrung when it comes to economic development, and that's why I continue to call on Governor Walker to veto the lame-duck legislation."
Evers has proposed eliminating WEDC. In a statement, Assembly Majority Leader Jim Steineke, R-Kaukauna, said the arrangement shows "just how invaluable WEDC is to our state’s economic health."
Kimberly-Clark did not ask for incentives from the state, vice president of global manufacturing John Deitrich said in a hearing last month, but when they were offered, "it changed the game."
Under the original proposal, Kimberly-Clark would have been eligible for up to $100 million over 15 years. The company would have been eligible for tax credits modeled after the ones given to the Foxconn technology company, which exceed the levels WEDC can authorize on its own under state law without additional legislative approval.
For instance, the company would have been eligible for tax credits of 17 percent of wages for jobs created and retained, rather than the 7 percent WEDC can usually offer. To remain eligible for the Foxconn-style tax breaks, the company would have had to retain 93 percent of its full-time employees in Fox Crossing and 93 percent of its employees throughout the state — estimated at about 2,700.