Walker's economic development deal went bust

The Kestrel deal was made in January 2012, when WEDC was under the direction of Scott Walker.

Photo: Michael Vadon

Amid lingering concerns over the secret $3 billion deal that Scott Walker made with Foxconn to build a plant in southeastern Wisconsin, one of his past failures with another manufacturer is back in the news.

In recent weeks, the Wisconsin Economic Development Council has announced its plans to pursue legal action against Kestrel Aircraft Co. for defaulting on its loan and on its promise to build a turboprop aircraft plant in Superior.

The Kestrel deal was made in January 2012, when WEDC, then under the direction of Scott Walker, arranged to give $4 million in low-interest loans and $18 million in tax credits to Kestrel Aircraft Co. In return, the company agreed to locate its new corporate headquarters and a manufacturing facility for creating turboprop aircraft in Superior.

By Dec. 31, 2016, the company promised, it would have created 600 new full-time jobs paying an average of $26 per hour, at the new facility.

According to the Portland (Maine) Press Herald, the Wisconsin Housing and Economic Development Authority also agreed “to work with Kestrel to obtain a $30 million allocation of New Markets Tax Credits for the project. The credits are a federal program that assists businesses that locate and grow in qualified low-income areas.”

It’s unclear whether the deal progressed to that stage. But it’s certain that the state’s deal with the aircraft producer never got off the ground.

Since accepting Wisconsin’s money, Kestrel has merged with another company to create ONE Aviation, and no manufacturing facility or any jobs have been developed in the state.

According to a WEDC memo, Kestrel has repaid only $865,490 of $4 million in loans and hasn’t made a payment since Nov. 15, 2016. The company also is in default to Superior, which awarded it $2.6 million.

Kestrel had a headquarters in Brunswick, Maine, where it also failed to deliver on a promise to create 600 jobs. The company was recently evicted from a facility there for failure to pay rent.

Critics of Walker's Foxconn deal fear something similar will happen in its partnership with the Taiwanese-based LCD manufacturer — only on a much larger scale. Walker agreed to give Foxconn $3 billion in incentives for the project, the most ever awarded by a state to a foreign corporation. In addition, there are a host of incentives being offered at the local and other levels.

WEDC has a terrible record when it comes to making such deals, raising questions about the competence of Walker and other Republican leaders to manage major economic development projects.

In its first few years, WEDC made more than two dozen awards worth more than $124 million to companies without a formal staff review. Some of those awards went to Walker supporters. Records were not kept for millions of dollars given to corporations, and the state never even tried collecting on many defaulted loans.

Sen. Dave Hansen (D-Green Bay) wants the Legislature to assert its authority and require that any contract between WEDC and Foxconn must first be approved by the state Senate and Assembly.

(1) comment

Mjj106

I knew I would read this one day.

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