Tag Archives: Talgo

Analysis: Taxpayer cost for Walker’s breach of contract with trainmaker rises to $50M

Wisconsin taxpayers are on the hook for a modernizing rail transportation project Scott Walker nixed when he took office as governor, breaking a contract that ex-Gov. Jim Doyle’s administration entered into with the Spanish trainmaker Talgo. 

Under terms of a settlement made recently in a lawsuit that Talgo filed against the state, Wisconsin will pay $9.7 million to Talgo in addition to the $42 million it’s already paid the company. The total bill taxpayers must pay for trains the state never received or used is $50 million.

Talgo had originally sued the state for nearly $66 million.

Doyle and the state’s then-Democratic Legislature agreed in 2009 to purchase two new train sets from Talgo. They were to be used for Amtrak’s popular Hiawatha line between Milwaukee and Chicago, as well as for a high-speed rail project between Milwaukee and Madison.

In addition to agreeing to purchase the trains, the state had entered into a 20-year maintenance agreement to service the trains, a deal to provide a maintenance facility and an option to purchase two additional train sets.

The deal fell victim to politics, as the new governor sought to burnish his credentials as an “anti-big government” conservative. The rail project was tied to $810 million in federal stimulus money to help pay for it, but Walker rejected the federal funding, depicting it as part of a scheme to foster state dependency on Washington.

Still, Talgo continued building the train sets that the state had agreed to purchase. In January 2012, Talgo notified the state they were ready for delivery, but the Wisconsin Department of Transportation refused to accept them. In November 2012, Talgo canceled its purchase contract with the state.

According to the settlement, Talgo will try to sell the two train sets it built for Wisconsin to another buyer. If successful, the train manufacturer will give 30 percent of the sale price to Wisconsin. 

But Nora Friend, the company’s vice president of public affairs and business development, told Milwaukee Business Journal that it would be difficult to find a buyer. Part of the problem is that the trains were not built to meet federal specifications, because they were paid for by the state, according to MBJ.

“We are hopeful we will find a state that is actually open to doing business and actually honors their contracts,” Friend told the publication.

Politics over people

Walker’s critics say the rejection of federal money and the subsequent loss of jobs and high-speed rail was the first in a series of destructive economic decisions the governor made.

Walker’s public argument at the time was that the project would eventually cost the state millions in maintenance fees.

But advocates for the project claimed it was potentially a vital economic development engine that would create jobs and spur new business growth along the rail line, as it has in other regions that have modernized rail.

In light of the Talgo deal, critics charged Walker with hypocrisy when he sought to borrow more than $1.3 billion for new highway projects in the 2015–17 biennial budget. At the time, Walker argued that the road construction would help create jobs. That’s something Walker has said the government should not be in the business of doing.

Walker also has been criticized for saying yes to the considerable federal funds that the state receives for road construction while turning down funds for other forms of transportation. He enjoys major financial support from roadbuilders and donors whose wealth is tied to the fossil fuel industry, leading to accusations that his transportation decisions are being made on their behalf rather than that of the state’s residents. 

Some of the highway projects Walker supports were found to be unnecessary, according to an independent audit of traffic flow patterns commissioned by 1000 Friends of Wisconsin.

A court decision earlier this year denied federal funds for a project to widen Highway 23 due to faulty traffic-flow projections from WisDOT. In response, the Republican-led Legislature included an item in the budget requiring WisDOT to reevaluate and justify its methods of traffic projections.

Walker vetoed that item, which watchdog groups said could have saved Wisconsin taxpayers billions of dollars.

Scott Walker’s massive economic failure

Scott Walker was elected governor on the promise that he’d create 250,000 jobs in Wisconsin by 2015. 

But Walker’s impact on job growth in Wisconsin has been disastrous. Under his tenure, Wisconsin has lagged consistently behind the rest of the region. The state has lost 31,027 jobs since Walker and GOP majorities came into office – the second worse job creation record in the nation (behind New Jersey).

As we reach Walker’s mid-term, let’s review how he brought us to this point. Walker began his gubernatorial tenure by turning down $800 million in federal stimulus money to bring high-speed rail to Wisconsin. That action cost jobs and infrastructure improvements that would have contributed to long-term growth.

In turning down the money, Walker appeased his tea party base, which opposes all government spending. His excuse to everyone else was that eventually the state would have to pick up a portion of the rail’s operating costs. He failed to consider, however, the jobs and economic activity it would have generated, including contributions to the tax base.

In response to Walker’s action, the Spanish train-manufacturing company Talgo abandoned a facility in the Milwaukee area that was projected to add up to 600 jobs. Talgo is now suing the state for breach of contract and the company refuses to turn over new trains that have already cost the state $42 million.

Walker’s economic management has only gone downhill from there. Huge cuts to public sector employment have significantly reduced state and local governments’ budget shortfalls as intended, but they’ve also had a crippling ripple effect throughout the state’s economy, lowering the tax base and causing tremendous suffering.

In a move that was praised by the Milwaukee Journal Sentinel and corporate-right groups, Walker dismantled the Department of Commerce and created the Wisconsin Economic Development Council, a public-private sector partnership that was supposed to give loans to promising businesses in Wisconsin to help them grow. Walker staffed the council with unqualified cronies with no background in the field.

WEDC’s mismanagement and complete lack of public oversight has so far resulted in $9 million in defaulted loans and the unexplained disappearance of $56 million. That money came from gas taxes, the federal mortgage settlement that was paid to the state and other public funding sources. WEDC has also been charged with bid-rigging schemes to give no-strings handouts to Walker’s political supporters and cronies. He’s fine with spending public money as long as it’s given to his friends without any accountability. 

Corporate right donations have successfully propagandized the public to believe Walker’s policies have been an economic success, even as Wisconsin recorded a net job loss from January to November 2012. Republicans, who now once again have total control over state government, are currently focusing their efforts on devising strategies to make it more difficult for traditional Democratic voters to cast ballots and for women to have access to reproductive medical care.

With gerrymandered legislative districts that ensure Republicans control of the state for the next decade, progressives are going to have to work on educating the public in order to minimize further deterioration of the state’s economy.