Regulatory Changes Lure P&G to Green Bay

Changes in regulatory and tax structure did as much to bring a new Procter & Gamble paper machine to Green Bay as direct financial incentives.

The state has committed $3.4 million to the project, one-third of which is a loan. Brown County put no money into the project and the city of Green Bay may provide some tax assistance but has not made a commitment.

Procter & Gamble representatives have not revealed all the reasons for putting the new machine here. Some are apparent, such as the proximity of a fairly new 1 million-square-foot distribution center in the I-43 Business Center, but less red tape was significant.

“Permitting was critical,” said Bill Ward, Procter & Gamble spokesman in Green Bay.

Gary Delveaux, manager of business and community development for Wisconsin Public Service Corp., said three developments have improved the business climate:

• Streamlining the permit approval process . State agencies have hard deadlines for moving permits forward. Industry representatives claimed that in the past projects were often killed by bureaucratic log-rolling without ever actually being denied.

• Single-factor sales tax, which means corporations doing business in Wisconsin pay taxes only on their in-state sales instead of a formula that encompasses sales both in and out of state and total property and payroll. That change was made in 2003.

• Paper companies and other Wisconsin manufacturers were exempted from paying sales tax on electricity they purchase beginning in 2003. Prior to that a tax credit system was in place, but most companies were not making enough profit to claim the credits.

The breakdown of state assistance is:

• A $1.5 million low-interest loan for purchase of equipment. The Commerce Department will make the loan.

• A $1 million grant to offset eligible expenses for deploying energy-efficient technology. The grant comes from the Department of Administration.

• A $500,000 grant for transportation improvements from the Department of Transportation.

• Northeastern Wisconsin Technical College in Green Bay will provide $400,000 worth of assistance in the development and delivery of an employee training program.

Ward said the company was pleased with the offers of assistance, though it may not claim all that is offered. The transportation grant, for example, may not be needed.

“There are a menu of offerings the state have given us, but each of the elements still have to be developed and evaluated,” Ward said. “We have a fairly robust transportation system. We would have to evaluate whether we need (that grant).”

Mary Burke, secretary of commerce, said t he state is eager to support projects that create or retain jobs.

“We don’t have a huge amount of money in our budget. We do what we can,” she said.

Burke said the Procter & Gamble project was important because it improves the paper cluster in Northeastern Wisconsin.

“We’ve made quite a few grants in the paper industry in the last two years in the area of customized labor-training grants,” she said. “Making paper isn’t like it used to be.”

This point is emphasized by the fact that the new Procter & Gamble machine likely will not create new jobs because of improvements in the plant’s efficiency.

“It’s a little bit glass half-full or half-empty,” Burke said. “If they aren’t able to produce more with less, there is a chance we lose the plant entirely. We have seen that.”

Procter & Gamble has not said how much the project is worth, but new paper machines cost about $200 million.

Competition for projects such as this come primarily from within large corporations, which leads to competition among states over providing incentives. Governors make phone calls, financial packages are put together and advantages are listed.

“Paper companies are building on average one or two new machines a year somewhere in North America,” said Patrick Schillinger, president of the Wisconsin Paper Council. “We have not seen that investment here in years. That trend, if continued, would have put our mills at a competitive disadvantage with their own corporations.”

Schillinger said to remain competitive in the towel and tissue markets, factories need capital investment for the best equipment. He said Georgia-Pacific in Green Bay has invested millions of dollars in upgrading equipment.

“To gain a toehold of competitive advantage, it comes through efficiency and new technology. That’s what these machines mean,” he said.