Feds seeking return of additional $2.9 million issued under Burke’s Commerce Department

The state is on the hook for another $2.9 million stemming from two Commerce grants issued while Mary Burke was secretary that the feds found failed to meet their standards.

The Department of Housing and Development’s determination that $12.3 million used to purchase property in Kenosha County did not meet requirements for Community Development Block Grants has already become an issue in the guv’s race via Scott Walker TV ads.

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Now documents obtained by WisPolitics.com through an open records request show HUD is also seeking the return of $2.9 million the state received for two other community blocks grants approved while Burke served as Commerce secretary under Gov. Jim Doyle.

Burke’s campaign defended the grants, saying they created jobs, including 3,753 through the money awarded to Juneau County.

A Department of Administration letter WisPolitics.com obtained said the 3,753 jobs created through the program included an estimated 1,200 that benefitted low- and moderate-income individuals.

“Mary makes no apologies for aggressively using scarce taxpayer resources responsibly to make investments that create jobs,” said campaign spokesman Joe Zepecki. “The fact is that each of these awards created jobs in Wisconsin and when Mary was secretary of Commerce there were 57,000 more jobs than we have today. She’s proud of her record at Commerce and looks forward to putting her private sector experience to work creating jobs and growing our economy as governor.”

Walker’s campaign slammed Burke for her “bad and careless decisions.”

“These bad deals are just two more in a series of costly failures that marked Mary Burke’s time as Jim Doyle’s Commerce secretary and show a pattern of Millionaire Mary Burke playing it fast and loose with taxpayer money,” said spokeswoman Alleigh Marre. “Seven years later Wisconsin taxpayers are still on the hook for millions of dollars as a result of Burke’s bad and careless decisions.”

Walker’s campaign released a second TV ad last week targeting Burke over the Kenosha grant. The state in 2006 gave the money to the village of Pleasant Prairie, which then passed it on to Abbott Laboratories. The company purchased the land and then turned it over to the Kenosha Area Business Alliance for $1, and the group prepped it for development. HUD found the deal didn’t meet its standards after the company failed to produce the jobs that were expected as part of the grant.

WisPolitics.com requested records on any other projects HUD found violated its standards and would have to be repaid. The records turned up two additional projects that were flagged as part of a review HUD began in 2011 and covered grants handed out between 2000 and 2006:

* More than $2.7 million that was awarded in fiscal year 2006 to Juneau County and the UW Board of Regents. The Department of Administration was unable to find a copy of the original award letter, but the correspondence it turned over said the Wisconsin Entrepreneurial Network used it for a program in which 2,029 participants created business plans that resulted in 3,753 jobs created. But the correspondence shows HUD believed the project did not meet its national objective for benefiting low- and moderate-income individuals. It also may have violated HUD standards because it had a statewide benefit rather than a local one as required under the grant. The WEN has made a good faith payment of $500,000 to cover a portion of the money owed, according to the records.

* $225,000 awarded to the village of Kronenwetter for infrastructure to serve Woods Equipment Co. in the municipality’s tax increment district. The review found the grant did not meet HUD’s requirement that the money help create and maintain 30 jobs for low- and moderate-income individuals.

Those grants and the Kenosha money that HUD disputes were flagged following an Office of Inspector General’s 2011 audit of the Community Development Block Grant program. The grants typically finance projects that range from housing to business start-ups, as well as community facilities. The activities in the HUD review covered grants awarded between 2000 and 2006.

That review flagged 825 “activities” for review. Typically, DOA said, each project that receives a block grant will have three to four activities.

The state addressed almost all of those issues by providing things like additional documentation on jobs created, but was unable to meet HUD standards for the three projects now subject to repayment.

The state told the feds earlier this year it can’t afford the $15.2 million they want Wisconsin to repay for the three projects failing to meet prerequisites.

Instead, it asked the agency to reduce future grants from HUD over a three-year period; it typically receives about $30 million annually in such grants.

The records WisPolitics.com obtained include a Dec. 6 letter from Gov. Scott Walker in which he advocated for a reduction in future grants, though he noted the state recognized that “alone does and cannot clear away the past mistakes made by the former Department of Commerce.”

In March, HUD refused the state’s request, citing three factors: a $900 million surplus that had just been announced; a grant reduction would reduce the amount of money available to assist low- and moderate-income Wisconsinites; and the state’s plans to reduce housing and community development activities from $78.7 million in fiscal year 2012 to less than $41 million in fiscal year 2014.

Instead, HUD agreed to reduce future grants by $7.6 million with the state required to make a cash payment to cover the other half of the money owed. The state plans to make the cash payment as part of the 2015-17 budget, according to the records.

DOA said it has not received a final answer from HUD on when the grant reduction will occur, though it will all be in one year.

The WisPolitics.com records request also turned up a fourth project for which the feds are seeking repayment.

The $1 million grant, awarded while Dick Leinenkugel was Commerce secretary under Doyle, was distributed through federal stimulus funds in 2009. It went to the village of Plain for a green technology training and enterprise center.

The state asked for a $1 million reduction in future grants to repay the money, but the request was denied. The state now wants to pay back the money during the 2015-17 budget. HUD had not yet responded as of Friday morning, according to DOA.

See documents on all four grants

— By JR Ross