Komatsu can earn tax credits on jobs added since April 2017

Most credits tied to capital investment

When Komatsu Mining Corp. held a big event in May 2017 to rebrand its facilities following the acquisition of Joy Global, chief executive Jeffrey Dawes made a point of saying how much the company valued its Milwaukee presence.

“We didn’t buy this company to close it up,” Dawes told reporters. “There’s huge experience here, more than 100 years worth, we want to capitalize on that.”

Jeffrey Dawes speaks to the media.

It appears Komatsu was already talking with state officials at that point about the possibility of a new headquarters, according to a staff review released Wednesday by the Wisconsin Economic Development Corp.

Nearly 18 months later, Komatsu announced plans for a $285 million headquarters at the Solvay Coke site in Milwaukee’s Harbor District. The state is offering the company up to $59.5 million in tax credits to support the project based on the number of jobs created and retained, capital investment and supply chain purchases made in the state.

The contract certification date is set as April 1, 2017, according to the staff review.

“This date aligns with when discussions began between the client and WEDC regarding the potential project and site,” the review says. WEDC spokesman Mark Maley said it is not uncommon for the agency to set certification dates based on when discussions or negotiations begin.

The certification date represents when the company can begin earning tax credits based on its performance. In the case of Komatsu, the company was eligible for $300,000 in tax credits for adding up to 140 new jobs from April 1, 2017 to March 31, 2018. Another $2.5 million was available for retaining 697 jobs and $800,000 was available based on supply chain purchases made in the state.

According to the staff review, the job targets were updated after the award received committee approval in late September to reflect “the company’s actual performance in the first year.”

Maley said Komatsu has until June of next year to report its performance for the first year of the contract so the agency has not actually verified any tax credits at this point.

To earn all of the credits award by WEDC, Komatsu would have to create 443 new jobs with an average wage of around $78,500, invest $285 million and spend around $130 million with its Wisconsin supply chain.

The largest portion of the credits, $28.5 million, are dedicated to the company’s capital investment. Komatsu earns a 10 percent credit for each dollar of significant capital investment.

Another $12.5 million in credits is allocated to job retention and $11.3 million is dedicated to new job creation. Komatsu earns a 7 percent credit on wages paid to eligible employees.

Finally, $7.2 million is available for Komatsu’s supply chain purchases in the state. The company receives a 1 percent credit for each dollar of significant supply chain spending in Wisconsin.

According to the staff review, $10.4 million in annual purchases with a Waukesha County firm represents the company’s largest in-state vendor. A Milwaukee County firm is second with $5.8 million in purchases. Komatsu spends between $3.2 million and $3.5 million each with three other Milwaukee County companies. A Racine County company at $4.1 million and an Ozaukee County business at $4 million also make the top 10.

The company names are redacted.

Also redacted is the other locations Komatsu considered for its new headquarters. The review does point out the company has 35 manufacturing facilities in the Americas, including 22 in the U.S.

“Three areas are available and being considered as they each have the capacity to handle the invest and size contemplated by this project,” the review says.

When Komatsu Mining Corp. held a big event in May 2017 to rebrand its facilities following the acquisition of Joy Global, chief executive Jeffrey Dawes made a point of saying how much the company valued its Milwaukee presence.

“We didn’t buy this company to close it up,” Dawes told reporters. “There’s huge experience here, more than 100 years worth, we want to capitalize on that.”

Jeffrey Dawes speaks to the media.

It appears Komatsu was already talking with state officials at that point about the possibility of a new headquarters, according to a staff review released Wednesday by the Wisconsin Economic Development Corp.

Nearly 18 months later, Komatsu announced plans for a $285 million headquarters at the Solvay Coke site in Milwaukee’s Harbor District. The state is offering the company up to $59.5 million in tax credits to support the project based on the number of jobs created and retained, capital investment and supply chain purchases made in the state.

The contract certification date is set as April 1, 2017, according to the staff review.

“This date aligns with when discussions began between the client and WEDC regarding the potential project and site,” the review says. WEDC spokesman Mark Maley said it is not uncommon for the agency to set certification dates based on when discussions or negotiations begin.

The certification date represents when the company can begin earning tax credits based on its performance. In the case of Komatsu, the company was eligible for $300,000 in tax credits for adding up to 140 new jobs from April 1, 2017 to March 31, 2018. Another $2.5 million was available for retaining 697 jobs and $800,000 was available based on supply chain purchases made in the state.

According to the staff review, the job targets were updated after the award received committee approval in late September to reflect “the company’s actual performance in the first year.”

Maley said Komatsu has until June of next year to report its performance for the first year of the contract so the agency has not actually verified any tax credits at this point.

To earn all of the credits award by WEDC, Komatsu would have to create 443 new jobs with an average wage of around $78,500, invest $285 million and spend around $130 million with its Wisconsin supply chain.

The largest portion of the credits, $28.5 million, are dedicated to the company’s capital investment. Komatsu earns a 10 percent credit for each dollar of significant capital investment.

Another $12.5 million in credits is allocated to job retention and $11.3 million is dedicated to new job creation. Komatsu earns a 7 percent credit on wages paid to eligible employees.

Finally, $7.2 million is available for Komatsu’s supply chain purchases in the state. The company receives a 1 percent credit for each dollar of significant supply chain spending in Wisconsin.

According to the staff review, $10.4 million in annual purchases with a Waukesha County firm represents the company’s largest in-state vendor. A Milwaukee County firm is second with $5.8 million in purchases. Komatsu spends between $3.2 million and $3.5 million each with three other Milwaukee County companies. A Racine County company at $4.1 million and an Ozaukee County business at $4 million also make the top 10.

The company names are redacted.

Also redacted is the other locations Komatsu considered for its new headquarters. The review does point out the company has 35 manufacturing facilities in the Americas, including 22 in the U.S.

“Three areas are available and being considered as they each have the capacity to handle the invest and size contemplated by this project,” the review says.

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