In a press release on Wednesday, Scott Walker and the CEO of Super Steel came out swinging with a major denunciation of Mayor Tom Barrett and Governor Jim Doyle. Walker said,
"Last summer, Governor Doyle and the Democrats in the legislature chose to award a $47.5 million no-bid government contract to Spanish train-maker Talgo to build taxpayer funded train-cars, rather than allowing Wisconsin manufacturers like Super Steel to compete fairly for the work. Mayor Tom Barrett is now using millions of taxpayer dollars to redevelop the city’s Tower Automotive site and undercut Super Steel's bid to assemble the train cars at their Milwaukee facility."
Walker's denunciation, supported by Super Steel Chairman Fred Luber, is a serious one and deserves some examination.
Last February, Governor Doyle flew to Spain to meet with Spanish business leaders and the Spanish Minister of Transportation. His trip was designed to float the idea of Talgo building passenger trains in Wisconsin with the aid of stimulus money. In July, Doyle signed a $47 million no-bid contract with Talgo to purchase two 14-car trains sets. Shortly after, Talgo announced it was looking for an assembly plant in Wisconsin, which would create anywhere from 80-120 jobs. All of this happened in a relatively short period of time.
The no-bid contract, although it was legal, irked local politicians who reminded Doyle that his policies already drove 123,000 jobs out of the stateand now he's outsourcing more work that could have been performed locally. Officials from Nippon Sharyo and Sumitomo (both manufacturers of railroad vehicles) were "surprised and disappointed" by Doyle's no-bid deal with Talgo. Bombardier of Montreal, Canada also said they had no record of being contacted by Doyle for an opportunity to present their plans. In other words, Doyle had his sights on Talgo alone.
It should be noted, however, that Super Steel is a subcontractor for Nippon Sharyo and Sumitomo Corp., so naturally if these companies had an opportunity to bid on the rail project, it would have provided work for Super Steel. And this is where part of the controversy lies.
After the no-bid contract was signed, the Spanish firm Talgo began looking to lease sites in Wisconsin with the option to purchase a facility. Talgo had its eye on a few locations including Racine, Janesville, Appleton, and Milwaukee - or so we were told. Super Steel from Milwaukee made a bid for assembling their trains, but Talgo said their bid was too high. Super Steel then formulated another bid so Talgo could use their facility's space, but Talgo once again rejected their bid saying their facility didn't meet the requirements. At this time, Mayor Barrett wrote a rather public letter attempting to persuade Talgo to reconsider Super Steel's facility. We'll get to Barrett's letter in a moment.
In March of this year, Talgo finally announced it will not use Super Steel's facility, but rather purchase a site recently purchased by Milwaukee at the former Tower Automotive Facility. This was a blow to Super Steel, which announced the very next day they would file for receivership - a type of bankruptcy or reorganization.
Here is where it gets a little more convoluted. On Wednesday, March 17th, Scott Walker and Fred Luber held a press conference criticizing Governor Doyle's no-bid process calling it a "stab in the back" to local businesses while also criticizing Mayor Barrett for providing Talgo an incentive to choose the Tower Automotive site over the Super Steel site. In other words, Barrett sweetened the pot for Talgo by providing major incentives to lease out Tower Automotive site.
It appears there was some cronyism at play here. According to Talgo, the city offered the Tower Site only after Talgo had rejected both of Super Steel's bids. But this doesn't exactly mesh.
On May 11th of last year, Transportation Secretary Frank Busalacchi signed a letter of intent to purchase Talgo's trains. Two months later on July 8th, the city of Milwaukee negotiated an agreement to purchase 84 acres of the former Tower Automotive site for $4.5 million in order to redevelop it into an industrial park. Just a week later on July 17th, Doyle decided to purchase two train sets from Talgo, who then announced they would begin looking for assembly site locations in Wisconsin.
In other words, it appears that Doyle and Barrett had purchased the Tower Automotive site to lure Talgo from the very beginning. This would mean that Barrett's letter to Talgo pleading with them to consider Super Steel was a political gimmick meant to provide some cover when Talgo chose the Tower site instead.
Jeff Fleming, a spokesman for Milwaukee's City Development Office, said that Talgo had long ruled out the Super Steel site and that Talgo never intended on using local workers to build their trains. Talgo, according to Fleming, was only looking for a space to lease, not for a work force. Again, this means that Super Steel never had a chance to get the work, and Barrett's public letter to Talgo was a farce.
What's more, the entire time line is suspicious. Alberta Darling, a Republican from River Hills, said it didn't pass the smell test because the time line, among other things, was too fast. In fact, Bob Jambois, from the Department of Transportation, said
"We understood that whoever signed the deal (with Talgo) first was going to get the assembly facility,"
In other words, Doyle realized he didn't have much time if he wanted Talgo in Wisconsin. If other states offered bids to Talgo first, it might have left Wisconsin holding the bag. Therefore, Doyle and Barrett needed to move and quickly. Unfortunately, they didn't have enough time to work Super Steel into the equation. All Super Steel got on their behalf was a lousy letter by Barrett asking Talgo to consider Super Steel while he was developing the Tower Automotive site for a Talgo location the entire time.
This is why Walker said the Tower site was unfair to Super Steel. Super Steel couldn't possibly compete with a city-owned site that offered Talgo an abatement on property taxes for a year, full payment of worker training, and money to upgrade the facility. Hence, Luber said,
" At 84 years old I never thought I’d live long enough to have the city take business from us. We have the only train manufacturing plant in the state of Wisconsin. Now there’s going to be another one at the Tower site built by the city with our taxpayer money"
Walker made a similar statement saying,
"how can any of those from the private sector compete when you have a site that is bought by taxpayers' money and in which millions of dollars of taxpayer money is being used to essentially set it up?"
Both of them have a point. If we've learned anything over the recent health care debate is that letting government compete against private sector businesses just doesn't work because it's not fair competition. The city of Milwaukee has more resources than any private firm, and therefore they could sweeten the pot for Talgo much more than Super Steel.
Walker has a valid point. This looks like cronyism. And by coming out against Governor Doyle and Mayor Barrett, Walker reinforces the fact that Barrett's business record is nothing to brag about.