ICYMI: How government aid helped Ron Johnson [Wisconsin Examiner]

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Wisconsin Examiner: How government aid helped Ron Johnson
A senator who votes against safety net programs benefited from government-sponsored financing for his business
By Erik Gunn
September 2, 2022

Key Points:

• In his two terms in office, Sen. Ron Johnson (R-Wis.) has run hard against government spending. Since his first Senate campaign in 2010, the Oshkosh Republican has described himself as an outsider and business creator who has succeeded without government help.

• Yet in the 1980s, the company that Johnson was running at the time expanded by raising money under a government-sponsored financing program instead of conventional corporate bonds — a program made possible by the federal government as well as the city of Oshkosh that saved the company hundreds of thousands of dollars in interest payments.

• The company also benefited from a direct federal grant from the city of Oshkosh to build a rail spur to serve the new factory it built in the city.

• Johnson’s use of the federal programs for the company he led, Pacur… has drawn new scrutiny in light of his reasons for voting against signature bills addressing COVID-19 relief, infrastructure development and repair, the microchip industry, health care costs and climate change.

• This past spring, Johnson’s vote against replenishing a federal bill that offered the restaurant industry support to overcome losses from the COVID-19 pandemic was one of only eight that kept the legislation from passing the Senate.

• In three separate transactions from 1979 through 1985, Pacur or its predecessor company raised a total of $5 million for expansions by selling industrial development revenue bonds. 

• Industrial revenue bonds — IRBs for short — are a sort of hybrid between government bonds and the commercial bonds that companies issue to borrow money from investors for capital projects.

• “IRBs absolutely are a subsidy because they lower the cost of capital by about 25% from commercial bond rates,” says Greg LeRoy, executive director of a nonprofit group that monitors government incentive programs aimed at supporting expansion or relocation by private business.

• Pacur was originally founded as Wisconsin Industrial Shipping Supply in 1977. In 1979, Oshkosh authorized a $1 million IRB for the company to finance its new buildings in the city. After the company was renamed Pacur, Oshkosh authorized two more IRBs to finance additional expansions: $1.5 million in 1983, and $2.5 million in 1985.

• When Pacur’s use of IRBs in its early expansion was first reported in 2010, Johnson’s campaign issued a statement that defended their use: “No taxpayer money was ever involved in those bonds, nor were taxpayers ever put at risk,” said the statement, which also noted that the loans were repaid in full with interest.

• But that defense sidesteps the central benefit that the company received thanks to the government program.

• For Pacur… opting for IRBs each time saved the company substantially. “IRBs would be let at about 25% less,” LeRoy says. “That’s a huge difference in your cost of money.”

• The tax-free bonds cut the federal government out of the tax revenue that conventional corporate bonds produce. “It was basically like a backdoor raid on the federal treasury that state and local governments cooked up,” LeRoy says.

• In addition to the government benefit that Pacur received by taking part in the three industrial bond issues, the company got an even more direct benefit when it built its plastics plant in Oshkosh in 1979: a $75,000 federal grant from the city that paid for a new rail spur to the site where the company built its new factory.

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