MacIver News Service | June 10, 2019
By M.D. Kittle
MADISON, Wis. — As the Legislature’s Joint Finance Committee nears the end of budget-writing season, Capitol insiders tell MacIver News Service there is a push to bring back two controversial measures declared dead in the last legislative session.
The reported return of legislation that would expand the powers of the shadowy Public Finance Authority and limit the so-called “Wedding Barn” industry just goes to show — once again — that big-government bills never really die, they just wait for a more opportunistic day.
Some insiders worry about what might be coming in a budget wrap-up, or 999, motion. The 11th-hour motions have been widely criticized in the past for cramming in controversial legislation, like a measure that would have diminished public access to legislation records.
Multiple legislative sources say the Wisconsin Tavern League is working to push a bill through the Joint Finance committee that would restrict the Agricultural Event Venue.
The Tavern League insists Wedding Barns are getting a regulatory pass because they are not forced to obtain liquor licenses like bars, restaurants and other venues that sell booze. Owners and industry advocates of wedding barns, increasingly popular venues for wedding receptions in Wisconsin, counter that they do not sell alcohol; they merely rent out their facilities to customers who are responsible for purchasing and serving beer, wine, and liquor on their own.
Mike Mikalsen, spokesman for state Sen. Steve Nass (R-Whitewater), said the new push to rein in and further regulate wedding barns goes deeper than fast-moving legislation in the Finance Committee.
“We have heard rumblings that the state Department of Revenue fairly soon will make administrative changes on how they regulate liquor sales, and might tighten up things in the way the Tavern League wants,” he said.
The bigger concern for the Tavern folks, Mikalsen said, is the emergence of all kinds of event destination side hustles popping up. The side businesses include everything from office buildings renting out conference spaces to the conversion of old buildings for parties and other special events – each turning over the sale of alcohol to their customers.
Last month, Democratic Gov. Tony Evers’ administration confirmed it would not force wedding barns to obtain liquor licenses, a move that has not sat well with the powerful Tavern League.
Last year a legislative study committee led by a Republican lawmaker with deep ties to the Tavern League agreed with the advocacy group that some kind of liquor license should be required for operators of wedding barns. And former Attorney General Brad Schimel issued a brief but conflicted informal opinion asserting that private events held in “public places” require liquor licenses.
The Tavern League argues that licensure for public venues is mandated under state law, but the statutes fail to provide a definition for public place.
Wedding Barn owners say the cost and, more so, the dearth of available liquor licenses could force them out of business.
The Wisconsin Institute for Law and Liberty is representing Agricultural Event Venue operators in a lawsuit against the state. WILL and several other state and national conservative organizations, including the MacIver Institute, are sending a letter to legislators this morning expressing concern about the rumored proposed change in the state’s liquor licensing laws.
“As a complete affront to economic freedom and limited government, this change, if proposed, should be rejected,” the letters urges. MacIver News Service received an advance copy of the letter.
Wedding barns, like apartments or vacation homes, the coalition argues, do not become “public places” simply because they are available to rent.
“Unlike a bar or a restaurant, an apartment or a vacation home — and a wedding barn — is not open to the general public,” the letter states.
Assembly Speaker Robin Vos’ office did not return a request seeking comment Sunday.
Rep. John Nygren (R-Marinette), co-chair of the Finance Committee, in a tweet Monday morning called the reports a “boldface lie,” that “no wedding barn regulation is proposed for budget action.” Nygren’s office did not immediately return an email Monday from MacIver News Service asking about the Public Finance Authority legislation or what some sources said could be wedding barn changes outside of the budget.
— John Nygren (@rep89) June 10, 2019
Capitol insiders say there appears to be another attempt to bring back legislation enhancing the strength of the controversial, quasi-government Public Finance Authority.
In 2017, then-Republican Gov. Scott Walker vetoed a provision that would have expanded the PFA’s power, giving it the ability to take private property through eminent domain. The governor struck the last-minute legislation at the request of three conservative senators who threatened to vote against the overdue 2017-19 budget unless the governor removed the PFA language.
State Rep. Scott Allen (R-Waukesha) has called for an audit of the finance authority. Allen has been critical of the Wisconsin-based PFA’s relatively minuscule investment footprint in the Badger State.
The PFA, created in 2010 through bipartisan legislation, connects investors to tax-exempt “conduit bonds” for “public benefit projects.” It has the backing of the National Association of Counties, the National League of Cities, the Wisconsin Counties Association and the League of Wisconsin Municipalities.
“(C)reated by local governments, for local governments,” the authority’s goal is to increase and streamline economic development projects, according to the PFA’s website.
The bond issuer handles high-risk bond deals, not for the faint-of-heart investor. Some of the projects financed by those bonds have come under scrutiny by government oversight agencies.
As MacIver News Service first reported, the PFA has built a multi-billion dollar tax-exempt and taxable conduit bonds business by brokering deals like a $30 million bond package for Planned Parenthood Federation of America’s national headquarters in New York City. The authority also is involved in the massive shopping and entertainment center, “situated along the (New Jersey Turnpike) at the Meadowlands, with the multi-colored facade and indoor ski slope that has become the butt of many Jerseyans’ jokes,” as a story in NJ.com described the 3.2 million square-foot complex.
The PFA was the subject of an Internal Revenue Service investigation.
In July 2017, the IRS released a preliminary ruling, concluding the $26.5 million of bonds issued by the Public Finance Authority for the Statler Hilton development project in Dallas are taxable, according to the Dallas Morning News. The bonds were issued in August 2016 “to provide funds to finance the cost of the acquisition of a portion of the Economic Development Tax Increment Financing grant” pinning up the project, according to the official statement prepared on behalf of the local government following the issuance of the bond.
In its ruling, the IRS said the zero coupon bonds should be taxable rather than tax exempt. A spokesman for the firm told MacIver News Service in April 2018 that he could not comment on the status of the IRS investigation or another matter involving the Securities and Exchange Commission.
The SEC in April 2018 informed attorneys for the PFA that the commission had concluded its investigation.
“Based on the information we have as of this date, we do not intend to recommend an enforcement action by the Commission against WPFA,” the SEC notice states. The agency advised that the notice “must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staffs investigation.” There appear to be no further updates online.
More recently, the PFA served as bond issuer in a Florida charter school project that ended up in a New York federal court. A lawsuit, dismissed in April, alleged that the broker-dealer in the agreement “made materially false statements in collection with a bond purchase agreement.”
Scott Carper, listed as program manager for the PFA, did not return an email seeking comment.
All of the PFA’s contacts, based on the phone numbers listed on the authority’s website, are from the East Bay counties in central California.
The contacts are from East Bay counties of Alameda and Contra Costa in the central area of California.
The PFA’s absence from Wisconsin has been a huge concern for lawmakers such as Allen. As Bloomberg noted in a 2016 piece, “One of the most prolific issuers in the $3.7 trillion municipal market is a Wisconsin agency with no employees, coveted tax-exempt bond status and a nationwide client list.” Bloomberg went on to note that the PFA in 2015 issued bonds for more than 30 charter schools, senior living facilities, universities and real estate developers in 15 states. “None were from Wisconsin.”
“When it was suggested that less than 2 percent of their work is being done in Wisconsin, I have to question why the Legislature created it in first place. It wasn’t to do work in Kansas or Idaho or Nevada or elsewhere,” Allen told MacIver News in September 2017.
Allen recently proposed a budget amendment to impose a 1 percent origination fee on conduit bonds, with the revenue going to the Wisconsin Technical College System.
“This budget amendment is crafted so that conduit bonding can finally provide a clear benefit to the people of Wisconsin. Furthermore, this is one step towards eliminating the local technical college line on your property tax bill,” the Waukesha lawmaker said in a press release.
Allen’s amendment also calls for the Legislative Audit Bureau to conduct an audit of the conduit bonding authority every two years. He noted the PFA has never been scrutinized through the audit process.
The amendment also necessitates that the Legislative Audit Bureau conduct an audit of the conduit bonding authority every two years. The Public Finance Authority, the Wisconsin conduit bonding authority created by statute, has never been scrutinized by an audit.
“This is a simple step to make sure that the origination fee is imposed on both public and private bond offerings,” Allen said. “With 98 percent of bonds being issued outside Wisconsin, this is a great way to fund something at virtually no expense to Wisconsin taxpayers.”