WITI-TV, MILWAUKEE -
The City of Milwaukee is sending workers home on unpaid furloughs, shutting firehouses, and cutting hours at the public library. So why would city leaders choose to pay more for construction projects than they have to? FOX6 Investigators discovered how an effort to create jobs for Milwaukee workers ended up wasting taxpayer dollars.
Political leaders touted the local business enterprise ordinance as a way to create jobs for unemployed Milwaukee workers. Instead it created a financial windfall for one company, and taxpayers are paying the price.
Every year the City of Milwaukee shovels out hundreds of millions of dollars in government contracts to fix up roads, water lines, and sewers. Taxpayers like Julie Schepp are footing the bill, she says, "They say it's for this improvement, and this improvement but I haven't really seen any improvements."
What Schepp sees is her grandchildren swimming in money, as the city seeks another 20% increase in water rates. "The garbage fee goes up. The sewer fee goes up. Everything seems to go up, but you really don't see anything from the money you're putting into it."
So she was frustrated when FOX6 told her the city is paying more for public works projects than it has to.
American Sewer Services is one of the city's top water, and sewer contractors. Lately, Owner Dennis Biondich has been struggling to keep workers on the job. "Five years ago, we ran seven crews. Right now, we're running two crews."
That's because Biondich keeps losing projects to one of his competitors, even though he's outbidding them. "For the first time ever, a non-low bidder is getting the project, and that's never happened before in the industry."
When the Milwaukee County Common Council introduced a series of proposals to boost employment in the inner city. Most of the attention was focused on paying local workers the prevailing wage. A less publicized provision would eventually land the city in court, and cost taxpayers tens of thousands of dollars.
The Local Business Enterprise program gives a 5% advantage to Milwaukee businesses that bid for government contracts. For example, a $100,000 bid from a Milwaukee based company only counts as $95,000. If the Milwaukee business wins the contract, the city still pays the full $100,000.
This program is costing suburban members of the trade group Wisconsin Underground Contractors Association(WUCA) millions of dollars. Executive Director Richard Wanta said, "The average taxpayer in Milwaukee should be outraged...You know the last time we looked in the phone book. There was only one major water, and sewer contractor in the entire city. Only one."
Wanta warned the Milwaukee Common Council that the added cost to taxpayers would largely benefit one company. Biondich says that company is MJ Construction. MJ Construction is based in Milwaukee, but it hardly needs help competing for government work.
In the past five years, the company has won 58 public works contracts worth millions of dollars. Only American sewer has done better with 59, but that was before the city tilted the playing field. Biondich says, "The last two projects I bid. I bid at my cost. With no profit into 'em at all, just to keep my guys working."
Since the ordinance took in 2009, MJ Construction has won six contracts for which someone else had a lower bid. Five of those six bids came from American Sewer that got the shaft. Including a project in the Rufus King Neighborhood that American offered to do for $22,000's less.
The City of Milwaukee has given seven public works contracts to someone other than the low bidder. Six went to MJ Construction, and one to Stark Asphalt.
This policy cost Milwaukee taxpayers more than $70,000. Many call it a waste of money, but Milwaukee Alderman Ashanti Hamilton doesn't see it that way. "If we support the core of our economic region, then everybody can benefit."
He crafted the ordinance with the intention of keeping tax dollars circulating in the City of Milwaukee. Hamilton says, "The idea is that not only do you get a tax benefit from a company being in the city, but you also get the commitment that they are hiring locally."
The alderman's words sound good, but when you dig deeper you'll see that MJ Construction only pays $5,000 in property taxes a year. That's a far cry from the tens of thousands spent on higher bids.
Milwaukee requires contractors to give at least 40% of the work on any city project to unemployed, or underemployed Milwaukee residents. That exactly what MJ Construction commits to on every job, the minimum 40%.
When asked how this is benefiting Milwaukee residents in terms of jobs Milwaukee Alderman Ashanti Hamilton says, "On the specific element of jobs in this particular situation. There may not be a major increase of jobs."
Instead of creating jobs for impoverished Milwaukee residents, the ordinance appears to be enriching a successful contractor who doesn't even live in Milwaukee.
MJ Construction Owner Michael Tomasini has a $400,000 house in Menomonee Falls, and he's used the bid preference to land an extra three million dollars in government work. He's just doing what the law says he can, but he didn't want to talk to FOX6 about it.
FOX6 Investigator Bryan Polcyn asked, "Is that the face of who this ordinance was intended to benefit?". Milwaukee Alderman Ashanti Hamilton answered, "To be quite frank with you I guess the answer to that question would be no. But at the same time there wasn't an individual person that the ordinance was created for. It was kind of an idea."
Hamilton promised to revisit the ordinance to see if it needs some tweaking, especially in the area of underground construction. He emphasized that the 5% preference applies to all city contracts, not just public works. While true, only one other city contract was affected by this policy. It was a small dollar electrical supply job that's costing the city an extra $997, to give it to a local business enterprise.
American Sewer has challenged some of the contract awards, taking one of them all the way to circuit court. The court ruled in favor of the City of Milwaukee. American Sewer, and the WUCA say they plan to hire a lobbyist to push for state legislation next year to eliminate the bid preference.
There's also a national sewer construction organization that is pursuing federal legislation to ban local bid preferences nationwide.
Political leaders touted the local business enterprise ordinance as a way to create jobs for unemployed Milwaukee workers. Instead it created a financial windfall for one company, and taxpayers are paying the price.
Every year the City of Milwaukee shovels out hundreds of millions of dollars in government contracts to fix up roads, water lines, and sewers. Taxpayers like Julie Schepp are footing the bill, she says, "They say it's for this improvement, and this improvement but I haven't really seen any improvements."
What Schepp sees is her grandchildren swimming in money, as the city seeks another 20% increase in water rates. "The garbage fee goes up. The sewer fee goes up. Everything seems to go up, but you really don't see anything from the money you're putting into it."
So she was frustrated when FOX6 told her the city is paying more for public works projects than it has to.
American Sewer Services is one of the city's top water, and sewer contractors. Lately, Owner Dennis Biondich has been struggling to keep workers on the job. "Five years ago, we ran seven crews. Right now, we're running two crews."
That's because Biondich keeps losing projects to one of his competitors, even though he's outbidding them. "For the first time ever, a non-low bidder is getting the project, and that's never happened before in the industry."
When the Milwaukee County Common Council introduced a series of proposals to boost employment in the inner city. Most of the attention was focused on paying local workers the prevailing wage. A less publicized provision would eventually land the city in court, and cost taxpayers tens of thousands of dollars.
The Local Business Enterprise program gives a 5% advantage to Milwaukee businesses that bid for government contracts. For example, a $100,000 bid from a Milwaukee based company only counts as $95,000. If the Milwaukee business wins the contract, the city still pays the full $100,000.
This program is costing suburban members of the trade group Wisconsin Underground Contractors Association(WUCA) millions of dollars. Executive Director Richard Wanta said, "The average taxpayer in Milwaukee should be outraged...You know the last time we looked in the phone book. There was only one major water, and sewer contractor in the entire city. Only one."
Wanta warned the Milwaukee Common Council that the added cost to taxpayers would largely benefit one company. Biondich says that company is MJ Construction. MJ Construction is based in Milwaukee, but it hardly needs help competing for government work.
In the past five years, the company has won 58 public works contracts worth millions of dollars. Only American sewer has done better with 59, but that was before the city tilted the playing field. Biondich says, "The last two projects I bid. I bid at my cost. With no profit into 'em at all, just to keep my guys working."
Since the ordinance took in 2009, MJ Construction has won six contracts for which someone else had a lower bid. Five of those six bids came from American Sewer that got the shaft. Including a project in the Rufus King Neighborhood that American offered to do for $22,000's less.
The City of Milwaukee has given seven public works contracts to someone other than the low bidder. Six went to MJ Construction, and one to Stark Asphalt.
This policy cost Milwaukee taxpayers more than $70,000. Many call it a waste of money, but Milwaukee Alderman Ashanti Hamilton doesn't see it that way. "If we support the core of our economic region, then everybody can benefit."
He crafted the ordinance with the intention of keeping tax dollars circulating in the City of Milwaukee. Hamilton says, "The idea is that not only do you get a tax benefit from a company being in the city, but you also get the commitment that they are hiring locally."
The alderman's words sound good, but when you dig deeper you'll see that MJ Construction only pays $5,000 in property taxes a year. That's a far cry from the tens of thousands spent on higher bids.
Milwaukee requires contractors to give at least 40% of the work on any city project to unemployed, or underemployed Milwaukee residents. That exactly what MJ Construction commits to on every job, the minimum 40%.
When asked how this is benefiting Milwaukee residents in terms of jobs Milwaukee Alderman Ashanti Hamilton says, "On the specific element of jobs in this particular situation. There may not be a major increase of jobs."
Instead of creating jobs for impoverished Milwaukee residents, the ordinance appears to be enriching a successful contractor who doesn't even live in Milwaukee.
MJ Construction Owner Michael Tomasini has a $400,000 house in Menomonee Falls, and he's used the bid preference to land an extra three million dollars in government work. He's just doing what the law says he can, but he didn't want to talk to FOX6 about it.
FOX6 Investigator Bryan Polcyn asked, "Is that the face of who this ordinance was intended to benefit?". Milwaukee Alderman Ashanti Hamilton answered, "To be quite frank with you I guess the answer to that question would be no. But at the same time there wasn't an individual person that the ordinance was created for. It was kind of an idea."
Hamilton promised to revisit the ordinance to see if it needs some tweaking, especially in the area of underground construction. He emphasized that the 5% preference applies to all city contracts, not just public works. While true, only one other city contract was affected by this policy. It was a small dollar electrical supply job that's costing the city an extra $997, to give it to a local business enterprise.
American Sewer has challenged some of the contract awards, taking one of them all the way to circuit court. The court ruled in favor of the City of Milwaukee. American Sewer, and the WUCA say they plan to hire a lobbyist to push for state legislation next year to eliminate the bid preference.
There's also a national sewer construction organization that is pursuing federal legislation to ban local bid preferences nationwide.
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