Paper mill revival loan winds up in showdown over pandemic relief

By Erik Gunn

For the city of Wisconsin Rapids, a shuttered paper mill is a potential lifeline to recovering some of the 900 jobs the community lost a year ago. 

For thousands of others who make their living cutting, selling and hauling timber across northern Wisconsin and northern Michigan, it represents the prospect of restoring income cut off when the plant’s owners announced its closing. 

But for Republican leaders of the Wisconsin Legislature, it has become the latest and arguably most concrete test in their ongoing campaign to control how Gov. Tony Evers spends the state’s pandemic relief money from the federal government.

The state Assembly passed a bill June 22 to authorize a $50 million loan to a cooperative that wants to reopen the Wisconsin Rapids mill. The legislation goes to the Senate this week. The catch: It requires using funds from the American Rescue Plan Act (ARPA) — despite questions about whether that’s possible.

The mill is owned by Verso Corp., which closed the papermaking facility as well as a pulp processing operation in Wisconsin Rapids in the summer of 2020. The company cited market changes that were exacerbated by the COVID-19 pandemic. 

The plant’s specialty product, coated paper, was used a lot in events and meetings, says Don Peterson, who is working with organizations hoping to buy the plant. “With COVID postponing a lot of those events, there was not the demand for that paper any more,” Peterson says.

Verso’s paper converting plant, which manufactures various products from finished paper, remains in operation in the city.

Leading industry

The paper plant started more than a century ago, a family-owned mill that as Consolidated Paper was by far the city’s leading industry for generations with thousands of employees at the company.

“When I grew up here, you could see the wealth in the community because of it,” says Wisconsin Rapids Mayor Shane Blaser.

Eric Sosin of Almond worked at the plant for 11 years before the 2020 shutdown. “I grew up in the Rapids,” Sosin says. “That paper mill was a staple to the community.”

Since even before the paper mill’s closing public officials — along with business owners who had depended on the mill as their customer — have been organizing to bring it back to life. Rep. Scott Krug (R-Nekoosa) and Sen. Patrick Testin (R-Stevens Point) were among those who convened meetings, which included participation from the Wisconsin Economic Development Corp. and local officials.

In October, with the help of the U.S. Department of Agriculture and the UW Center for Cooperatives, the Great Lakes Timber Professionals, an organization of people who cut and sell timber from forests in Wisconsin and Michigan, established a new cooperative that they hope will be able to buy the plant. A second group, the Consolidated Cooperative, consisting of other businesses and organizations that either are involved in the broader timber industry or help support it, has joined the project. The two co-ops are working together.

Being able to restore the market for forestry products is helpful “not only to our members — but that’s huge to the forest health of Wisconsin,” says Henry Sheinebeck, executive director of the Great Lakes Timber Professionals.

The co-op organizers didn’t directly ask for state funding, says Peterson, the administrator for both of the co-op groups.  

To purchase the mill the co-ops have looked to various sources. Krug and Testin introduced legislation (AB-367 / SB-369 ) in late May to help provide funding in the form of a $50 million state loan, to be administered through the WEDC.

The legislation specified funding for the $50 million loan would come from Wisconsin’s $2.5 billion share of ARPA, the federal pandemic relief bill enacted after President Joe Biden took office. A subsequent amendment added another $15 million for a similar loan to help with a cooperative purchase of a pulp and paper mill in Park Falls.

At odds over ARPA

While longstanding state law gives the governor direct authority over how federal dollars that come to the state are spent, leaders of the Legislature’s Republican majority have been angling for months to dictate the Evers administration’s ARPA spending choices. They began with a bill that would route all of the governor’s ARPA spending plans through the Legislature’s Joint Finance Committee, where they could be vetoed. When Evers vetoed that measure, they followed up with a series of bills directing expenditures with the money. Evers vetoed those as well.

Other than vetoing them, the administration has essentially ignored the Legislature’s ARPA-spending proposals. The Verso project, however, is an exception.

In early June, Evers included the paper mill project as part of his bid to persuade the GOP majority to reverse its steadfast opposition to accepting a federally subsidized expansion of the state’s Medicaid program under the Affordable Care Act. 

When Evers called a special session to act on a Medicaid expansion bill, which would save Wisconsin more than $1 billion under a temporary boost in the federal subsidy, he listed the $50 million Verso project as one of many items that he would fund with that windfall. Unmoved, Republican leaders gaveled the special session in and out without taking any other action.

On June 16, Legislative Fiscal Bureau analysts sent a memo to Senate Minority Leader Janet Bewley (D-Mason), who had asked whether it would be permissible to use the ARPA funds as the Krug-Testin legislation proposed.

The memo doesn’t answer the question definitively. It states that the funds can be used to aid “small businesses” in response to “negative impacts of the COVID-19 public health emergency.” 

It also states that if a loan like the one envisioned in the Krug-Testin bill “were determined to be an ineligible use of the funds, Wisconsin would be required to repay to [the U.S.] Treasury the amount expended on the ineligible use.”

Even if the proposed loan were allowed, the timing of the payback period could further complicate the deal, potentially leaving the state on the hook to the federal government for a significant amount of money, the memo suggests.

Evers asks for alternative

On Monday, June 21, Evers convened a conference call with Krug, Testin, Bewley, the mayors of Wisconsin Rapids and Park Falls, Reps. Katrina Shankland (D-Stevens Point) and Beth Meyers (D-Bayfield), as well as Verso worker representatives and WEDC leaders. 

Citing the possibility that the federal government might not allow ARPA to fund the project, the governor  proposed an amendment to the Verso legislation that removed the funding source.

“At that time, I thought it sounded like a very good compromise,” says Blaser, the Wisconsin Rapids mayor. 

But when the Assembly took up the legislation in its floor session the next day and Democratic lawmakers offered the amendment, the Republican majority refused to take it up.

Instead, GOP lawmakers, including Krug, accused Evers of failing to engage the legislation until the last minute. Shankland charged that the Republicans hadn’t reached out either to the governor or Democratic legislators to develop a cooperative approach.

In a statement he issued after the vote, Evers accused the Republicans of “playing politics” with the issue. 

In the debate after the amendment was rejected, Shankland said she would still vote for the bill. But she warned that with the fiscal bureau memo questioning if the loan would be permitted, “you’re selling false hope to hundreds of people.” 

Krug said he was confident the loan would fall well within ARPA’s constraints, however.

“It was COVID — the final nail in the coffin,” that led to the plant’s closure, said Krug said, adding later: “I tell you, this is what the American Recovery Plan Act sounds like it should do.”

The Assembly passed the bill 63-35 with three Democrats — Shankland, Beth Meyers (D-Bayfield) and Nick Milroy (D-South Range) — voting for the legislation along with all of the Assembly Republicans. On the same day, the Assembly also passed, on mostly party-line votes, five other bills that use ARPA funds, also over protests from Democrats that they would likely face a veto.

Sosin, the former Verso paper mill worker, says he’s concerned that without the state’s help, the cooperative might have trouble getting off the ground. 

But Peterson, the co-op administrator, downplays that possibility.

“We’re not stalled waiting on it,” he says of the state loan. “If it comes, great. If not, we’re looking for other options for funding.”