Racine History: Evolution of SC Johnson's Racine campus

SC Johnson will unveil its $40 million "Project Honor" building on Friday night with an exclusive gala dinner (no, we weren't invited). But in honor of SCJ's newest architectural masterpiece, we have a series of photos documenting the growth of SC Johnson's Racine campus over the past 100 years.

All photos compiled by Racine historian Gerald Karwowski from his collection at the Oak Clearing Farm and Museum. Buy Karwowski's latest book, "Racine: A Postcard History" here.

As a side note, this collection of photos kicks off a year-long project at RacinePost celebrating Racine's 175th birthday. Look for more historical photos and essays in the weeks to come.

Looking at the North east corner of 16th and Howe Street in about 1910 before the buildings were razed to build the New S. C. Johnson & Son administration building. The Victorian house next to the Leon Szczupakiewicz Schlitz Saloon was used as the company's main office from about 1903 to 1910. At left is George Stanton's barbershop.

In 1911,hand-filled cans of wax were hand packed 100 to a hand-made wooden box and hand-trucked to the shipping room where they were loaded into horse drawn drays. The wagons took the load of 100 pound crates to the dock to be shipped by water on the old Chicago-Racine-Milwaukee shipping line.

Advertising billboards and factory buildings which were located at the north east corner of Racine and 16th Streets. At this intersection the sweet smell of wax was so strong that a blind man would know they were near the Johnson Wax factories.

Frank Lloyd Wright chats during a 1930s test ordered by building inspectors to see if the lily pad columns which were a integral part of the Administration Buildings design would hold the weight they were designed for.

The Great Work Room of the Administration Building as it looked in the 1950s.

A rare view during the construction of the Johnson Research tower taken from in front of the Frank Karwowski house at 1537 Franklin Street.

A stunning night view of the S.C.Johnson& Son Research Tower Complex in 1952.

Two children admire the beautiful Johnson world globe. It was the largest of its kind when it was erected at the Racine plant in 1954.

One more aerial view.

Project Honor, SCJ's newest addition to its Racine campus. (See more photos here.)

Carnauba lands in SC Johnson's new Fortaleza Hall

The Carnauba has landed.

A replica of the airplane that launched SC Johnson's fortune is clearly visible inside the new Fortaleza Hall on the company's Racine campus. And it looks pretty impressive.

The glimmering plane hangs from the ceiling of the sleek, cylindrical building near the Frank Lloyd Wright-designed research tower. Sam Johnson and his sons, Fisk and Curt, flew the Carnauba to Brazil in 1998 to retrace the route HF Johnson Jr. - Sam's father - used to discover carnauba wax that became SC Johnson's first major product.

Fortaleza Hall is part of SC Johnson's $40 million "Project Honor," which is a tribute to Sam Johnson. The company hired Lord Norman Foster and his London-based Foster + Partners firm to design the building.

In addition to Fortaleza Hall, which will serve as an educational facility, Project Honor also includes a Community Building for SC Johnson employees. The building will include a dining room, fitness center, bank, company store and concierge service. (See more details about the project here.)

Construction is scheduled to be finished this month.

Now you see it... now you don't.

The plane was gently lowered...

...into the basement Tuesday night.

SC Johnson, city emails offer intimate lookat how company secured tax exemption

Foster+Partners rendering of Project Honor's Fortaleza Hall being built on SC Johnson's Racine campus.

SC Johnson used considerable influence, resources and ingenuity to convince former Mayor Gary Becker and Gov. Jim Doyle to approve a property tax exemption for the company's Frank Lloyd Wright buildings and the new Fortaleza Hall, according to company emails obtained by RacinePost.

The collection of emails from 2007 and 2008 provide an intimate look at SC Johnson's top executives orchestrating the deal that one email from an SCJ vice president suggests could save the company $400,000 a year in property taxes. SC Johnson Spokeswoman Kelly Semrau verified that the emails were authentic, but said some of the emails provided to RacinePost were taken out of context.

We've reviewed the emails and and are reprinting select quotes from them as they relate to Becker's deal with the company to trade the property tax exemption for money for the Uptown arts district.

The emails show SC Johnson sought the exemption to limit the amount of taxes it's required to pay on the new building under construction on the company's Racine campus. They also show a close tie between Becker's plans for Uptown and a property tax exemption, and SCJ's ability to successfully lobby the governor for the exemption.

All told, it was a remarkable effort by SC Johnson to minimize the company's taxes, and a questionable decision by Becker to support the exemption -- which ultimately will cost the city, county and RUSD a fortune -- without making it public.

For its part, Semrau said SC Johnson was upfront with Becker about its intention to seek the property tax exemption for its Wright buildings and Project Honor. State law allows the governor to issue executive orders to exempt architecturally significant buildings from property taxes. It also allows educational tourist centers adjacent to the historic buildings to be tax exempt.

SCJ used the law to secure an executive order from Doyle to exempt its Administration Building and Research Tower, and the new Fortaleza Hall next to the Administration Building, from property taxes.

"There is nothing the company did that was wrong," Semrau said. "It was a legitimate tax situation."

The Tax Exemption

The leaked emails begin in March 2007 with company officials pondering ways to limit property taxes on the new Project Honor, which was looking at a $52 million price tag (see below).

On Wednesday, March 28, 2007, Robert Randleman, vice president-corporate tax counsel, wrote an email to Jane Hutterly, executive vice president of worldwide corporate and environmental affairs, seeking guidance on "the company's desire to save property taxes on the Project Honor building additions."

Randleman wrote:

Alternatively, if we were to reduce the annual tax tax cost but agree to provide the city with a one time contribution to develop Uptown, the overall savings would be significant. Also, there is a significant possibility that once the Fortaleza Hall is completed and the plane is in place, the city could assess personal property tax on the aircraft. This would not be the case if the building received a state exemption.

Hutterly responded on April 9, 2007:

My perspective, Bob, is we should take the tax exemption that is appropriate under the law. I also will have some discomfort if this means we are really pushing the regs; while not adding any new jobs; as it could appear that the "rich (Fisk / family) only get richer" when Racine needs the tax revenue. Under the current scenario, I would assume that that would mean the community building is not tax exempt. That portion could be TIF'ed and we could also supplement that with contributions as needed.

Semrau said the tax exemption was not a requirement for Project Honor. SC Johnson would have built the buildings without the exemption, she said.

But the exemption paid off for the company. While Semrau estimated the exemption would save the company between $190,000 and $240,000 per year, one email suggested the number could be closer to $400,000 per year.

Randleman wrote to Fisk Johnson on Jan. 7, 2008:

Attached is a copy of the Executive Order - to be signed by Governor Dole (sic) ... As a result of this designation, we anticipate that the FLW buildings and Fortaleza Hall will be exempt from real estate tax resulting in an annual savings of approximately $400,000.

Racine Unified

Early on, SC Johnson was sensitive to the Racine Unified School District losing tax revenue, according to emails. SC Johnson's Brian Anderson, program manager for community development, responded to a question from Scott Frey, SCJ's director of corporate services and facilities, about Unified losing tax revenue if the Administration Building and Research Tower are tax exempt.

Anderson wrote on May 17, 2007:

The schools lose $8,234 per year if the FLW buildings are excluded. In the total scheme of things at Unifies (sic) this is not a significant amount of money. I am not sure what the district would do with 10,000 annually that is off the tax rolls. One potential idea for the schools is to provide updated technology to them annually in some amount.

Semrau said SCJ does not have a plan to reimburse Unified for tax revenue lost to the exemption of the FLW buildings.

Project Honor's Fortaleza Hall will serve as an educational tourist center for people visiting SC Johnson. This rendering from Foster+Partners shows Fortaleza Hall with Frank Lloyd Wright's Research Tower in the background.

Educational Tourist Center

SCJ carefully considered how Fortaleza Hall could be included in Doyle's executive order. State law allows an educational tourist center adjoining a historic building to be included in the property tax exemption.

Frey wrote Anderson on May 17, 2007 asking:

Is the tax exemption provision written specifically for FLW or simply any historical landmark? Will we have some requirements around displays, messages, etc in Fortaleza Hall in order to assure we are meeting the intent of the exemption?

Anderson responded: "???" But subsequent emails show the company making changes to Project Honor to secure the tax exemption.

The company did not initially call for the Project Honor buildings to be open to the public, Semrau said. But the tax exemption for Fortaleza Hall required public access, she said. (Note: Semrau contacted RacinePost after this story was published to clarify that if SCJ had not received the tax exemption it would have still built Fortaleza Hall. "But maybe we wouldn't have opened it to the public as one example since keeping buildings open to the public are expensive due to upkeep, security, tour guides, etc.," Semrau wrote in an email.)

SCJ will hire tour guides and allow visitors into the building, which will pay tribute to the story of how HF Johnson flew the Carnauba airplane to Brazil to study the carnauba palm tree that launched the company's fortune. Sam Johnson and his sons retraced the trip in 1998.

Initial plans for Fortaleza Hall did not include educational exhibits for tourists.

Randleman wrote to Kristine Banan, title unknown, on June 1, 2007 (Note: MEA is an internal SCJ acronym that Semrau declined to define):

There is little doubt that the Frank Lloyd Wright buildings are architectural landmarks. I would like to see the MEA emphasize the fact that the adjacent Fortaleza Hall will be used as an educational tourist center. This could be accomplished by changing the fifth sentence in the fifth paragraph to read:

"The Hall will provide an area for employees to informally meet and will be used as an educational tourist center for visitors to the Frank Lloyd Wright administration building, Golden Rondelle and other areas of the SCJ campus."

Randleman wrote on June 6, 2007:

Had a brief conversation with Fisk today - he emphasized the fact that he wants us to proceed with the property tax exemptions for Project Honor. He said that we could include specific displays in the exhibit if it would assist us in proving that the exhibit is indeed an educational tourist center. Next step is for Jane to send the presentation deck to Fisk and she and I will meet with him to answer any questions.

Public Relations

SCJ officials carefully considered the ramifications of the tax exemption becoming public - something that didn't happen until RacinePost broke the story on May 7. (See a summary of our coverage on this story here.) The company was particularly concerned about a planned Journal Times story on Project Honor's groundbreaking. Hutterly didn't want taxes mentioned with the story, which was given as an "exclusive" to the JT.

Hutterly wrote to Randleman on Aug. 29, 2007:

I'm confident we can weather the storm on this and any outcry over the FLW / FH application to the state, and ultimately, the time of all of this would be connected by those who are doing their homework and would want to say that SCJ is trying to avoid taxes and doing their part. That said, it would be helpful to us on the public side if we could stagger the actions on all of this.

She added: "It would be very disappointing to all of us if a side bar article on the new building was "SCJ avoids taxes."

Fisk Johnson wrote Sept. 4, 2007 to Randleman:

"... if we want to delay the action (actual filing that may become public?) in this exemption process to avoid something ending up in the papers at the same time as the ground breaking article I leave that to Jane and you to decide. I assume if it is easy enough to make a short delay of the filing (?) and not incur any financial risk and avoid the risk of this ending up in the paper at the same time... then that sounds like a good thing. I would assume the PR to be manageable either way."

Cost of Project Honor

The actual cost of Project Honor is expected to reach $52 million, according to an email. That far exceeds the $36 million figure SC Johnson had shared in the past. Semrau said the $36 million number is the cost of construction of the building. The $52 million figure is the total cost of the project, including landscaping, furnishings and items other than construction, she said.

Hutterly wrote on Aug. 31, 2007, to Scott Frey and others with the subject line, "Fisk's $$ on PH with the Press":

What number are you comfortable sharing with the press? I'm not comfortable with $52MM. How about the construction number of $36.5MM?

Lobbying for the exemption

SC Johnson lobbied the governor for the tax exemption in the summer of 2007, according to emails.

Randleman wrote to Fisk Johnson on Aug. 31, 2007:

"The Pricewaterhouse Coopers representative that will be meeting with Secretary Berk on behalf of SCJ will also be accompanying the Commerce Secretary and Governor Dole (sic) on an Asian trade mission starting September 10. The PwC representative hopes to be able to take advantage of this time with Ms. Berk and the governor to informally pursue the topics discussed during the September 5 meeting and further advocate SCJ's position. This is a fortunate opportunity."

The company also worked Becker for his support, which was secured in November 2007, according to emails. Chip Brewer, director of worldwide government relations, wrote to Michael DeGuelle, SCJ's former state tax manager, on Nov. 12, 2007:

Mike - I spoke to Gary Becker and he is prepared to support SCJ if he gets a call from the Gov's office.

Brewer also wrote on Nov. 20, 2007:

Good news. I just spoke to the Mayor. He happened to be in the Governor's office today with a group of mayors on other business. Susan pulled him aside and asked him about Project Honor and he gave his strong OK.

Becker actually pushed former assessor Tom Kienbaum to sign a letter of support for the exemption. Anderson wrote on Feb. 13, 2008, to Jane Hutterly, Chip Brewer and Theresie Bode:

The assessor has to send a letter to Mike declaring the property tax exempt which is then forwarded to State to finalize this process. The meeting went very well and the mayor was very supportive and kept asking where does Tom sign. The city assessor is retiring at the end of the month so could put this off for his replacement to do, which the mayor assures me wouldn't happen.

Kienbaum didn't actually sign the letter. His successor Ray Anderson signed it on June 2, 2008. The letter, written to DeGuelle, reads:

We have no objection to you submitting the exemption application and our Office confirms its support for the full and timely implementation of the Executive Order's intentions.

Uptown TID

SC Johnson and the city worked closely together to create the Uptown TID, which will use an estimated $166,000 in property tax revenue from Project Honor's Community Building - it's not exempt from property taxes - to make improvements to the area, according to emails.

Semrau said the city approached SC Johnson about the Uptown TID. Emails among top executives indicate SC Johnson knew about the TID in June 2007 - six months before the idea was made public.

Fisk Johnson wrote an email June 7, 2007 to Hutterly stating:

I would like to push for as low an appraised value on the community building as possible (but I am fine agreeing to putting whatever that tax might end up being, based on that lowest appraised value, into a tif).

Hutterly responded on June 7, 2007:

We will put the final plans in place to do that and further make sure that your planned meeting with the Mayor next month coincides at the right time with our approach to the State for the tax exemption. We will also prepare appropriate key messages for the Becker meeting.

On Jan. 4, 2008, Brewer wrote to Brian Anderson, Jane Hutterly and Kelly Semrau:

Mike reports that this has gone to the Governor's desk for signature, probably within the week. We do not expect any press announcement about this. After this is signed, we can let the Mayor know and he can begin the TIF process. That is a public process and it is my understanding there would be publicity surrounding the TIF and the City's plans for Uptown development. We will need to work with the Mayor on those announcements and any announcements about SCJ contributions.

Brian Anderson wrote to Brewer and DeGuelle on Jan. 10, 2008:

I believe that these are two next steps, first a meeting with the city assessor to have the FLW properties taken off the tax roll and to inform him that Fortaleza Hall is not taxable and second, inform the city that we are ready to create a spot TIF to benefit Uptown.

Becker appeared to carefully consider the value of Project Honor in working out plans for the TIF district and the tax exemption, according to emails obtained from the city of Racine. He wrote to Anderson on Aug. 27, 2008:

Brian, just to follow up on our conversation a few days ago. It is my understand that the assessment of the property will be a minimum of $20,000,000. Please confirm if I have this right.

Anderson replied Sept. 2, 2008:

Gary, we have estimated that the construction cost of the taxable portion will be in the area of $20 million, however the actual assessment is determined by the state. We have not stated any amount as a minimum but we will not challenge the assessment that the state assesses.

$500,000 for Uptown

SC Johnson originally wanted to pay the city $30,000 a year for 10 years for Uptown, according to an email. But a series of emails showed the total increase to $500,000 and shifted from a 10-year payout to a five-year payout. The shorter time frame was crafted to maximize the benefit during Becker's second term in office.

Here's Anderson in the May 17, 2007, email (the "he" refers to Gary Becker):

I would go $30,000-over 10 years that is $300,000, which is what he would receive in 20 years under the current tax bill. This grant can be used for what he would like and doesn't go against the general levy or budget.

SC Johnson Chairman and CEO Fisk Johnson wrote June 7, 2007 to Hutterly:

I wonder if we have a better chance of getting the mayor's support if we agree to $100,000 over 5 years versus $50,000 over ten years (since it will be more impactful to his term in office). I leave that to you to decide.

SCJ has yet to make its first payment on the five-year, $500,000 plan, according to city emails. That fact seemed to concern Racine Development Director Brian O'Connell in an email he wrote to Brian Anderson on April 16:

The flyer for the next speaker at the Rondelle came in an SCJ envelope. I thought it might be the check for the Uptown grant. But it wasn't. Everything still OK with that?

Anderson replied April 17:

Everything is OK, but some here want to meet with you and the new mayor after the election to make sure everyone is still on the same page. It is harder with some things here than at City Hall. The money is still committed but probably won't get to you until end of June, first of July. Sorry that this has to be so complicated.

SC Johnson reviewed the TIF budget and raised questions about some of the items planned for Uptown. In an email to O'Connell on Nov. 13, 2008, Anderson asked to see marketing materials planned for the TID and raised questions about the city's budget for the district. Anderson wrote to O'Connell:

Not sure why $50,000 would be needed for the Island at 14th as it already exists and it would seem that to put plantings into the island would not cost $50,000, but maybe I am missing something.

O'Connell replied on March 2, 2009:

The Uptown Association has discussed having an "identity feature" (fountain? planter/garden?) at the island. I like the idea but it is very vague at the moment.

The marketing item is for targeted marketing of the Uptown buildings to "artists." Advertising in specialized publications is one use. This is an item that could benefit from your insights and the insights of any SCJ marketing wizards.

Tax-exempt deal will save SC Johnson at least $190,000 per year

The cover page of the 'Project Honor' plans SCJ filed with the city.

Former Mayor Gary Becker traded away at least $190,000 a year in local property tax payments for money to pay for his vision of an arts district in Uptown.

The city issued SC Johnson a $39 million building permit on May 12, 2008, to build the 60,345-square-foot "Project Honor" on its Racine campus. The project is made up of two buildings: Fortaleza Hall, designed to honor Sam Johnson, and the Community Building, which will include a cafeteria, company store and other employee amenities.

Under an executive order Gov. Jim Doyle signed Jan. 10, 2008, Fortaleza Hall will be exempt from property taxes as an educational and tourist center. The same goes for SCJ's Administration Building and Research Tower, which paid about $40,000 in property taxes last year. (To get an idea of how rare the executive order was, Doyle's order was the only executive order signed by a Wisconsin governor between January 1965 and Dec. 12, 2008 to involve Racine. It was also only the second time a governor made a building tax-exempt for architectural significance.)

But the new Community Building will not be exempt from taxes. Instead, it will be included in the Uptown Tax Incremental District, and property taxes collected on the new building will be used to pay for property and street improvements in the Uptown area. (Read our initial story on Becker's deal with SCJ here.)

So how much money are we talking about?

SCJ's building permit was for $39 million for Fortaleza Hall and the Community Building combined. The Community Building is listed at 44,000 square feet, according to company press release. Fortaleza Hall is about 16,000 square feet.

Dividing the $39 million project strictly by square feet would result in a 75-25 percent split between the two new buildings. The Community Building would then cost about $29.25 million and Fortaleza Hall would come in just under $10 million.

But SCJ's numbers suggest the buildings are closer to equal in value. The company's response to an earlier story said they would pay $166,924 in incremental tax to the Uptown TID district for the Community Building. Assuming that's per year (it's not clear from the statement), and assuming a property tax rate of $21.81 per $1,000 of assessed property value (last year's amount), it appears SCJ is estimating the Community Building's assessed value at closer to $7.7 million.

Our own reporting suggests Fortaleza Hall may be the more expensive, and valuable, of the two new buildings. SCJ doesn't have to break down how much they're spending on the tribute to Sam Johnson, but the company is reportedly sparing no expense. A world-class architect, curved Italian class and the hanging display of the Carnaúba aircraft (the one that launched SCJ's fortune) are all included. (Click here for SC Johnson's response to our initial stories revealing that the Administration Building and Research Tower are now tax exempt.)

SC Johnson Spokeswoman Kelly Semrau said the company estimates Fortaleza Hall, once complete, will be tax exempt from $150,000 and $200,000 in property taxes. An assessment will be conducted after the project is completed, she said. (That runs counter to one of our sources, who said the building won't be assessed because it's already tax exempt.)

Based on current tax rates, that would place Fortaleza Hall's estimated assessment at between $6.8 million and $9 million.

Semrau noted the construction amount and the assessed amount are not the same. She added SCJ officials reduced the square footage of Fortaleza Hall since the company applied for the building permit.

Blueprints for Project Honor taken from the plans SCJ filed with the city. Fortaleza Hall, which will honor Sam Johnson, is on the left. The Community Building, for SCJ employees, is on the right.

So let's put together some pieces.

We've reported in the past (and now have a third source confirming it) that Becker and SCJ made a deal. SCJ would receive the city's support in pursuing tax-exempt status for its Administration Building, Research Tower and Fortaleza Hall, and Becker would receive $500,000 over five years for Uptown. SCJ also agreed to include its new Community Building in the Uptown TID to help pay for street and building improvements in the area.

In other, simpler words, Becker traded away a minimum of $190,000 in annual property tax payments (and probably more) for $500,000 over five years to improve Uptown.

What's incredible about the deal is the disregard Becker showed for other local governments in making the deal. Based on the 2008 tax rate, and assuming $190,000 in annual tax payments:

• Racine Unified lost $59,000 in annual property tax payments.
• Gateway Technical College lost $10,000 in taxes.
• Racine County lost $25,000 in taxes.
• And, the city lost $93,000 in taxes.

We attempted to reach Racine Mayor Tom Friedel and Mayor-elect John Dickert Friday for comment. We'll report their reaction when we get it.

Dave Hazen, Racine Unified's finance director, didn't know specifics about SCJ's tax-exempt properties, but he said the arrangement sounded similar to the tax incremental finance districts local governments setup to attract development. New developments in TIDs pay taxes, but all of the tax money goes to pay off the loans used to build roads, utilities and other infrastructure needed to attract business in the first place. Unified only benefits once the TID's loans are paid off, usually around 15 years after the development is finished.

Case in point, the city created an Uptown TID and will capture all of the property tax from SCJ's new Community Building for the next 14 years. Instead of supporting schools, the county or the city's general fund (ie. police, fire, parks, etc.), the property tax payments will only go toward streets and buildings in Uptown. The result: SCJ is building a $39 million structure, and Racine Unified won't see a dime for 14 years.

Despite being left out, Hazen said it's hard for school officials to oppose TIDs. "It's good for development, it's how the community is going to grow," he said.

He added a key point about TIDs: They never take away tax base from local governments.

The wild card in all of this is whether SC Johnson could have gotten the property tax exemption from the state on its own. If SCJ could have, then Becker swung a deal to at least get something in return.

But two sources with direct knowledge of the negotiations told us Becker and SCJ traded support for the tax exemption for the Uptown money. Maybe SCJ doesn't build Project Honor without the deal, or maybe a great local employer simply deserves the tax break, but it's increasingly clear our former mayor gave away hundreds of thousands of dollars in annual payments to support his vision for Uptown, and he did it without telling the City Council or making the deal public.

This map shows Project Honor's outline, just north of the existing Administration Building.