Foxconn Passage Not Certain, Some Legislators Say

Foxconn agreement
Terry Gou, founder and CEO of Foxconn Technology Group, explains how he sees Wisconn Valley taking shape. (photo by Matt Binetti) Japan

A $3 billion incentive package to bring Foxconn Technology Group to Wisconsin isn’t a sure thing to pass the state Senate next week, political leaders said, and economic experts urged a close look at the possible deal.

A vote on the plan is possible next week, but passage is not certain, Senate Majority Leader Scott Fitzgerald told the Journal Sentinel.

The project would require Wisconsin taxpayers to back Foxconn with $3 billion in incentives over 15 years, but the state wouldn’t break even on the deal for 25 years, Reuters reported. The Senate is poised to review a bill that would trigger the project before the state House takes it up.

The entire Foxconn complex will be located on at least 1,000 acres — about 1.56 square miles — and include 20-million-square-foot campus, with jobs that pay an average salary of $53,875 plus benefits, company representatives said.

Saying that state leaders should question the assumptions underlying the deal, one former state economic adviser told Racine County Eye the plan only pencils out if you assume new jobs are “magically created out of thin air.”

While no precise location of the plant has been announced, Racine County Eye has learned that a commercial real estate firm is negotiating on behalf of Foxconn with property owners in Mount Pleasant and Sturtevant.

Read the Legislative Fiscal Bureau Analysis.

Legislators Call for Caution on Foxconn Deal

Majority Leader Fitzgerald (R-Juneau), said the state needs to be “cautious,” the Journal Sentinel reported.

“That’s what we’re doing right now, is the due diligence to make sure this is a good deal for the state and a good deal for locals — and ultimately creates this kind of high-tech campus that everyone’s hoping for,” he said.

Gov. Scott Walker called for the special legislative session last week after Foxconn CEO Terry Gou signed a memorandum of understanding to build a 20-million-square-foot factory to make LCD screens.

Read: Draft of the Wisconn Valley Bill

Under the bill to be considered, Foxconn would be able to bypass some state environmental permits, the tax incremental finance district could be extended up to 30 years and the community the facility is located in could borrow money to help pay for the project, which has been dubbed Wisconn Valley.

The incentive package — the largest single investment the state would make in a corporate development project in its history — relies heavily on tax credits. If approved, the company would be able to “earn tax credits equal to 17 percent of wages paid or 15 percent of capital invested spread out over a 15-year period,” according to a release from Walker’s office.

Former State Economics Adviser Offers His Take

It’s difficult to quantify the impact on taxpayers with so many unknowns relating to the workforce Foxconn could employ, said Jeff Sache, former director for the office of economic advisers for the Department of Workforce Development.

Foxconn promised to pay an average salary of $53,800 a year for up to 13,000 employees, but those positions are may of those are skilled labor and engineering jobs. Sache said the job creation rhetoric doesn’t really hold water because the company wouldn’t be creating new workers.

“Those jobs are being filled by people within a labor market that is already working and already paying taxes,” he said. “But you could boil that down to — working with Foxconn, they are paying a higher wage.”

It’s also not known how many people would move to Wisconsin for those jobs or how many people would seek additional training to become eligible for those positions that were unemployed or underemployed, he said.

“This only holds a full bucket of water if those jobs were magically created out of thin air, and people were not working and haven’t been paying taxes,” Sache said.

The City of Racine has the second highest unemployment rate in the state and 15,000 Racine County residents don’t have a GED.

TIF District Payoff Difficult Without Income Revenue

The proposed bill also calls for extending the duration of a tax incremental financing district to 30 years.

A TIF district is a development tool municipalities can use to attract business. Property taxes from a designated area are used to support bond issues that pay for infrastructure, in an effort to expand the tax base. But the increased tax revenues are first needed to pay off the money borrowed via bonds before being available to backstop other expenses — such as the tax credits that would be offered to Foxconn.

“So if you have no income for 15 years, you can’t make that up on the back end,” Sache said.

With the potential return on the state’s $3 billion investment estimated as far off as 2042, Fitzgerald told the Journal Sentinel that he found the report “striking.”

“Is it going to be a good deal for taxpayers? A lot of that is going to be based on viability, on how this happens over the next 15, 25 years,” he said. “And what is the payback going to be? And it’s difficult to really measure that right now.”

Foxconn chief Gou set a Sept. 30 deadline for the state to approve the deal.


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Denise Lockwood
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Denise Lockwood has an extensive background in traditional and non-traditional media. She has written for Patch.com, the Milwaukee Business Journal, Milwaukee Magazine and the Kenosha News.