State Legislation Would Tighten Job Requirements on $3 Billion Wisconsin-Foxconn Deal

The new bill would give Foxconn Technology Group up to $2.85 billion in cash payments from the state in exchange for building an up to $10 billion flat screen plant and hiring up to 13,000 workers.

by Jason Stein and Rick Romell, the Milwaukee Journal Sentinel / August 23, 2017
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(TNS) -- STURTEVANT, Wis. -- Gov. Scott Walker's administration is seeking to tighten up job creation requirements as part of a multibillion dollar deal to bring a Taiwanese company to southeastern Wisconsin, a top official said Tuesday.

Foxconn Technology Group could receive up to $2.85 billion in cash payments from the state in exchange for building an up to $10 billion flat screen plant and hiring up to 13,000 workers.

Speaking at a budget committee hearing here Tuesday, the head of Wisconsin's jobs agency said the state was seeking to include stronger safeguards on those payments in its final contract with the company.

Mark Hogan, chief executive officer of the Wisconsin Economic Development Corp., said his agency is seeking to require Foxconn to return some of the payments if employment at the factory doesn't hit employment targets.

If Foxconn’s employment should rise to 13,000 by the fifth or sixth year of the deal but then decline, “we would look at putting in our contract the ability to pull back some of those dollars," Hogan told lawmakers.

That would represent a significant addition to the Foxconn deal, which has some safeguards in place but no minimum job creation requirement for some of the potential payments to the company. Democrats have called for including these protections in the Foxconn bill itself rather than waiting to see if they are included in the final contract with the company.

More than 100 people gathered at a Gateway Technical College Tuesday as the Joint Finance Committee took 5½ hours of testimony on the Foxconn bill from about 50 people.

The legislation drew praise from a broad group of public officials and education and business leaders, including from Wisconsin Manufacturers & Commerce, the state's largest business lobby and 42 local chambers of commerce. The supporters easily outnumbered critics, who questioned the environmental impact of Foxconn, its commitment to Wisconsin and its prospects for sustained success.

“This is one of the biggest decisions we’ll ever have to make,” Sen. Alberta Darling, a Republican from River Hills and Joint Finance co-chair, said just before the hearing.

“There’s a lot of downside to saying no and a lot of upside to saying yes,” Darling said.

But Rep. Gordon Hintz of Oshkosh and Sen. Jon Erpenbach of Middleton, both Democrats, said Republicans were ignoring their efforts to improve protections for taxpayers and the environment as they sought to rush the incentive package through the Legislature

“They’re asking for $3 billion from the state of Wisconsin with a lot of questions out there,” Erpenbach said.

Erpenbach criticized Foxconn executives for not being present Tuesday to answer questions. But Darling said the focus of the hearing is not on Foxconn’s business but rather a deliberation on the proposal for state assistance.

“This isn’t a sales job for Foxconn to come in here and try to woo us,” Darling said.

Foxconn’s impact on other companies throughout the state would be “significant,” Hogan told committee members.

Oshkosh Truck, for example, spends $300 million a year on supplies from Wisconsin companies, Hogan said. Foxconn, he said, will spend $1.4 billion.

Production workers at the plant will be paid more than $20 an hour, Hogan said. He said that not only will the average annual salary be nearly $54,000, but so will the median. That means half of Foxconn employees here would be paid more than $54,000 a year and half less.

Hogan also confirmed what has been widely believed but not officially acknowledged: Foxconn will locate its massive liquid crystal display panel factory in Racine County or Kenosha County.

Darling, however, cautioned reporters against concluding that the decision to hold Tuesday’s hearing in Sturtevant meant Racine County is the favored site. The committee came to Sturtevant because Gateway offered a suitable space for the hearing, Darling said.

Darling also offered insight on the pace of the Foxconn assistance bill. The measure, which has passed the Assembly, likely will be taken up by the Senate the week of Sept. 11, she said.

The Joint Finance Committee is considering whether to approve environmental exemptions and up to $2.85 billion in cash payments to the Taiwanese company in exchange for siting a flat screen plant and up to 13,000 jobs nearby.

On Monday, a report by a UW-Madison economist found the massive manufacturing complex could generate nearly $4 in gains for the state for every $1 in taxpayer subsidies.

If the Taiwan-based electronics manufacturer employs 13,000 people in the state, the ripple effect could spawn an additional 19,000 to 26,000 jobs through growth from the company's suppliers and other businesses in the region, said Noah Williams, director of the Center for Research on the Wisconsin Economy.

The liberal group One Wisconsin Now pointed Tuesday to open records that it had received from Gov. Scott Walker's office showing that in 2015 Williams had sought to advise Walker on his unsuccessful presidential campaign. That year, Williams also contributed $500 to Walker's campaign, federal records show.

At the hearing, Secretary of Administration Scott Neitzel said that while the Wisconsin plant will be Foxconn’s most automated, it still is likely to meet thehuge number of promised jobs.

“Every discussion we’ve had with the company always ends up at 13,000 jobs,” he said.

Hintz, the Oshkosh Democrat, questioned whether Foxconn will follow through on its stated plans to spend $10 billion on a Wisconsin plant.

With the company also announcing investments of $12.4 billion in China and $5 billion in India, “that would be more than they’ve spent in the last 23 years combined,” Hintz said.

He also said Foxconn promised to create 100,000 jobs in Brazil, but came through with only 10,000 and now will be halting manufacturing there.

He also asked whether Foxconn’s plans to build a similar LCD plant in southern China, where labor costs are far lower, could jeopardize the future of production in Wisconsin. And he questioned whether the screens Foxconn makes here will remain competitive over the 15 years of the proposed deal with the state.

Hogan said officials are confident Foxconn will invest $10 billion here. The company has aggressively embraced Wisconsin and “we have seen nothing but a full commitment,” he said.

Foxconn wants to make screens in the U.S. because it is a huge market for television sets, with 30 million sold per year, Hogan said. As for Foxconn’s ability to adjust to changing markets, he noted that the firm holds 55,000 patents.

“This is not a company that sits on the sidelines waiting for somebody else to come up with an idea,” Hogan said.

It will take more than two decades for Wisconsin taxpayers to get their money back from the project.

The Legislative Fiscal Bureau has found that if the state makes the full $2.85 billion in payments to the company, it would take 25 years of plant operation for taxpayers to recoup the money.

Kenosha Mayor John Antaramian, whose community appears to be, along with Mount Pleasant, one of two Foxconn finalists, said amendments to the bill are needed.

The municipality that lands Foxconn should be allowed to use money generated in the tax incremental district around the factory for the added services it will require without bumping up against levy limits and cost controls, Antaramian said.

“We need to be able to waive the levy limits and the cost control rules … so that there is no impact on the property taxpayer,” he said.

The chosen community also should be included in the clawback provisions the state negotiates with Foxconn, Antaramian said.

“The city is not going to be able to go against a corporation of this size and be successful,” he said.

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The legislation to secure the Foxconn plant would exempt the company from state wetlands regulation and instead would rely on the U.S. Army Corps of Engineers to approve or deny permits that would allow the company to destroy wetlands to build the plant.

"We strongly reject the idea that it is to the state's advantage to cede water-related review and decision making to the federal government," said Brian Vigue, policy liaison for the Wisconsin Wetlands Association.

Vigue said that rather than an outright exemption for the company, legislators should consider a quicker review of affected wetlands.

He also said state officials should insist that replacement of wetlands should take place in the same watershed.

For other Foxconn-related development, Vigue urged creation of a separate technology zone. In it, the Department of Natural Resources could help speed development and at the same time protect resources by identifying suitable construction sites and spots for new wetlands.

Rick Romell reported for this story in Sturtevant, with Jason Stein in Madison. Lee Bergquist in Milwaukee contributed to this report.

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