By Senator Howard Marklein
August 25, 2017
Nearly a month ago, Wisconsin received the news that a major technology manufacturer called Foxconn selected southeastern Wisconsin for a $10 billion manufacturing facility that has the potential to create 13,000 jobs. Along with this news began a process in which the legislature has been compiling and considering a $3 billion incentive package for the company.
As I have been studying the bill, the amendment and the project overall, I have received input in favor and opposed. I have also fielded many questions. I have developed the following Q&A list based on these conversations:
Q: What is Foxconn?
A: Foxconn is a global leader in design, manufacturing and assembling computer and high-tech consumer electronics. They are best known for assembling iPhones. The company started in 1974 and holds more than 55,000 patents. They are ranked #27 by Fortune 500.
Q: Why should we, in southwestern Wisconsin, care about Foxconn?
A: Foxconn represents an entirely new industry for manufacturing in Wisconsin and the United States as a whole. They plan to bring up to 13,000 new jobs to our state and will invest $10 billion to build a 20 million square foot facility which is the size of 11 Lambeau Fields. This plant will be the first LCD facility outside of Asia.
In addition to the direct impact of the Foxconn plant itself, the residual jobs and dollars created during construction and in its supply chain will have rippling impacts all over the state. One commenter on my Facebook page said, “This is not a stone in a pond ripple effect. This is an asteroid in a pond ripple effect. This will benefit the economy statewide.”
We have manufacturers and suppliers in our communities who may directly and indirectly work with Foxconn. The Supply Chain Marketplace tool was launched this week as a pipeline for manufacturers and service providers to connect with Foxconn. Take a look at the following link to learn more: www.WISupplyChainMarketplace.com.
We also have universities and colleges poised to train workers for Foxconn, their suppliers and spin-offs that may result from having a new technological company in our midst. A techno-giant like Foxconn draws the attention of investors and entrepreneurs to Wisconsin. We cannot possibly predict all of the potential benefits of this investment.
Q: What if we give Foxconn all of this money and they don’t come through? What kinds of guarantees do we have?
A: We are not “giving” Foxconn any money up front. The company will have to spend money and hire people to receive any of the incentives.
There are three types of incentives that the state is considering for Foxconn:
1. Payroll Tax Credits – 17% of qualified wages paid to full-time employees with a cap of $1.5 billion. The 17% will only be calculated for positions that pay $30K - $100K annually.
2. Tax Credits for Capital Expenditures – 15% of significant capital expenditures for seven years with a limit of $1.35 billion.
3. Sales Tax Exemption for building materials, supplies, equipment and taxable landscaping and lawn maintenance services for construction and development of the facility.
The state will set specific thresholds and measurements with the company during contract negotiations. They will have to meet specific numbers in order to qualify for different levels of tax credits. The bottom-line is that they will not get credits unless they meet the goals we set with them.
I would also ask every reader to consider whether they would bail out of something into which they invested $10 billion? Foxconn will have more skin in this game than we will.
Q: Wouldn’t our money be better spent on schools, roads, etc?
A: Again, we are not “giving” Foxconn any current money from the state treasury. We are not cutting Foxconn a check before they put a shovel into the ground or before they hire a single person. We are not taking money from another program or priority to pay Foxconn.
The credits Foxconn will receive would not exist without Foxconn’s existence in Wisconsin. The tax credits that make up the incentives are directly tied to Foxconn’s payroll and Foxconn’s spending to build their facility. They have to put the money in to get the money out.
Any investments that the state and local governments make to improve roads and infrastructure will benefit citizens for generations regardless of Foxconn.
Q: Will the relaxed environmental regulations in this deal lead to pollution, water quality issues, etc?
A: All air, water and waste-related laws are in effect for Foxconn. The company will have to apply for, and pass, the Federal Environmental Impact Statement requirements like every other company.
The only changes to environment-related state laws are to streamline the environmental process on the state level while keeping all of the environmental requirements in place. We are shortening the wait and removing obstacles that do not change the outcomes in the permitting process. The Department of Natural Resources (DNR) maintains control of the permitting process and the agency believes that the environment would be protected. The permitting process for Foxconn will be similar to the process for EPIC, Amazon and Uihlein.
In fact, the bill changes Foxconn’s wetland mitigation to 2:1, which is well above current law that requires 1.2:1.
Q: The LFB said that the breakeven point is in 25 years. Is this a good return-on-investment?
A: The LFB analysis is the most conservative prediction of possible outcomes. I am a CPA. I want to know the most conservative financial position. The LFB analysis is the low-end potential. However, the potential upside is immeasurable right now. There are some analyses that show a much greater gain, much faster and further reaching impacts.
Q: Will Wisconsin have enough workers to meet the company’s needs?
A: The universities and colleges throughout Wisconsin are eager for the opportunity to train workers and offer more professional opportunities to keep Wisconsinites in our state. We will also draw workers from other states and countries who will move to Wisconsin to work for Foxconn. This is an enormous opportunity to reverse Brain Drain to Brain Gain.
Our population is aging. We need a robust, young workforce to support those of us who will retire in the coming years. A company of this magnitude will support the growth of a workforce, train workers, attract workers and their families and bolster the demographics of our population. For many years, more people have left Wisconsin, than have come to Wisconsin. This is an opportunity to reverse this trend.
Q: What if workers come from Illinois? How will that impact Wisconsin’s tax revenue?
A: Wisconsin has a reciprocity agreement with Illinois for income taxes to allow workers in our states to complete one tax return, but pay taxes to both states. Wisconsin will receive taxes from Illinois for Illinois residents who work in Wisconsin.
Q: Foxconn backed out of a deal in Philadelphia. What if they do the same here?
A: In the Philadelphia deal, Foxconn left because the local incentives didn’t materialize. The incentives that the company was promised did not come through. Foxconn did not renege on the deal, Philadelphia did.
The State Assembly passed Special Session Assembly Bill (SSAB) 1 on August 17, 2017 with 59 Ayes, 30 Noes and 6 Paired votes. The bill received bi-partisan support and was amended to further fine-tune the bill.
The legislature’s Joint Finance Committee (JFC), on which I serve, held a day-long hearing in Sturtevant, near the intended site of the company, on Tuesday, August 22, 2017. We heard from dozens of people with a mix of opinions. Most of the local residents, leaders, educators and organizations who testified were in favor of the proposal.
The JFC will hold an Executive Session to vote on the bill in the coming weeks before it goes to the full Senate for consideration. If the JFC or Senate amends or changes the bill, it will have to go back to the Assembly.
Overall, there comes a point at which we must decide whether we are willing to take a managed risk in order to grow as a state. There are several examples of smaller companies that have built and grown with the help of taxpayers such as Lands’s End, EPIC and Amazon. If we hadn’t invested in these companies or cleared the way for their investment in us, we would not have the benefits of their businesses in our state.