By Elizabeth Elving, Shepherd Express
When Foxconn Technology Group first announced its plan to build a $10 billion electronics factory in Wisconsin, it seemed like a big win—for President Donald Trump, who called the decision “incredible” and promptly took credit for it and for Gov. Scott Walker, who needs a splashy achievement to tout as he seeks reelection. It seemed like a win for Wisconsin, too. The liquid crystal display production plant would reportedly bring in as many as 13,000 jobs with an average salary of $53,000, and possibly summon an industry renaissance.
“This is an area of manufacturing that we surrendered in the United States a couple of decades ago. And here it is coming back to Southeast Wisconsin,” says Buckley Brinkman, executive director and CEO of the Wisconsin Center for Manufacturing and Productivity. “It’s an unbelievable opportunity for all of us.”
To convince the Taiwanese company to invest in Wisconsin, Walker released legislation offering billions in taxpayer money and lifting key environmental regulations. The incentive package passed along mostly party lines in September. Weeks later, Foxconn named the village of Mount Pleasant in Racine County as the future site of its 20 million-square-foot campus. Supporters have called the development “transformational” and a “turning point.” But for many residents, excitement about the mega-plant is overshadowed by dismay at what the state gave up to get it here.
“I’ve heard from hundreds of people from all over the state, and many are concerned about the fiscal impact this is going to have,” says Representative Katrina Shankland (D-Stevens Point). “The State of Wisconsin could have struck a better deal, and unfortunately I think Governor Walker gave away the farm.”
Payouts and Exemptions
The incentives package includes up to $2.85 billion in refundable tax credits (depending on the company’s level of capital investment and job creation) and an additional $150 million in sales tax exemptions on construction materials. Walker has claimed that Wisconsin won the Foxconn deal despite being outbid by “at least one” other state, and documents obtained by the Milwaukee Journal Sentinel show that Michigan offered nearly $3.8 billion.
However, Michigan’s offer consisted primarily of tax waivers for various taxes that Foxconn would be paying, whereas Wisconsin’s offer was a refundable tax credit, which meant that we would be providing tax payments to Foxconn. Since Walker’s administration has already minimized taxes for manufacturers, his $3 billion amounted to mostly cash payments, making it the better offer. To cover these incentives, the state will pay between $200 million and $250 million annually (according to the Wisconsin Economic Development Corporation) over a period of 15 years.
“As it stands now, it is possible for the state to cover the estimated credit cost within its revenue flows,” says Todd Berry, president of the Wisconsin Taxpayers Alliance. “That’s not to say there’s money sitting there. It’s just one of those things that will move to the front of the budget priority line.”
Opponents of the incentive package worry about what this means for other budget priorities. “Healthcare, public schools, roads and infrastructure, small business development; all of those things will come after the required Foxconn payments,” says Shankland. “To give a foreign company priority over our kids’ future is irresponsible.”
A report from the Legislative Fiscal Bureau estimated that it would take at least 25 years for the state to recoup this investment. That’s assuming the company hits its hiring goal of 13,000 (mostly Wisconsin-based) workers, projections that Shankland calls “overly rosy.” But with so much unknown about the future workforce, it’s more or less impossible to forecast when taxpayers would actually break even.
And the Environment?
There’s also no way to predict, at this stage, what the facility’s environmental impact might be. Proponents of the Foxconn deal argue that the environmental exemptions are just meant to streamline the process, and that the company is committed to protecting natural resources. Kerry Schumann, executive director of Wisconsin League of Conservation Voters, is not so sure.
“It’s just a cover,” Schumann says. “When you give these kinds of exemptions, you’re saying ‘you have a free pass around the law,’ and it does affect the environment when that happens.”
The incentive bill reduces restrictions on discharging materials into wetlands and rerouting streams and waives the requirement for an environmental impact statement. It’s also left environmentalists worried that the plant, which will need to use vast quantities of water from Lake Michigan, won’t have to comply with the Great Lakes Compact.
Schumann says she’s certain that the facility could follow environmental regulations and still be successful, as so many other Wisconsin businesses have. Whether Foxconn (which has a history of polluting rivers in China) will be willing to do so is another matter. She also notes that the Department of Natural Resources has recently “fallen down on the job when it comes to enforcement of environmental laws.” Fortunately, Schumann says, Wisconsin citizens are good about taking these kinds of matters into their own hands.
“This is going to take some really serious inspection and due diligence on the part of the people who live in the area,” she says. “They are going to have to be constantly asking questions, constantly pushing back, constantly on alert.”
Environmentalist groups could challenge these exemptions in court, but Foxconn may have a special advantage there, too. An amendment to the incentive bill allows for an expedited appeals process in cases involving Foxconn. This unprecedented provision would let parties appeal decisions directly to the state’s conservative-leaning Supreme Court. Any orders made by the lower courts would automatically be stayed until a final decision was reached. An analysis by the Wisconsin Legislative Council found that some of the amendment’s provisions may be unconstitutional.
“All Wisconsin businesses and Wisconsinites have to adhere to the laws, and this company gets a pass,” says Sen. Lena Taylor (D-Milwaukee). “That’s disturbing. They’ve given this company the ability to access our justice system in a way that no other Wisconsinite can.”
Jobs for Wisconsin
For the majority of legislators (including several Democrats), any misgivings about the incentive package were outweighed by the prospect of thousands of middle-class jobs. But with the factory so close to the Illinois border, its unclear how many of those jobs will go to Wisconsin workers. Walker has predicted that 90% of jobs would go to Wisconsin, but there’s no built-in guarantee for that.
“Where are these workers going to come from? Are they going to move from Northern Wisconsin? Are they going to come from Racine and Kenosha counties? Or are they going to come from Northern Illinois?” Berry says. “Nobody can say that because nobody knows.”
A modified version of the incentive bill “encourages” Foxconn to hire Wisconsin residents, but a minimum hiring requirement proposed by Assembly Democrats was voted down. Taylor maintains that since Wisconsin tax dollars are funding this project, Wisconsin workers and businesses should be “at the front of the line” for hiring and contracting decisions. Additionally, Taylor would like to see Foxconn commit to hiring in the state’s rural and urban “crisis areas” facing the highest unemployment. “If you’re going to make this kind of huge investment, you should at least be attacking the problems that you have,” she says.
Because the state’s overall unemployment rate is relatively low, Brinkman says a project of this scale presents “the opportunity to pull a whole group of people out of poverty and into the workforce.” To get those jobs, however, workers need access to training. This is especially true for a highly automated facility that Brinkman says will “require more of every worker.”
Gateway Technical College has applied for a $5 million state grant to expand its SC Johnson iMet Center to train prospective Foxconn employees. Taylor says it’s important for the state to invest in these programs and to learn more about what hiring needs will be—not only for Foxconn, but for companies that stand to lose employees to Foxconn. “I would love to make sure that training is done and expanded to make sure we’re thinking about Wisconsin businesses that will be affected,” she says.
Additional transportation will also be needed for workers throughout Wisconsin to access the Mount Pleasant facility. Racine County or Pleasant Prairie may have to spend tens of millions of dollars on infrastructure such as roads. Another amendment introduced by Assembly Democrats asked for the creation of a Regional Transit Authority for this purpose. It was voted down along party lines.
Opportunities and Unknowns
With the incentive package approved, opponents of the deal continue to ask questions and raise concerns, often stemming from Foxconn’s worrisome history. The electronics giant has long been criticized for its inhumane treatment of workers and is known for installing “safety nets” around its factories to prevent suicides. “We’re a state that is very concerned about workers,” Taylor says, “so we’ll continue to make sure that we are talking about these things—about workers, about access for women and minorities to get positions within the company, including positions of leadership. We have to figure out how to navigate these issues, even after things are moving.”
Another big question is how vulnerable the plant will be to changes in the market or to innovations that could render LCD screens obsolete. “The rate and direction of technological change is so dramatic now,” Berry says. “There are things you just can’t predict.” Foxconn would probably be able to adapt to such disruptions as it has in the past, however adaptation might mean abandoning the Wisconsin plant and building somewhere else.
For now, Shankland says, Democrats are focused on pushing for accountability. Much of that depends on the Wisconsin Economic Development Council, which is responsible for making sure Foxconn is fulfilling its employment obligations (and not receiving subsidies for jobs they’re not creating). Past audits have shown inaccuracies in the agency’s data, and Shankland says more needs to be done to make sure it’s tracking jobs accurately. Skeptics hope that increased accountability will protect taxpayers and secure the opportunities that were promised at the outset. Still, after months of scrutiny, the Foxconn deal no longer seems like the resounding win that Trump and Walker made it out to be.
“Governor Walker and the folks who voted for the Foxconn bill really misjudged how voters would feel about it,” Schumann says. “There’s a good chance this is going to backfire on a lot of people once election season rolls around.”