Thursday, July 19, 2018

Foxconn won't give good-paying jobs to Racine Co, but you'll still pay the bills

While our Fair Governor flew off to DC today to meet with the president* for a Foxconn-related photo op, recent developments continue to expose the lack of planning that went into this scam, and that it isn't going to be all that proponents claimed that it would.

Bruce Murphy notes another reason to hate the Fox-con in a recent column titled, “Foxconn Deal Allows Low-Ball Wages.”
At issue was the company’s promise to pay workers at Foxconn an average wage of $53,875, which the state was requiring in order for the company to get the massive, multi-billion state subsidy — the largest ever given in America to a foreign company — the Walker administration was promising. The story by reporter Arthur Thomas [in the Milwaukee BizTimes], who continues to scoop the Milwaukee Journal Sentinel in covering Foxconn, reveals the Walker administration originally proposed to count only wages under $100,000 in computing the average wage while Foxconn’s negotiators wanted no “artificial cap” on the average wage. “Foxconn expects all wages to be considered for the average annual wage calculation,” attorneys for the company wrote.

The state’s negotiations were handled by the Wisconsin Economic Development Corporation, which has a dreadful record of protecting taxpayers. A 2017 Legislative Audit Bureau report found that of hundreds of millions in tax credits, grants and loans authorized since 2011, the agency “cannot be certain about the number of jobs actually created or retained as a result of any awards.” In fact only 12.5 percent of contract awards “even had an expected result of job creation or retention.”..

Under a $100,000 cap, Thomas notes, Foxconn could have paid 65 percent of its workers a $30,000 salary and “still met its average salary commitment. A $400,000 cap allows for 93 percent of the workforce to be paid $30,000 while still meeting the requirement.” In short, WEDC simply caved in to Foxconn’s demand.
And this is where the recent photo ops that Walker/Foxconn/WEDC have held in Milwaukee, Green Bay and Eau Claire play in, along with Walker’s and WisGOP’s transparent attempt to sell this boondoggle to skeptical outstate voters.

While these white-collar and engineering offices won’t account for all that many jobs, they will likely be high-paying, and raise the average wage level that allows for 17% of all wages from all jobs to be sent back in bags of cash to Foxconn. Meanwhile, Foxconn can pay workers at the Racine County plant bargain-basement wages and write those jobs off too, as long as they reach $30,000 a year (or around $14.43 an hour).

Or Foxconn can even offer less than that, if they don’t want to get the 17% kickback from the state for those low-wage jobs. This is a situation Foxconn might be OK with, since they’ll get a 15% kickback on all costs involved in building their factory (whether staffed by robots or humans), and would still get 17% off the higher-paying jobs in other parts of the state.

Even if you assume Foxconn does pay their factory workers $30,000, Murphy points out that the taxpayer costs will not end with that 17% kickback on wages in many instances.
…Walker knew that up to 93 percent of these jobs could be anything but high tech and instead could pay so low a salary the workers could be eligible for Food Stamps. At $30,000 for a family of four, these workers would also be eligible for a tax-paid subsidy of more than $7,000 under the Affordable Care Act.

This, in short, is a deal that offers a guarantee that only 7 percent of the jobs being offered will pay family supporting salaries. And to get this the state has agreed to give Foxconn a total subsidy that is now at $4.1 billion and counting, and which will cost the state’s taxpayers $1,773 per household. Yet even with this massive subsidy, the greatest ever given to a foreign company in America, the taxpayers could also be on the line to help pay federal subsidies for food assistance and health care to these workers.

Another problem that has emerged with the Fox-con is how to house workers that might want to relocate to the Southeastern corner of Wisconsin. As Nate Beck wrote in the Daily Reporter this week, the fact that we don’t know how much (or how little) workers will be paid at the Foxconn plant means that it is difficult to figure out what type of housing is needed in the area.
Jerry Franke, a real estate developer enlisted by Racine County officials to encourage housing development, said the village of Mount Pleasant won’t be able to realize in full the promised benefits of Foxconn’s planned $10 billion factory unless the people working there ultimately decide to take up residence locally. Speaking a briefing on Monday about the project’s progress, Franke said local officials are hopeful the Foxconn deal will bring a market-rate apartment complex to Mount Pleasant, something the village hasn’t seen in 20 years.

But developers are now showing reluctance to pursue projects in the village — which is contending skyrocketing land prices and various regulatory barriers. One reason for the hesitancy: Foxconn has yet to release a detailed report showing how much it will pay the bulk of its workers in Wisconsin, Franke said. Without those numbers, it’s hard for developers to know what kind of housing to build.

“Foxconn needs to give us a breakdown of the wages by jobs. Right now, to say, ‘(The jobs will pay) an average of $53,000,’ that doesn’t do anything,” Franke said. “Until we’ve got that stratification of income and jobs, we’re shooting in the dark.”
Makes me wonder why Walker, WisGOP and WEDC were rushing through this deal in a matter of weeks without these details becoming better known. That “headlines over details” mentality continue to cost us with the Fox-con.

In addition, Beck’s report points out that Foxconn-related land speculation and buyouts of current residents in the area means that Mount Pleasant has seen its residential property assessments go up by 10% this year. That might be nice if you view a home as an investment, but it’s also going to raise your property taxes for next year- and your taxes were already going up to pay for the hundreds of millions of dollars of property-tax exempt subsidies being given to Foxconn.

Sucks if you live inside this zone...or near it

So, what is Mount Pleasant Village President Dave DeGroot thinking of doing? Giving another tax break to developers.
DeGroot said local officials may also have to reconsider policies meant to ease the way for development. He said they should look at rewriting local zoning laws to allow for more density and changing the Racine Water Utility’s so-called REC fee, a charge developers pay for sewer and water infrastructure.

And if the developers aren’t paying for the new sewer and water pipes, guess who is? The existing taxpayers of Mount Pleasant. What a deal!

Is anyone going to be better off under the Fox-con by the time this is done? Outside of a few well-connected companies and paid-off elected officials, of course. It’s cronyism at its worst, and the 99% of us outside of the inner circle are going to be stuck with the bill.

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