Foxconn changes the project, so Evers wants to change the deal. What's WisGOP's problem?

This was a pleasant surprise to see this week from our Governor.

Gov. Tony Evers said Wednesday he wants to renegotiate the state's contract with Foxconn Technology Group and emphasized the Taiwanese company won't be creating 13,000 jobs in Wisconsin as originally envisioned.

"Clearly the deal that was struck is no longer in play and so we will be working with individuals at Foxconn and of course with (the Wisconsin Economic Development Corp.) to figure out how a new set of parameters should be negotiated," Evers told reporters in his Capitol office.
He said it was premature to say what specific changes he would be seeking. Under existing deals, the state and local governments could provide the company up to $4 billion to establish a massive facility in Racine County and create up to 13,000 Wisconsin jobs.

"All's we know is that the present contract deals with a situation that no longer exists, so it's our goal to make sure that the taxpayers are protected and environmental standards are protected," he said. "And we believe we need to take a look at that contract and see if it needs to be downsized as a result."

And Evers is well within his rights to do so, because if you read the Foxconn contract, there was this particular section about what Foxconn was supposed to build in Racine County.

5. Construction of Facility. Developer (Foxconn) shall establish and operate Developer's Generation 10.5 TFT-LCD Fabrication Facility (the “Facility”) in Area I. Within Area I, Developer shall invest approximately $10 billion to construct and equip the Facility, including approximately $5.570 billion in direct construction expenditures ("CapEx Expenditures"), and Developer shall complete construction of the Facility within an approximately 7 year period, commencing no later than January 1, 2019. The Developer shall furnish to the Municipalities’ Agent the same reports required under the WEDC Contract.

Well that Gen 10.5 facility isn’t happening any more, and instead is being downsized to a Gen 6 that will have smaller products and fewer workers. However, that contract WEDC signed with Foxconn allows the company to collect on the full 15% of construction costs and 17% of salaries if they merely have 520 people hired in connection to the project in Wisconsin by the end of this year.

That is a number Foxconn could hit if you count the handful of employees that might work in the building that the company has purchased in Green Bay, Milwaukee, Eau Claire and Madison (even if Foxconn is doing very little at those buildings today). If Foxconn hits their incentives, it could cost Wisconsin taxpayers more than $200 million, depending on costs.

That’s a subsidy approaching $400,000 a job, so no wonder Evers might want to change the terms, especially since Foxconn has already changed their original plans. Assembly Speaker Robbin’ Vos (R-Foxconnsin) responded to Evers’ comments in his typically thoughtful, objective manner.

"Tony Evers must have some kind of a contract with the Democrats who are running for president who are rooting for this project’s failure so they can somehow blame Donald Trump," Vos said.

"It’s really insulting to kind of take the tack that he is, which just in my mind shows how naive — let’s be kind — how naive Gov. Evers is to not understand the full ramifications of the words that he says and the actions that he is trying to take with this administration."

Projection is a funny game, isn't it?

Sorry Robbin’, but the one who’s being naïve isn’t Tony Evers. The Governor recognizes the major taxpayer costs coming down the pike for this white elephant, and wants to limit the damage before it chokes off a lot of other things in the state.

Vos’s own constituents are the ones in the biggest danger of getting jacked over. Let’s go back to January, when we found out that the local costs for the Foxconn project had jumped even higher than the already eye-popping numbers they had committed.

In the summer of 2017, Racine County and Mount Pleasant officials estimated it would cost them $763 million to execute the Foxconn Technology Group development. The new estimate is about $912 million, according to numbers provided by the village and county.

As of the end of 2018, both the village and county have spent $190 million on the infrastructure, land acquisition and finance related expenses, but that includes $60 million paid to the county from Foxconn for land acquisition.

Foxconn, which has started construction on the property, will start paying taxes to the village next year, after the village assesses what’s been built in Area I of the project this December.

Basically, the local communities leveraged the daylights out of themselves based on promises Foxconn made for what would happen in the coming years. And as Bruce Murphy notes in his most recent column for Urban Milwaukee, what’s stopping Foxconn from leaving these locals holding the bag?

But what if the company refuses to pay? What if it folds up its tent and leaves town? Then the village would have to go to court to try and enforce the contract. By contrast, most of the state subsidy for Foxconn is incentive-based: the money comes as the company meets goals in hiring and capital investment. Racine County and Mount Pleasant are spending nearly all the money upfront, which is far more risky.

Meanwhile the village has huge swaths of land that have yet to be developed by Foxconn and probably never will. In early April, Village trustees “voted to allow the leasing of portions of the Foxconn development area to local farmers,” the Journal Times reported. The village is leasing 1,066 acres for $180 per acre to two farmers. One of them, Tom Fliess, Jr., is leasing land he sold to the village for $1.675 million in August 2018.

That $191,880 in rental isn’t going to come close to paying back $912 million in debt.

But hey, WisGOP hacks will ask "Why should you care?" if you don't live in the community.

The contract is clear: Foxconn earns up to $2.85 billion in tax credits from the state based on actual investment and job creation. No jobs and investments. No tax credits. It’s pretty simple.

— Scott Walker (@ScottWalker) April 18, 2019

This is where I'll remind you of this section of the Foxconn legislation.

Moral Obligation Pledge for Local Governmental Municipal Obligations
The Act specifies that, recognizing its moral obligation to do so, the Legislature expresses its expectation and aspiration that, if ever called upon to do so, it would make an appropriation to pay no more than 40% of the principal and interest of a local governmental unit's municipal obligations, if all of the following apply: (a) the local governmental unit's municipal obligation is issued to finance costs related to development occurring in or for the benefit of an EITM zone; and (b) the DOA Secretary designates the moral obligation pledge for the local governmental unit's municipal obligation before the municipal obligation is issued, based on a plan that the local governmental unit submits to DOA on a form prescribed by DOA. The Act requires that the proceeds of municipal obligations issued by a local governmental unit under this bill provision be used to finance costs related to development occurring in or for the benefit of such a zone. In addition, the Act authorizes the Secretary of Administration to contract with a local governmental unit to implement the moral obligation pledge.

The Act defines "local governmental unit" to mean a city, village, town, county, or technical college district that contains any part of an EITM zone designated under the bill. In addition, for purposes of a state moral obligation pledge under the bill, the Act defines "municipal obligation" using the current law definition under Chapter 67 of the statutes relating to municipal borrowing and municipal bonds, where municipal obligation includes every lawful promise or engagement in writing by a municipality to pay at a specified future time a specified sum of money.

Finally, the Act creates a legislative determination that the provision of assistance by state agencies to a local governmental unit under the grant and moral obligation provisions, any appropriation of funds to a local governmental unit, and the moral obligation pledge serve a substantial statewide public purpose by assisting the development of such a zone, by encouraging economic development, by reducing unemployment, and by bringing needed capital into the state for the benefit and welfare of people throughout the state.

Another word for this “moral obligation pledge” is BAILOUT. That is what would likely have to be done if the Village of Mount Pleasant or Racine County can’t make ends meet because they’re too busy paying off the debts from the massive infrastructure they gave to a Foxconn factory that will be much smaller than planned (if it ever happens at all).

Quick math tells me that 40% of the $912 million that Mount Pleasant and Racine County has put up would be around $365 million that state taxpayers could be on the hook for. We could be stuck with a bunch of cleared, empty fields, a minor-at-best Foxconn employment center, with state and local taxpayers each out hundreds of millions of dollars each.

So when you hear lines like what Walker is trying to sell, know that THE GOP IS BSING YOU, and that state taxpayers are certainly on the hook if this project never happens.

AND FOR WHAT? To throw a Hail Mary on a project that many Wisconsin businesses would have done with barely any incentives at all, and without all of the home displacements and environmental rollbacks that have been part of this boondoggle.

You bet your ass Tony Evers needs to renegotiate this, if not outright sue Foxconn for breach of contract, and dishonest dopes like Robbin’ Vos who are questioning why should be tossed out of office for their idiocy and disregard for the state’s taxpayers. Or these GOP politicians should be forced to pay what the Fox-con will cost me, given all the infrastructure was funneled down to Robbin’s district (OINK!).

Either way works, guys.