Tuesday, July 11, 2017

Is Wisconsin going to get Fox-Conned?

Wisconsin media has started throwing out increasing amounts of talk about iPhone manufacturer Foxconn possibly locating one of their new factories in the state. Monday’s article in the Milwaukee Journal-Sentinel is typical of the coverage, and described the latest moves in Racine County, which seems to be the favored site if the factory is located in Wisconsin.
Last week, Assembly Speaker Robin Vos and two other leaders in the Legislature said in a memo that Foxconn wants to locate in southeastern Wisconsin, bringing up to 10,000 jobs. At the same time, the legislators suggested that the development was being threatened by delays in providing money to improve I-94 through Racine and Kenosha counties.

Vos, a Republican, represents most of southern Racine County.

Racine Mayor John Dickert has said representatives of an effort to land Foxconn have approached the city about providing water and sewer service to a potential large plant outside the Racine limits, along the interstate. The city provides water to Mount Pleasant.

And the Racine County Board held three closed-door sessions in June to discuss committing public money to unnamed “competitive multisite economic development opportunities.”

After the most recent session, on June 27, the board took the unusual step of approving — unanimously and without discussion — a special $500,000 letter of credit to the area’s economic development organization to cover expenses related to unspecified economic development projects.

Is this coming to Racine?

All of this sounds promising, but I got two simple questions for all of this Foxconn talk. “How much are they asking for?” and “How much will this cost us?”

Part of this is hinted at in the article, as Racine is talking about extending water and sewer service to an out-of-town site, and Robbin’ Vos is claiming that upgrading I-94 in the area would be a major help in landing the project. And there is clearly some kind of tax-free incentive deal being put together to encourage Foxconn to come to Wisconsin, and would likely involve breaks at the state level (with income and corporate tax write-offs?), and the local level (in the form of free land and property tax write-offs?).

So why is all of this negotiating going on in secret? Is it because the elected officials in WisGOP and Racine County don’t want the people to know how much they are planning to give away to this company before they have the photo op? And is this part of the reason that the state budget is being held up because they are trying to tuck away some kind of package for Foxconn where they get massive write-offs that can be cashed in before one iPhone rolls off the line? It sure doesn’t seem like there is going to be a lot of public discussion about what we will have to pay to get Foxconn to come here.

Look, I think it’s great if we can get factories to be set up here if a business thinks that Wisconsin is a worthwhile place to locate because of a strong workforce and infrastructure. I even don’t have a problem with offering some kind of short-term help in the form of Rehab Credits, enterprise zones, and/or TIF funding. The caveat to that is there must be clawback provisions if the company fails to deliver on its promises, and possibly assistance to a community to make sure local taxpayers aren’t being stuck with a major bill.

I have ZERO confidence any of that would be part of a Foxconn deal. This screams “corporate welfare giveaway” and “big jobs announcement with little to show for it,” and would be right in line for the type of gimmicky garbage that will be part and parcel of Scott Walker’s 2018 campaign (I’m not going to go into the possibility of campaign kickbacks that might happen with such a deal).

If we’re going to be working on such a plan, officials at the state and in Racine County need to be open with the public, tell us where the site is, tell us how much extra infrastructure will have to be built for this factory, and tell us how many tax dollars are going out the door to this company instead of being invested into roads, schools, and a quality of life that would attract enough talent and make companies want to locate here without gigantic subsidies.

There’s no guarantee Foxconn will ever actually create the jobs they promise. Go back to March and read this Washington Post story talking about how Foxconn pulled the “we’ll bring a factory here” routine with the state of Pennsylvania 4 years ago, and never followed through on its promise.
In 2013, Foxconn’s chairman sent a jolt through this state capital when he said his company — best known for making Apple iPhones in China — would invest $30 million and hire 500 workers for a new high-tech factory in central Pennsylvania.

Locals were giddy. Foxconn had a small office here, but this seemed like the start of an entire new industry. Pennsylvania’s governor boasted about the deal. The Brookings Institution think tank hailed Foxconn’s decision as a sign of U.S. manufacturing’s strength.

But the factory was never built. The jobs never came. “It just seemed to fade to black” after the announcement, recalled a local official. It was the start of a mystery, created by a chief executive known to promise projects all over the world that never quite pan out. Yet few people seem to notice. Foxconn and others continue to get credit for deals that never take place. In December, Pennsylvania’s economic development staff was still touting the $30 million factory that never was.
So let’s see if anything happen, even if there is some kind of Foxconn jobs announcement in the coming months. The consistent cycle of “media-covered job announcement followed by few jobs and eventual layoffs” that we’ve seen throughout the WEDC-centered Age of Fitzwalkerstan is also an ominous sign. Again, I don’t want to say I’m opposed to the idea of Foxconn coming here. But it sure seems like a lot talk is going on about “potential new jobs”, and nowhere near enough is being discussed about how much those jobs will pay, how much the taxpayers will pay to this company, and what ripple effects will there be for the local economy wherever Foxconn may locate.

One last thing- if Wisconsin’s unemployment rate is truly at 18-year lows (a sketchy enough claim on its own), then where are we going to find the workers that will want to work at what is likely to be bargain-basement wages at Foxconn? The same pro-WisGOP corporate hacks that want this deal are the same ones that complain about labor shortages, which is in no small part due to the fact those businesses offer the lowest weekly manufacturing wages in the Midwest. So if we’re at surplus employment, where do these workers come from, and does that mean that other existing businesses will suffer if their current workers leave to go to work at Foxconn?

We need to talk about this NOW, as this state is already facing major budget troubles (with another $51 million hole revealed on Tuesday) before it chooses to give away millions more to another corporation. This is especially true because we have a Governor and Legislature that only seems to care about having a set of “it’s working” talking points, and they don't care about what happens after the photo op with suits and shovels gets on the air.


  1. And, this "$10 billion dollar investment" will most certainly include $5 billion+ of M&E since FoxConn automates as much as possible. Hmm, wonder why there is a quiet backroom push to eliminate the personal property tax?

    1. Ooh, very good point. Yet another subsidy, and if it is all machines, then we may be talking very few jobs but a helluva lot of subsidies

  2. Foxconn looks to be leaving Brazil:


    "back in 2011, the company had pledged to invest $12bn in the country and create 100,000 local jobs within six years.

    However, the promises soon proved hard to keep: the company wanted the Brazilian government to come up with 30 percent of the cash, as well as a private investor - both failed to materialize."

    It looks like it will really cost us to get their factory.

    1. Great find! None dare call it extortion.

      We need to see the (taxpayer-supplied) price tag, and what services we have to cut to make up for this.

  3. It's not as if Racine County or the City of Racine are awash in cash, either. Does anyone know if Cory Mason is involved in these discussions? Just curious, since he aims to be mayor of Racine.

    LFB has a discussion paper on enterprise zone tax credits, offering as one alternative a limit on the dollar amount of credits available per year. This one might be out the window now ...

    1. Good catch on the LFB papers and the limits (see folks, it pays to be nerdy!). Right now it looks like a certain amount of the awards has to be in rural areas, but that can always be changed.

      So watch for your 999 measures. That would totally be the way to try to sneak through changes like this to gear it toward Foxconn.