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.
And while the cost of buying land has been more than expected, but the amount of land that has been developed for Foxconn has been much less than expected, which is driving up interest costs for the local communities.
Originally, the village and county took short-term loans on Areas II and III in expectation that Foxconn would begin to develop those areas within the next five years. But plans for the project changed, and those short-term loans were refinanced into long-term loans, a major factor in the increase in interest payments.
To pay for the interest on the debt, the village has issued a special assessment on Foxconn, which is scheduled to be paid back to the village every year for the next 20 years totaling roughly $202 million.
In addition, local communities like the Village of Caledonia are hooking up to the new sewer and water lines that are being sent out to Foxconn, which is a cost their taxpayers will have to pick up over time. And that total investment is now expected to cost $185 million, and not the $160 million that was originally projected.
And I wouldn't count on Foxconn developing Areas II and III any time soon, if this recent article from Bloomberg News is any indication.
Foxconn Technology Group may hire workers at a slower pace for its new Wisconsin plant, adding to mounting gloom over the state of the technology industry and global trade.
The biggest assembler of Apple Inc.’s iPhones, known as Hon Hai Precision Industry Co. in Taiwan and Asia, said it has adjusted the timeframe for recruitment and hiring at its $10 billion manufacturing facility in the U.S. state....
The announcement comes amid mounting signals demand for Apple’s iPhone is flagging. Apple is said to plan hiring cutbacks for some divisions.
In November, Bloomberg News had reported that Foxconn is planning steep reduction in its expenses in 2019.
It may stay this way for a while.
Even worse is that Torres notes in the Racine newspaper article that Foxconn could get money back from the local governments if they don't build.
There is no guarantee that Foxconn will develop Areas II and III, but they have up to 10 years to begin working on that property.So Foxconn either gets billions in jobs credits, or they get millions from the land that was gifted to them, and later is sold to other. Nice win-win for our foreign friends, isn't it?
If the 10 years elapse and no work has been done, the village can then sell the land to other interested parties; however, according to village officials, that money would go to Foxconn to reimburse them on its payments on the special assessment for that land.
And remember, the Legislative Fiscal Bureau's memo on Foxconn from last year notes that there's a 40% moral obligation pledge put into the Foxconn legislation to help to bail out these local communities. Which means if Foxconn fails, state taxpayers would be out $360 million as it stands today.
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 submitted to DOA. The Act also permits the DOA Secretary to contract with a local governmental unit to implement the moral obligation pledge.As I said last week, just give Foxconn a check for $100 million, tell them to go away, and hit the reset button. And if Foxconn doesn't take that deal, have new AG Josh Kaul (or outside lawyers like Matt Flynn) take Foxconn to court for breach of contract, and dare the GOP to try to recall a guy for holding Foxconn to account in a deal no one outside of BubbleLand likes.
A state moral obligation pledge for local governmental municipal obligations can be viewed as a credit enhancement mechanism that could assist in the marketability of debt issued by a local governmental unit. Because of this pledge, debt not previously issued by a local governmental unit, or issued in larger amounts than before, may be issued at a lower interest rate due to the Legislature's moral obligation pledge to repay a portion of the outstanding principal and interest if the local governmental unit is unable to make such payments. The moral obligation pledge is not legally binding. Rather, it is a statement made by the current Legislature that it expects a future Legislature to, if called upon to do so, make an appropriation to assist in the repayment of outstanding debt issued by a local governmental unit.
Given the massive amount of money that local Racine County taxpayers are on the hook for in this boondoggle, why aren't there recall petitions flying against the local crooks that sold out their community's futures for this flashy Fox-con failure? Seems to be in order after what we have found out in the last week.