Wednesday, January 1, 2020

Fox-con will keep costing locals a whole lot more in 2020, and Foxconn ain't paying them back

As increasing evidence comes in that Foxconn not only won't add anything close to the jobs or large-scale production that it promised Wisconsinites in 2017, and received an unprecedented incentive package from, the ass-covering is going to pick up from the WisGOPs and local yokels that designed and signed off on this scam.

A good example of that comes from the Village of Mount Pleasant, who has the most to lose if Foxconn ends up falling short and/or collapsing. To counter recent negative headlines about the project and the company's future in Racine County, they tried to tell the public that things were just fine, and that Foxconn was paying taxes back to the Village.
The Village of Mount Pleasant has received 2019 property tax payment from Foxconn Technology Group in the amount of $1,071,899.55, making Foxconn the largest taxpayer in the Village.

In addition, Foxconn also paid its first Special Assessment payment in the amount of $7,325,050. Foxconn is responsible to pay Special Assessments to cover the cost of all land acquisitions in the project area, in addition to the $60 million it paid the Village in 2017. To-date, 850 acres of land in Area I have been conveyed to Foxconn, and a total of $110 million in Special Assessments are in place on the approximately 2,600 acres of land in Areas I, II, and III.

“Ahead of schedule, Foxconn Technology Group has paid its 2019 property tax and special assessment payments to the Village of Mount Pleasant. These payments, totaling more than $8.4 million, establish the company as the largest taxpayer in the Village,” said David DeGroot, Mount Pleasant Village President.“We continue to see tremendous progress at Foxconn’s campus in the Village. These advance payments are one more example of Foxconn’s commitment to our area and to its obligations under the local development agreement.”
$8.4 million? Well, that sounds like a nice return to the Village. Except when you start looking at the reality underneath, and realize that the ROI isn't much at all.

First of all, that $60 million down payment that Foxconn made doesn't seem like much when you realize that the Village of Mount Pleasant had to pay $38 million above what they budgeted to get the land that they gave to Foxconn, so that's a lost cost.

In addition, let's not forget about the large amount of property taxes forgone from all of the homes that were bought out via eminent domain and destroyed for a project that won't come close to the area that was cleared and paved over for it.

Then, you look at the Village of Mount Pleasant's budget for 2020, and that $8.4 million in taxes becomes very small. In particular, look at TID 5, which is annual costs that help to pay off the $912 million local Tax Incremental District that the Village gave to Foxconn to pay for infrastructure improvements and other things given to the company.

Note the line-items of the 2020 budget in the Foxconn TID. First, the revenue side.

You can see that the Village is intending to borrow more than $112 million next year to pay for expenses in the Foxconn TID. And why is that?

Take a look at that $86.2 million in debt principal and $9.0 million in interest. Basically Mount Pleasant has to pay off one debt payment by borrowing more money, and they also plan to keep adding $48 million in sewer and other water work, along with other expenses. So $8.4 million in taxes from Foxconn compared to $143 million in expenses that are earmarked to their specific TID district? And a lot more in new debt expenses for the future? Doesn't seem like a good deal to me.

Even with the extra borrowing, they're still bleeding the Foxconn district's balance down from $103.3 million to less than $72 million, which means that if more money and tax base isn't returning to the Foxconn district in the next few years (and that seems increasingly unlikely), there's even more debt and more borrowing that'll have to happen.

Or...the Village will go bankrupt because it can't (or won't) keep going further into debt to keep pumping false hope into this white elephant. At that point, state taxpayers would likely be asked to bail out Mount Pleasant, based on this provision that is part of the Fox-con package approved by the GOP Legislature in 2017 and signed by then-Governor Walker.
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 [Foxconn incentive] 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.
In addition to the ever-increasing local costs that Mount Pleasant and Racine County have to take on for the Fox-con, let's not forget that this whole project has a rotten core, because it was based on favortism and politics over any kind of honest economic development analysis.

James Rowen hit on this in his Political Environment blog, where he noticed a Washington Post article that talked about how China uses subsidies and infrastructure to give advantages to home-grown companies, and saw a lot of similarities to Wisconsin's relationship with Foxconn.
Subsidies, in the form of discounted loans, cheap land, inexpensive electricity and more, are marbled throughout China’s state-led economy. This edge often makes it difficult for U.S. businesses to compete.

I wasn't surprised by the recognition of so many business subsidies "marbled throughout China's state-led economy."

What came to mind immediately were the similarities to the Foxconn deal Walker and GOP legislative leaders 'negotiated' forced on state taxpayers, local residents, utility customers statewide, and the environment - - another thing to keep in mind when you read about environmentally-damaging plants in China:
Gov. Walker exempted the Foxconn factory from any major environmental review. Last-minute changes by Trump political appointees at the EPA could keep Foxconn from making expensive improvements to reduce smog.

So while US-China trade discussions are being driven by the same Donald Trump who also pushed the Foxconn deal for his own partisan presence in Wisconsin----let's not pretend that only the Chinese use state power to manage the economy pump up businesses to hand marketplace control or political advantages to their leaders.
So in addition to the costliness, the Fox-con has likely done a lot to give Foxconn benefits and incentives that Wisconsin-based companies haven't been able to set, and has paved the way for other giveaways in Wisconsin to the politically-connected at the expense of everyone else (can you imagine how many more times this would have been abused under a third term of Walker?)

But hey, it gave a lot of pork to this little guy's district.

Time to cut the cord on these welfare cases in 2020. That goes for both Foxconn and Robbin' Vos.

1 comment:

  1. “While straddling communities can receive Great Lakes water that is ‘used solely for public water supply purposes,’ this new diversion is aimed at a single industrial customer. Seventy percent of the water that Racine delivers to Mount Pleasant will go to Foxconn. The deal not only removes water from the Great Lakes; it also privatizes it.

    There’s a twist to this story. After the DNR approved the diversion, Foxconn dramatically reduced the scope of its plant. But its water allotment is unchanged. Taxpayer dollars are already paying for expanded infrastructure. As a steward of the Great Lakes, Wisconsin should proportionally scale back Foxconn’s diversion. One Taipei-based analyst estimates that Foxconn’s new plans require only 1.4 million gallons a day, rather than 7 million.

    This is not the first time that Wisconsin has sidestepped the compact. As Peter Annin reveals in the new edition of ‘The Great Lakes Water Wars,’ it tripled the share of water allocated to the village of Pleasant Prairie in 2010 — an apparent attempt to entice development to the Interstate 94 corridor.

    As a good-faith partner to the seven other states, two provinces and tribal communities that border the Great Lakes, Wisconsin should stop making broad exceptions to our water protections. This is also an opportunity to refine what is otherwise a model water policy. The compact should be amended to state plainly that Great Lakes water cannot be diverted just to benefit new private development, even when delivered by an in-basin utility.”

    There are so many ways in which this rotten "deal" stinks of corruption.