Sunday, November 26, 2023

Microsoft steps up to pay for the mess that Foxconn and local yokels left us with

More than 6 years after the PR scam deal was originally announced, we might actually get some sort of large-scale development out of the Foxconn region in the southeastern Wisconsin village of Mount Pleasant.
Under terms of a development agreement...Microsoft will pay $100 million for 630 acres of village-owned land and buy another 400 acres from a private property owner, the Creuziger family, who had declined to sell the land to the village. The parcels are north and west of the current Microsoft development on land known as areas 2 and 3.

In addition, Microsoft will guarantee a minimum $1.4 billion in new taxable land and development value by Jan. 1, 2028....

According to its agreement with the village and Racine County, taxes on $1.4 billion of valuation or payment of the equivalent amount is the minimum amount needed to cover the debt payments and other expenses expenses of the financing district that was created to develop the business park. As of last year, Foxconn's four buildings had added just more than $500 million in new taxable value according to the most recent district financial report. Foxconn has been making special payments to help cover borrowing costs, but in January the tax bill will increase dramatically, to $28 to $30 million. Payments will remain at that level until the district is retired in 2047.

Alan Marcuvitz, the attorney representing Mount Pleasant, said the Microsoft deal should put to rest concerns about the district's ability to meet its obligations. Cash will begin to flow from Microsoft beginning next year, when it will begin paying taxes on land that, under city ownership, had been tax exempt.

I suppose it's nice to see something bigger happening there, but what about the company that was originally supposed to have built up a ton of stuff in that area by now?

Former J-S business writer Kathleen Gallagher is now an executive at a tech nonprofit, and she wrote a column at her former paper saying that we shouldn't forget how the Village of Mount Pleasant mortgaged its future, and how village officials are using the Microsoft land purchase to bail themselves out of a bad Fox-con.
The sleight of hand here is that local officials and their public relations people want us to think the State of Wisconsin officially released Foxconn from its commitments in 2021, when it renegotiated the tax incentive contract. But that’s not true.

The reality is that Wisconsin renegotiated Foxconn’s eligibility for state tax credits, shrunk the cash incentives from their original stratospheric levels, and reduced the number of jobs required to get the cash payments. The state was not a party to the locals’ 2017 agreement so, as a matter of contract law, Foxconn’s promises -- the jobs, the spending and even the big screen production factory -- are still intact. For now.

Clearly Foxconn has not fulfilled key terms of the agreement. Yet local authorities haven’t declared a breach. And now that Microsoft is involved, the financial picture looks much better.
Gallagher goes on to remind us that what Foxconn ultimately did in SE Wisconsin isn't anything close to the grandiose stuff that was being bandied about 6 years ago. And yet they will end up owing us nearly nothing for the broken promises and numerous amounts of BS they and their GOP allies tried to get over on Wisconsin residents.

With Microsoft pledging to invest billions on two square miles in Racine County, government officials are touting the promise that the village and county debt on the business park will be retired early. They’ve got a better foundation for their hopes this time: Microsoft has a strong track record of following through on its development commitments.

Still, the economic impact here will fall far short of the hype. Foxconn committed to invest $10 billion, create 13,000 full-time jobs with a minimum average salary of $53,875 plus benefits, and build a supply chain infrastructure. Not to mention the anticipated uptick in innovation, which will fall far short as well.
It looks like the Mount Pleasant trustees on Monday night will release Foxconn from its promises about jobs and technology development. The apparent price: Foxconn must give up its right of first refusal on the land Microsoft wants to buy.
Chairman Gou knew. The other two didn't care.

So Foxconn getsto walk away from the free land that it got from the original scheme? With upgraded values on what they have left because of infrastructure and services that they never came close to paying full price for? I'm also curious to know if the Village of Mount Pleasant will ever get the $30 million balloon payment that Foxconn was supposed to pay by the end of January, or if Foxconn going to be able to walk away from that balloon payment as well (now that Microsoft has bought the land), which allows Mount Pleasant to put off bankruptcy pay its bills for the short term.

It seems to be a nice way to kick the can down the road with more promises of "development and jobs are coming". Like Gallagher, I do think Microsoft will follow through on much of what they are saying they will do in Racine County, and there's more hope for something sizable to finally be salvaged from this whole ordeal. NBut until the buildings are done the people move in, it's still a hope and not a guarantee.

So while Mount Pleasant can use these land sales to pay off some of the debt that's coming due in the next few years, when we get to 2028, are we going to be back in the same situation where the announced investment falls short. And if so, will state taxpayers still have to bail out the local yokels that gladly went along with the Fox-con?

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