10 Tough Questions About Foxconn Deal

Foxconn chairman Terry Gou and Governor Scott Walker hold a memorandum of understanding. Photo by Jeramey Jannene.

It’s crunch time for Wisconsin legislators on Gov. Scott Walker’s deal that would give the high-tech giant Foxconn $3 billion in tax breaks, if it builds a $10-billion manufacturing facility in southeast Wisconsin that could employ up to 13,000 in a few years.

With an Assembly vote on the package – the biggest-ever economic development deal between state government and a business –  tentatively scheduled for Thursday, here are 10 questions that make legislators squirm.

1: Will my vote help or hurt me in the next election?

If Foxconn breaks ground on the facility by election day in November 2018, a picture of the construction site, and a total of how many employees the company has by then, might make a good TV ad justifying a vote for the deal. But voting “yes” means trusting a deal negotiated by the Walker and Trump administrations with a Taiwan business tycoon.

If you vote no, and Foxconn breaks ground and starts hiring, imagine the TV ads that will run against your before the election: “Foxconn wanted to help return Wisconsin to manufacturing greatness. [Your name here] said, ‘No’.”

2: What financial legacy do I leave my kids and grandkids?

A state Department of Administration forecast –using the most optimistic estimates – predicted that the “break even” year for the deal won’t be until 2042-43. That’s when all tax breaks given Foxconn will finally be outweighed by increased tax revenues resulting from the company’s investments.

Senate Majority Leader Scott Fitzgerald said the 2042-43 estimate was “striking,” and one reason the Foxconn package didn’t have enough Senate votes to pass last week.

In short, what happens after 15 years?

“They can do whatever they want after that 15-year period,” argues Democratic Rep. Chris Taylor, a member of the Legislature’s Joint Finance Committee.

4: What message does $3-billion plus in tax breaks send to tax-paying corporations?

The bill also includes $12.5 million in tax breaks to Fiserv to encourage it to keep its headquarters in Wisconsin. The $3 billion Foxconn tax break, although paid out over 15 years, totals more than three times the $940 million in corporate income taxes other businesses are expected to pay this year.

5: How long will Foxconn’s plant operate, given the short lifespans of electronic products?

The Foxconn plant in Wisconsin would make liquid crystal displays, but how long will they play a dominant role in high-tech communications? A 28-page summary of the Foxconn deal by the nonpartisan Legislative Fiscal Bureau (LFB) raised that issue: “Technological advances and changes in Foxconn’s market share, operating procedures, or product mix could significantly affect employment and wages at the proposed facility over time.”

After all, weren’t state officials once promised that GM vehicles would “always” be built at the Janesville assembly plant? It closed two days before Christmas 2008.

6: Will there be changes to the bill before Legislators vote?

Will the Assembly Jobs and the Economy Committee recommend changes before Thursday’s vote that make the deal more acceptable? Or will those changes be shot down because Walker and Foxconn warn they could kill the deal?

7: Could – and should – Wisconsin’s Investment Board buy into Foxconn, giving it an equity stake?

“If I’m going to give you money, then I want some ownership,” said Democratic Rep. Jason Fields, who said the deal as written offered Wisconsin only “wishes and prayers.”

The state’s public employees rely on growth in the pension fund overseen by the state investment board for their retirements. Is a Foxconn investment a smart decision to help recoup the taxpayers’ investment or too risky a choice for such a fund?

8: What is the impact on the environment?

Besides exempting a new Foxconn plant from an environmental impact study, what other concessions – for filling in wetlands and diverting Lake Michigan water, for example  – are part of the deal?

9: What enforcement does the deal have?

Why does the deal’s fine print say state government “may” – and not “must” – clawback or try to recover past tax breaks, if Foxconn cashes those refundable tax-break checks and then leaves Wisconsin?

10: Can any financial estimates projected as far into the future as 2043 be trusted?

Especially when they come from Foxconn and from Walker loyalists at the state Department of Administration?

“Any cash-flow analysis that covers a period of nearly 30 years must be considered highly speculative,” the LFB analysis warned.

It will be a tough vote. “My Facebook page comments say ‘no’,” one Kenosha County lawmaker says. “But the people I meet on the street want it.”

Steven Walters is a senior producer for the nonprofit public affairs channel WisconsinEye. Contact him at stevenscwalters@gmail.com