The Secrets of Foxconn
Walker administration won’t release details of massive subsidy until after contract is signed.
It’s the biggest corporate handout in state history, and the largest subsidy to a foreign company in American history, now totaling $3.8 billion. And yet the full details of the deal between Foxconn and the Wisconsin Economic Development Agency (WEDC) will not be shared with the public until after the contract is signed.
The Legislature approved and Gov. Scott Walker signed the massive subsidy for the Taiwanese electronics company, with the assurance Foxconn would create as many as 13,000 jobs at a $10 billion, LCD panel manufacturing facility it proposes to build in Mount Pleasant in Racine County. But the proposal did not spell out any protection for taxpayers should the company spend less than it promises in capital expenditures or create less than 13,000 jobs, as I wrote. Meanwhile the $3 billion plan has grown in size, as local governments in Racine County pledged another $764 million in subsidies.
The details of this unprecedented deal were left for the WEDC to determine, in a contract to be negotiated with Foxconn. “During the legislative debates, Sen. Alberta Darling (R-River Hills) and other Republicans said they would leave it up to the expertise of the WEDC to create a contract,” Sen. Tim Carpenter (D-Milwaukee) says, in an interview with Urban Milwaukee.
But Mark Hogan, CEO of the WEDC, told her no, as the story noted. “Any contract that WEDC signs is available to the public” only after it is signed, he said. “I’m not going to comment on the Foxconn contract because we’re currently in negotiations, other than to say I think as with any contract, those negotiations are ongoing. There’s never a point in time until you sign the contract that it’s finalized.”
But it’s not just Sargent, the Audit Committee and Legislature that can’t see the details before it is signed. Even the members of the WEDC board cannot see the contract and are asked to vote on it based on a staff review and summary of it. And that information only comes at the last minute, giving him almost no time to ask questions about the technical details, Carpenter says.
“I had two pages of questions on the (contract summary), and they would only give me a half hour with staff, just before the meeting. That wasn’t enough time.” Not to mention that Carpenter was then supposed to vote immediately, with no time to digest the complicated information.
“They don’t give you enough time to understand the details,” he complains. “We’re always a hundred steps behind them.”
So Carpenter asked for a delay in the meeting. “And they denied it.”
The result of so little scrutiny might have been predicted. At the last minute a lawyer working with WEDC found a problem, that Carpenter has called a “nuclear bomb.” As explained to the Wisconsin State Journal, Hogan told board members “that the way the deal was structured the agency couldn’t guarantee it could protect taxpayers if the company violated the agreement…We could have given them all this money and we wouldn’t have been able to get it back.”
The fact that legislators are being excluded from determining the details of the biggest such subsidy in U.S. history seems incredible, but that becomes more astounding when you consider the track record of the agency that is entrusted with making these decisions. There is no department of the Walker administration that has generated as many negative headlines for as many years as the WEDC. It has had constant turnover (“We’ve gone through different heads of WEDC every year,” Carpenter complains) and repeated reviews by the non-partisan Legislative Audit Bureau which has found many problems with its performance.
The most recent report, from last May, found that of hundreds of millions in tax credits, grants and loans authorized since 2011, the agency “cannot be certain about the number of jobs actually created or retained as a result of any awards.” In fact only 12.5 percent of contract awards “even had an expected result of job creation or retention.”
Finally, the idea of having the WEDC decide the details of state policy seems all the more questionable given that it is not really a public agency. The public-private hybrid has only four elected officials on the board, who are outnumbered by the seven other board members.
“It’s more of a country club mentality,” Carpenter observes. “The staff of WEDC calls the shots. It’s more of a rubber stamp board.”
For example, Carpenter notes, the WEDC spent $200,000 in taxpayer money to do an internal analysis of how well it was tracking the number of new full-time employees at companies receiving WEDC grants and loans in return for their promise to create jobs. But Hogan refused to release the report to board members, calling it “proprietary information,” Carpenter notes.
The revised Foxconn contract is expected to be reviewed at the next WEDC board meeting, tentatively scheduled for November 8th, “but that could be pushed back, depending on what they find,” Carpenter says. He has asked that board members be given the full staff review and contract summary at least 48 hours before the board is asked to vote on it, but has yet to hear if that will happen.
“This whole process really stinks, the way WEDC handles it,” Carpenter charges.
Adding to the stench, he says, is the track record of Foxconn, which is notorious for backing out of deals, mistreatment of employees and other shady operations. Carpenter worries the company will be allowed to cheat the taxpayers. “This is very serious. It’s not really protecting the taxpayers.”
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