Murphy’s Law: Foxconn Subsidy Now Exceeds $4 Billion » Urban Milwaukee
Bruce Murphy
Murphy’s Law

Foxconn Subsidy Now Exceeds $4 Billion

Government subsidy keeps increasing while Foxconn’s required investment has declined.

By - Dec 21st, 2017 01:45 pm
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Foxconn chairman Terry Gou and Governor Scott Walker signing a memorandum of understanding. Photo from the State of Wisconsin.

Foxconn chairman Terry Gou and Governor Scott Walker signing a memorandum of understanding. Photo from the State of Wisconsin.

When the state deal with Taiwanese company Foxconn was first announced, the numbers were bold and clear: the company would get $3 billion in subsidies from the state and in turn would build a $10 billion plant and create 13,000 jobs.

That stood not just as the largest subsidy in state history, but the largest government subsidy to a foreign company in American history.

But the giveaway has continued to grow, while Foxconn’s required investment has shrunk. After legislation was passed approving the deal without determining the specifics, the Wisconsin Economic Development Agency hammered out the details that dropped Foxconn’s required investment in its new plant to just $9 billion. The Journal Sentinel has reported this, yet its stories keep referring to the $10 billion plant.

Meanwhile the Village of Mount Pleasant and Racine County agreed to give Foxconn $764 million in tax incentives. The measure also commits the state to paying 40 percent of local governments’ expenses for the plant “if ever called upon to do so.”

The state will also spend $30 million on a new two-mile road east of I-94 to be called “Wisconn Valley Way,” and aimed at easing traffic congestion near Foxconn’s plant.

And last week we learned the Walker administration will also siphon $134 million from the state transportation fund to widen and improve several local roads near the future Foxconn factory, as a report by the nonpartisan Legislative Fiscal Bureau disclosed. The Department of Transportation didn’t give the fiscal bureau an exact estimate for the local Foxconn roadwork when it was requested, but the bureau found the information “referenced in a grant application for $246.2 million in federal funds for the nearby I-94 project,” the Wisconsin State Journal reported.

Those roads include County KR, Braun Rd. and state Highway 11, according to Kevin Muhs, Deputy Director of the Southeastern Wisconsin Regional Planning Commission. The local roads will be turned into state highways so state transportation can be used on them.

The Foxconn development has also pushed the state to spend $252 million to expand I-94 from six to eight lanes from College Ave. in Milwaukee County south to Highway 142 in Kenosha County. While it was anticipated this would eventually be done, it was far from guaranteed, given huge shortfalls in the transportation fund and delays in other projects. What is certain is that the I-94 widening and $134 million in local road improvements by the state will lead to longer delays or cancellations of other projects in the state.

The state has also applied for $240 million federal grant to help pay for the I-94 widening.

Gov. Walker has also pledged to spend $6.8 million on an ad campaign to help attract out-of-state residents for Foxconn. “We need bodies,” he confessed. The Fiscal Bureau had estimated that about 10 percent of Foxconn workers will be Illinois residents, but a preliminary analysis commissioned by Walker’s Wisconsin Economic Development Corp. estimated as many as half of the construction workers and Foxconn workforce could come from other states, primarily Illinois, as the State Journal reported.

Meanwhile American Transmission Company has announced it will build a new substation to provide electric power to Foxconn at a cost of $140 million, which will then be charged to the 5 million customers of We Energies in southeast Wisconsin. The project “essentially would ask the public to contribute still more to Foxconn through higher electric rates,” the Journal Sentinel reported.

Foxconn has also been exempted from environmental regulations, and some experts believe this will cause pollution that might eventually require remediation paid for by taxpayers. And Foxconn’s newest demand is for its plant to be treated as a foreign trade zone, which could reduce its customs duties and cut the company’s costs. Odds are, it’s not the last demand the company will make.

Ald. Bob Bauman tallied the total costs for taxpayers in a speech before a Common Council committee and concluded it would cost $4.5 billion. That might be a tad high, unless you believe the I-94 widening would have never happened. But even without it, the total cost is nearly $4.1 billion, to get a $9 billion plant. That’s astounding: a cost of $1,774 per household in Wisconsin.

Back when the subsidy was $3 billion the Fiscal Bureau estimated it would take till 2043 or later for taxpayer to recoup all the money being spent, and even that was based on “speculative” figures on spinoff jobs, it noted. At $4.1 billion it’s safe to say it will take until 2050 to recoup those costs.

And for taxpayers outside southeast Wisconsin, it’s likely they will never see a full payoff, which may be why Walker seemed to be deemphasizing the issue in other parts of the state.

“This deal just keeps getting worse and worse,” Democratic gubernatorial candidate Tony Evers has charged. “Scott Walker should be ashamed of himself.”

More recently Walker touted the deal in Green Bay, saying “it’s going to be a big deal if we capitalize on it all over the state of Wisconsin. You can help do this first in construction phase, and secondly as we see the supply chain going forward.”

But Bauman says that’s far fetched: “I am doubtful there will ever be a return on the public investment even if the most optimistic projections of jobs and tax base are met,” he says via email. “I suspect Walker et. al. do not care. They will reap the short term political benefits but will be long gone by time the results (or lack thereof) start coming in regarding job growth and economic development.”

Correction: The Village of Mount Pleasant and Racine County agreed to give Foxconn $764 million in tax incentives, not Pleasant Prairie.

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26 thoughts on “Murphy’s Law: Foxconn Subsidy Now Exceeds $4 Billion”

  1. Terry says:

    This nightmare just keeps getting worse and worse. Career Politician Scott Walker handed over 4 Billion of tax payer’s dollars in corporate welfare to a foreign company for a few thousand soon-to-be automated or innovated into nonexistence jobs. This is what you get Wisconsin when you let a career politician, who has zero experience working in the private sector or free market nor any business experience make your business deals for you! The only hope is to vote this complete idiot out of office and get some accountability back into the governor’s mansion and maybe just maybe, nix this monstronsity once and for all.

  2. Observer says:

    No spinoff cash for Wisconsin cement companies. They are building their own plant. https://www.jsonline.com/story/money/business/2017/12/20/foxconn-plans-big-concrete-production-plant-water-main-contracts-approved/969665001/ And somewhat related the permanent trump “tax cut’ for millionaires and the yearly shrinking cut for the rest of us might lead to higher Wisconsin taxes. https://www.jsonline.com/story/news/politics/2017/12/21/federal-tax-cut-could-lead-higher-state-income-taxes-wisconsin/969205001/ So if someone wants to call me a libtard, go for it as the last laugh will fall from your pocketbook.

  3. ERIC J. says:

    But did FOXCONN make their cash payment to the Mt. Pleasant account to start acquiring land ??? ( Already late from last Friday )

  4. Lapham S. says:

    They still haven’t made their payment as of today.

  5. John Casper says:

    Bruce, many thanks for all your terrific work on this.

    Observer,

    Thank you very much.

    That caught my eye too.

    I don’t know anything about producing cement, except that it can produce mercury.

    “Case Studies for U.S. EPA Mercury Compliance for Power & Cement Plants”

    https://www.envirotech-online.com/article/health-and-safety/10/ohio-lumex/pcase-studies-for-us-epa-mercury-compliance-for-power-amp-cement-plantsp/2264

    Not sure if Wisconsin cement companies are exempt, as Foxconn may be, from state mercury regulations. Not sure how the state and federal laws line up.

    Other, could Foxconn use this plant to compete with Wisconsin cement companies?

    Please feel free to ignore.

  6. Jake formerly of the LP says:

    The scam keeps growing for one foreign company, while Iowa steals away an employer of 185 in Sheboygan for less than $1 million in incentives.

    http://www.sheboyganpress.com/story/news/2017/12/19/sheboygans-mayline-safco-relocate-operations-iowa-taking-185-jobs/966221001/

    Nice priorities, Gov Dropout. Throw big money at one big corporation, and forget about the companies and communities that have,needs here and now.

    FIRE THIS BUM

  7. James says:

    State officials are also planning to reserve some of the new lanes on I-94 near Foxconn, and on the adjoining expanded county roads, for Foxconn’s self-driving vehicles which are to move some 4,000 employees per shift from the parking lot. Foxconn also wants self-driving vehicle lanes on I-94 to and from Mitchell Field.

    Where are the plans for BRT, and park & ride, routes connecting Milwaukee and Foxconn?

  8. Kimberly Mahoney says:

    It’s the Village of Mount Pleasant contributing $764 million, not the Village of Pleasant Prairie. And, what about the fact that Mount Pleasant and the DOT are using the road projects as a reason to use eminent domain in order to remove hundreds of property owners so they can GIVE the property to Foxconn? Walker, Wanggaard, Vos and Ryan could careless about those people.

  9. Steve says:

    Village of Mount Pleasant, it says Pleasant Prairie.

  10. WashCoRepub says:

    So exciting to see Wisconsin “Thinking Big” for a change… getting rid of the small-minded, limited thinking that has held us back in the past. Unemployment in Wisconsin the lowest it’s been since 1999! Great times are ahead for us.

  11. John Casper says:

    WashCoWingnut,

    You wrote, “thinking Big” for a change… getting rid of the small-minded, limited thinking that has held us back in the past.”

    So Gov. Walker was wrong about collective bargaining holding “us back?”

    Were we held back when Milwaukee was the “tool shop to the world?”

    You wrote, “unemployment in Wisconsin the lowest it’s been since 1999!”

    In God we trust. All others bring links.

    You wrote, “great times are ahead for us.” Do you work at Foxconn? Did you miss where Foxconn is taking their business away from Wisconsin cement companies?

    What’s the state’s rate of home ownership?

    Is working seven-days a week on three-part time jobs to make rent and car payments your idea of “thinking big?”

    Why couldn’t this corporate welfare at least go to Wisconsin manufacturers, H-D, Briggs and Stratton,….

  12. Dave Reid says:

    @Steve and Kimberly Mahoney Thanks I’ve made the correction.

  13. ERIC J. says:

    WashCoWingnut, : And Scott Walker and the ( R ) legislature picking ” Winners and Losers ” with an outrageous $$ cost $$ to ” the hardworking taxpayers of Wisconsin “.

    -WHAT ELSE DOES FOXCONN WANT ?????

    -FOXCONN stumbling when its their turn to write a check .

  14. Devin says:

    ERIC J: The payment was made today (December 22nd)

  15. John Casper says:

    Devin, thanks.

    “Foxconn Gives Wisconsin Village $60 Million for Land Options”

    https://www.usnews.com/news/best-states/wisconsin/articles/2017-12-22/foxconn-gives-wisconsin-village-60-million-for-land-options

    Anybody know who gets the interest in the escrow account?

    If Mount Pleasant lost revenue, will Foxconn repay?

  16. will says:

    Will this plant be fenced in for workers can’t leave like Foxconn other plants? Wisconsin citizens will also be paying for housing on the site for their own Asian Engineers. Just another GOP scam on hard working Wisconsin taxpayers. Have not heard of one person yet at the 3 factories I visit thinks this is good for Wisconsin. But they are very angry about putting up their hard earned money to a foreign company with that treats it’s workers like slaves.

  17. Tyro says:

    A lot of people are criticizing the cost and spending that Wisconsin is doing here. That is precisely the point: the state needs to spend this money for a Foxconn factory before teachers, social workers, unionized road and train construction workers, or universities get their hands on it.

  18. John Casper says:

    Tyro,

    What is “precisely the point” of Wisconsin taxpayers giving Taiwan and China $4 billion?

    Does this push the state deficit to both of $6 billion?

    http://host.madison.com/wsj/news/local/govt-and-politics/state-faces-billion-deficit-heading-into—budget-cycle/article_5a3d6933-5937-5b23-8cd7-3bc16bf07edb.html

    Since you want more corporate welfare, why not give it to H-D, Briggs and Stratton, ….

    Capitalism rests on a three-legged stool: shareholders, workers, and consumers. If gov’t doesn’t protect the rights of all three, the stool falls over.

    Nice video of President Reagan, “collective Bargaining = freedom.”

    “These are the values inspiring those brave workers in Poland, the values that have inspired other dissidents under communist domination, who have been willing to go into the gulag and suffer the torture of imprisonment, because of their dissidence. They remind us that where free unions and collective bargaining are forbidden, freedom is lost… They remind us that freedom is never more than one generation away from extinction. You and I must protect and preserve freedom here, or it will not be passed on to our children and it will disappear everywhere in the world. Today, the workers in Poland are showing a new generation how high is the price of freedom, but also how much, it is worth that price. I want more than anything I’ve ever wanted, to have an administration that will through its actions, at home and in the international arena, let millions of people know, that Miss Liberty, still lifts her lamp beside the golden door.”

    http://bloggingblue.com/2015/03/ronald-reagan-collective-bargaining-freedom-video/#comment-146867

  19. Little Boots says:

    Foxcon is a Trump/Walker created fiasco already. 4 billion in tax payer money down the black hole for nothing.
    It’s time to fire Trump Walker and all republicans in 2018!

  20. Jeremy says:

    The money is not spent. Foxconn still must actually earn much of it. This discussion is akin to counting the property tax for an announced development that never gets built. Money pledged to Foxconn spans multiple biennial budgets. There’s plenty of time for the politicians to come up with worse ways to spend taxpayer money. Let’s stop counting money that isn’t there yet. Can we get a ticker on the actuals?

  21. John Casper says:

    Jeremy,

    You wrote, “There’s plenty of time for the politicians to come up with worse ways to spend taxpayer money.”

    No, there isn’t. As I pointed out above, the State was already $2.2 billion in-the-hole. Thanks to Gov. Walker taking your advice, ” Let’s stop counting money that isn’t there yet;” now the State has $6.6 billion in debt. WIGOP will take more money from UW and everyone else they can to fill that.

    You wrote, “Foxconn still must actually earn much of it.”

    Since they missed the first deadline–escrow account–what are the next five deadlines Foxconn has to meet? What are the dates? What are Foxconn’s deliverables, or as you wrote, “can we get a ticker on the actuals?”

    You don’t drive. The State’s road are atrocious, approaching the third-world’s. That $30 million you missed in Bruce’s post, the State is already spending that on two-miles of NEW road, “Wisconn Valley Way.” If Foxconn pulls out, that investment is a complete waste.

    Why are you assuming that the State can pull out of this? Any lower court ruling that Foxconn doesn’t like bypasses the appeals process. Foxconn goes right the state Supreme Court. Foxconn has the deep pockets to buy the SCWI. Since WIGOP and SCWI eliminated the possibility of tracing the source of large PAC donations–crushing the John Doe–who would know? Are you depending on the federal courts to overturn a contract signed by the Governor? How long will that take?

    You’ve forgotten the Pledge of Allegiance, “one nation, indivisible, with liberty and justice for all?” Thanks to Gov. Walker and WIGOP, we’ve got a two-tiered judiciary. One tier for Foxconn, one for everyone else.

    Among the many benefits Gov. Walker didn’t invoice Foxconn for are the fresh water and lack of seismic activity. Foxconn can and will use Wisconsin’s welfare as a leverage to see if they can do better somewhere else. Let’s hope they find a bigger sucker.

    Familiarize yourself with Foxconn’s history, “He that lieth down with dogs shall rise up with fleas.”

  22. Aggie says:

    This deal is so bad that it is getting national coverage from CNN.

    “http://money.cnn.com/2017/12/28/news/companies/foxconn-wisconsin-incentive-package/index.html”

    Some key lines from the article pretty much sum it up…

    “In fact, among the additional costs to the Foxconn project is a $6.8 million advertising campaign to woo workers from out of state to work in Wisconsin, including at the new plant.”

    “In addition, the local electric utility is upgrading its lines and adding substations to provide the necessary power that will be used by the plant, at a cost of $140 million. The cost of those projects will be paid by 5 million customers in the area.”

    “While the state touts Foxconn’s plans for 13,000 workers, the company has only committed to hiring 3,000 at this point.”

    So much winning, for Foxconn

  23. John Casper says:

    Aggie, thanks.

  24. Jake formerly of the LP says:

    Jeremy- Are you saying that we could save a lot of these billions if we renegotiate this scam and/or have Foxconn walk away?

    I’m totally down with that! All the more reason to boot out Walker and the crooked, complicit GOP in 2018.

  25. Terry says:

    What a boondoggle! Career Politician Scott Walker FoxCONNED Wisconsin!

    Dump Walker 2018
    Dump ALL republiCONS 2018

  26. Howard Beale says:

    Trump continues to tout this as his personal victory.
    We’re all on the hook for BILLIONS for this corporate welfare (and it’s not even an American Company)
    Remember come November people
    Vote Walker and the entire GOP out.

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