City May Contest Foxconn Electricity Deal

Milwaukeeans will have to pay for Foxconn three times. That’s according to Alderman Robert Bauman, who says Milwaukeeans will pay once in their state taxes, the second time in their electricity bills, and the third time in their local property taxes.

The first charge for local residents is to help pay for the nearly $3 billion state subsidy to the Taiwan-based electronics company that is building a manufacturing campus in southern Racine County. The latter two charges come from a $140 million substation and high voltage power lines that American Transmission Company intends to construct to serve the plant. The $140 million would come from all of ATC’s customers, which includes residents and businesses in parts of Illinois and Michigan’s Upper Peninsula as well as eastern Wisconsin.

“The typical residential customer would pay pennies per year over the life of the project,” says ATC spokeswoman Alissa Braatz. That’s compounded in local property taxes according to Bauman because the city is also paying for millions of dollars a year in electricity and must pass those increased costs onto property taxpayers. To add insult to injury, the state has not announced any plans to offer public transportation for possible Milwaukee workers to the campus.

The equipment upgrades are necessary according to ATC because the Foxconn campus, which is planned to include up to 20 million square feet of buildings on the south side of Highway 11 in Racine County, would consume more than six times the energy used by the next largest factory in Wisconsin.

The Common Council’s Public Works Committee debated contesting the ATC plan at their Thursday morning meeting. The move comes after Bauman pointed out that city ratepayers are being asked to foot the bill for this deal after being told the city itself was required to pay for streetcar-related utility work.

Bauman, a prominent streetcar proponent, says “it’s not just a streetcar issue, it’s a basic fairness issue for all of the developers and property owners in the city.” Bauman referenced a number of Historic Third Ward projects that developers have had to pay for utility relocation costs on. Alderman Nik Kovac echoed his remarks, noting that the developers of $10 million Greenwich Park Apartments affordable housing building near E. North Ave. and N. Farwell Ave. were subject to a $500,000 charge from We Energies for utility relocation. The Greenwich Park project underwent a substantial redesign to accommodate the unexpected cost.

Assistant City Attorney Thomas D. Miller was on hand to educate the committee (and reporters) on the legality of contesting the deal, and how it might happen. That includes just how ATC charges end-users. The company, a state-mandated spinoff of We Energies and other utilities, charges utilities for electrical transmission. ATC’s rates are regulated by the Federal Energy Regulatory Commission and regional transmission organization Midcontinent Independent System Operator. Bauman asked: “So the ATC charges are embedded in my utility bill?” The attorney responded: “That’s right.”

Miller cautioned the committee that the ATC proposal and the streetcar case are not exactly the same. The streetcar issue was a matter of utility relocation, while the ATC proposal is new equipment. The costs of utility relocation required for the 1,200 campus is being paid for out of the $764 million tax-incremental financing district created for the Foxconn project.

Still, the city is likely to have the standing to intervene in ATC’s application or We Energies’ subsequent application for a rate increase. The application is expected in February, with the first hearing expected in June. “The application has not been filed yet, but things will move quickly,” said Miller.

The hearing was important enough to require an unusual appearance — by Miller’s boss, City Attorney Grant Langley. The long-time office holder suggested there would be difficulties in challenging the application, but that his office would examine options and report back to the council.

Kovac and Bauman joked that they would simply take MacIver Institute President Brett Healy‘s 2011 submission to the Public Service Commission (requiring the city to pay utility relocation costs for the streetcar) and “change a couple proper nouns.” Miller advised that based on state statute, Healy’s case wasn’t a strong one. “So Mr. Healy’s argument was a loser until the state legislature made it a winner?” Effectively yes. Kovac suggested they should consider updating more than the proper nouns.

A streetcar-specific state law change, via the biannual state budget, ultimately settled the streetcar matter, forcing the city to pay utility costs estimated at over $15 million. Miller said that before this the city thought they had a good case in court. Kovac and Bauman both said those funds could have gone to lengthening the route. Roads and other public works projects do not require local municipalities to regularly pay for utility relocation.

“If there’s one thing I hate in government it’s hypocrisy and duplicity,” said Bauman.

Alderman Michael Murphy added that he’s surprised large companies like Rockwell International aren’t objecting to ATC’s giveaway to Foxconn. He noted that intervening in the case would give more people an opportunity to weigh in on the quickly passed Foxconn deal. He noted that such a move might invite a vindicative response by the legislature, but that the legislature has already shown a strong willingness to operate in this fashion prior to the Foxconn deal.

Streetcar vs Foxconn

Ald. Mark Borkowski wasn’t having the debate. “We’re going to make political points? Fine. There is absolutely no comparison between Foxconn and our streetcar.” Kovac responded, ” I’ll bet in ten years, more people will ride the streetcar then go in and out of [the Foxconn factory] every day.” The first phase of the streetcar, excluding the lakefront spur, is expected to generate 1,850 daily rides. The Foxconn campus could employ up to 13,000 people according to Governor Scott Walker.

The committee approved the resolution, which grants the City Attorney and other officials the ability to object to rate cases, on a 3-to-1 vote, with Borkowski objecting.

Foxconn City

The utility measure isn’t the only iron Bauman has in the fire regarding Foxconn. Earlier this month the alderman launched an investigation into the feasibility of building a satellite city for Milwaukee residents that will work for Foxconn. The Foxconn campus, which could employ up to 13,000 people, is proposed for a site more than 25 miles from downtown Milwaukee. Bauman has stated his preference is for a robust transit system to connect the campus to Milwaukee, but short of that the city might need to invest in affordable housing near the campus.

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