Foxconn Squeezes Evers

It was back in September 2017, that the Legislature approved a deal with a massive subsidy for Foxconn. That was nearly three years ago. And what has the company done for Wisconsin to date? 

Supposedly, the deal was going to have a statewide impact, as Foxconn announced the creation of “innovation centers” in Milwaukee, Eau Claire and Green Bay. But as I predicted back in August 2018, these were simply “Potemkin villages,” glitzy sounding projects meant to help re-elect Scott Walker that would never be created. That’s exactly what has happened. The influential high tech industry publication The Verge has repeatedly investigated these innovation centers, along with a later proposed project in Madison, and come up with nothing. In April 2019, the publication visited the state and found buildings that were largely empty. In response Foxconn officials told the media the story was wrong, generating this headline from The Verge: “Foxconn says empty buildings in Wisconsin are not empty.”

Just a few days ago, The Verge published a follow-up story: “Foxconn’s Buildings Are Still Empty, One Year Later.” Its reporter Josh Dzieza found the Eau Claire building was empty “with no visible activity,” and in Green Bay, there was no building, the plans for it had been scaled down, and “no permits have been taken out, and construction has yet to begin.” In Madison, where Foxconn was supposed to have major partnership with the state’s flagship university, a “search of records for Foxconn’s property… turned up no building permits, and other tenants of the building have not seen any Foxconn employees.” In Milwaukee “the most significant permits the company has applied for are to renovate elevators and an exit door. In January, Ixonia Bank moved into the building’s first floor.”

“Foxconn has also continued to lease out its Green Bay building to other businesses,” the story reported. “Its Madison and Racine innovation centers are still occupied by the banks that were there before Foxconn purchased the buildings.”

Which brings us down to the big baby, the Mount Pleasant campus in Racine County, which was supposed to be a $10 billion colossus with 13,000 employees, the “eighth wonder of the world,” as President Donald Trump dubbed it. That was been downsized repeatedly, with an ever-changing manufacturing menu: first a Gen 10.5 plant, then a smaller Gen 6 plant, then coffee kiosks and recently ventilators. As The Verge reported: “The factory is set to open in May… It is unclear exactly what the factory will produce.” 

What is clear is that the project violates the contract Foxconn signed with the state. It stipulates that Foxconn will build a Gen 10.5 LCD plant, which it is not doing, and its operations at Mount Pleasant are being done by its subsidiary Foxconn Industrial Internet, which was not a party to the contract. 

“The project that they have right now is outside the bounds of the contract,” Wisconsin Department of Administration Secretary Joel Brennan told The Verge in December. Since May 2019 Foxconn has been “continuously encouraged” to revise the contract, Brennan noted, but has yet to show any willingness to do so.

“Our conversations with Foxconn about aligning the contract with the project continue, Wisconsin Economic Development Corp. Secretary Missy Hughes recently noted; “it is WEDC’s objective to do so in order to support the project.”

Instead the company continues to pretend it is complying with the contract and has recently presented paperwork to the WEDC showing it has met the required hiring targets. “Foxconn directly employed 600 individuals, with more than 550 meeting the criteria for qualifications as full-time employees,” Jay Lee, board member and vice chairman of Foxconn Technology Group wrote in a cover letter to Hughes. “We have built a strong foundation for the Wisconsin project, and set the stage for Wisconn Valley to be the center of a high-technology hub for North America.

But the contract has a huge loophole I’ve reported on, one which Foxconn and Republican leaders, Assembly Speaker Robin Vos and Senate Majority Leader Scott Fitzgerald, declined to discuss. There is nothing to stop Foxconn from hiring people toward the end of the year, collect all the capital investment tax credits and then lay off the employees.

Biz Times reporter Arthur Thomas, the only other member of the local media offering some skepticism of the Foxconn deal, has reported that “Nearly 70% of the 580 employees working in Wisconsin for Foxconn and its subsidiaries at the end of 2019 started their current positions in the fourth quarter of last year,” with 246 hired in December.

Moreover, 36 of the employees listed by Foxconn were working outside the state. Another loophole in the contract allows Foxconn to claim tax credits for non-Wisconsin employees. A 2018 Legislative Audit Bureau report noted the problem, yet another loophole a revised contract would need to address. 

Thomas estimates that Foxconn could collect $2.84 million in tax credits for job creation, which is chump change. The real gold is the tax credit for capital investment. “The company also said it invested more than $280 million in its Mount Pleasant campus over the last two years, potentially making it eligible for $42 million in capital expenditure tax credits,” Thomas reported. 

Those credits, however, can’t be awarded under the contract unless Foxconn has met the required jobs target. Which makes it worth the money, indeed, quite profitable, for the company to hire hundreds of employees for a few months or less and then lay them off once the $42 million is collected. 

I count two ways the company is violating the contract, and two loopholes it is using to grossly violate the spirit of the contract. Which is why Foxconn won’t renegotiate. Instead its strategy is to get big headlines for meeting its targets and then dare the administration of Gov. Tony Evers, knowing he will be demonized by Vos, Fitzgerald and other Republicans for scaring away business. Meanwhile there is no evidence any manufacturing is going on at any of Foxconn’s properties. 

This is a big moment for Evers, to enforce the contract and protect the state’s taxpayers, all the more so at a time when the state is likely to face a huge budget hole due to a viral pandemic and resulting economic slowdown. 

It’s very simple: Foxconn wants to bilk the taxpayers. It shouldn’t be allowed to do so.