Why Foxconn Won’t Leave Wisconsin
It's spent hundreds of millions and gained nothing. Why not fold up its tent and leave?
Back in December I wrote a column suggesting the state’s deal with Foxconn was dead. The reason was simple: Foxconn was out of compliance “in many different ways” with the contract it signed with the state and was refusing to renegotiate it despite repeated requests by the Evers administration and Wisconsin Economic Development Corporation to do so.
Rather than renegotiate, which would have resulted in a massive cut in its subsidy, reflecting the massive reduction in the planned project, Foxconn decided to try and game the system. As Urban Milwaukee reported in March, the contract former Gov. Scott Walker created with Foxconn included a huge loophole. The company could hire hundreds of employees on a short-term basis, get the state tax credits for capital expenditures and then lay off the workers.
The story also makes clear that none of the employees were hired to work on any actual project, because Foxconn has yet to figure out what it can manufacture successfully in Wisconsin. The company has considered the following businesses, The Verge reported: fish farms, exporting ice cream, storing boats, cosmetics, designer handbags, gaming teams, dairy exports, and a project involving “camera-festooned autonomous vehicles.” For some reason the story left out my favorite, airport coffee kiosks.
In response to the story, Foxconn founder Terry Gou released a press release declaring the company will “continue to work… to create more jobs” and “has pressed forward with its Wisconsin plans.” Except that Gou stepped down as head of the company back in January 2019 and while he still serves on the company’s board, is no longer the spokesperson for the company.
Yet the Milwaukee Journal Sentinel, in one of its funniest headlines ever, featured the press release in a story announcing that “Foxconn says its commitment to Wisconsin ‘has not wavered’ though its plans have changed.” And what exactly are those “plans”? The story didn’t explain.
The Verge reporter Josh Dzieza suggests Foxconn has stayed because the company doesn’t want to disappoint President Donald Trump, who has been a huge proponent of Foxconn, tying the project to his promise to bring back manufacturing to middle America. If so, Foxconn would be leaving Wisconsin next month should Trump lose the election.
But I have my doubts. I think what’s keeping Foxconn here is a contract it signed with Mount Pleasant and Racine County, where the company’s supposed “manufacturing” plant — in September the company received a permit to change its intended use to “storage” — is located.
Local officials went all out for the project. Mount Pleasant’s annual budget is just over $15 million, yet in late 2017 the village and Racine County (whose budget was $151.6 million that year) jointly approved a figure 50 times higher than the village’s budget — $764 million in spending — for land acquisition, road construction and new infrastructure. Some 42 miles of water pipes, 26 miles of gas pipes and 28 miles of telecom wires were constructed, all for what was supposed to be a 20-million-square-foot manufacturing plant and is now a 1.1-million-square-foot storage facility.
In short the company is required to pay that $30 million in taxes a year, even if it isn’t manufacturing anything, or making any money at the plant. Right now, given all the plans and products it has considered and rejected. its main way of making money would seem to be getting tax credits from the state. Except that the administration of Gov. Tony Evers has made clear it won’t fall for this.
What if Foxconn folds up its tent and leaves town? Then the village would have to go to court to try and enforce the contract. That could result in a protracted legal battle, which wouldn’t help Foxconn the next time it tries to do a deal in the U.S. or any other westernized country.
The irony is that local officials were far tougher than Walker, who gave Foxconn anything it wanted, including a giant loophole that allowed it to get tax credits even if no real jobs were created. But it’s that tougher, smarter local government contract that’s preventing Foxconn from leaving, and Wisconsin from closing the chapter on what is surely the biggest business fiasco in state history.
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- Op Ed: Foxconn Shows Folly of Cheesehead Revolution - Dan Shafer - May 12th, 2021
- Foxconn Deal Doesn’t Reduce Local Government Risk - Corri Hess - May 3rd, 2021
- Murphy’s Law: The True Costs of New Foxconn Deal - Bruce Murphy - Apr 28th, 2021
- The State of Politics: All Sides Won On New Foxconn Deal - Steven Walters - Apr 26th, 2021
- New Foxconn Deal Cuts Incentives By $2.77 Billion - Jeramey Jannene - Apr 20th, 2021
- Rep Hintz: Statement on Approval of Revised Foxconn Contract - State Rep. Gordon Hintz - Apr 20th, 2021
- New Foxconn and WEDC Agreement Provides Flexibility and Clarity for Renewed Tech Investments in Science and Technology Park - Foxconn Technology Group - Apr 20th, 2021
- Gov. Evers Announces Renegotiated Foxconn Contract to Save Taxpayers $2.77 Billion - Gov. Tony Evers - Apr 20th, 2021
- Rep. Hintz: Statement on Foxconn Announcement - State Rep. Gordon Hintz - Apr 19th, 2021
- Evers Announces New, Smaller Foxconn Deal - Jeramey Jannene - Apr 19th, 2021
Read more about Foxconn Facility here