Bruce Murphy
Murphy’s Law

Local Costs for Foxconn Cut By 2%

Annual update by Mount Pleasant still leaves total state-local costs at $1.32 billion.

By - Feb 8th, 2021 06:03 pm
Foxconn signing. File photo by Graham Kilmer.

Foxconn signing. File photo by Graham Kilmer.

Call it a victory — but a very small one — for taxpayers.

The Village of Mount Pleasant has done its annual update of the estimated costs for the Foxconn project and has shaved off about $17 million or 2% of the total estimated cost of $808 million for the village and Racine County. The revised estimate leaves the total estimated cost at just over $791 million.

The major cost reductions were a $12 million reduction in the expected costs for water infrastructure. That came because of lower bid received for the water infrastructure work, according to Mark SchaafCommunications & Media Relations Director for Racine County.

The other major cost reduction was in expected interest on debt incurred to pay for the project, mostly due to the ongoing decline in interest rates.

The two major cost increases were a $3.5 million uptick in expected operating costs and a $2 million hike in the cost of sewer infrastructure.

This $17 million reduction means the total estimated costs of the Foxconn development, previously estimated by Urban Milwaukee at $1.34 billion, have declined to $1.32 billion.

And that does not include $252 million the state spent on widening I-94 from six to eight lanes from College Ave. in Milwaukee County south to Highway 142 in Kenosha County. While this was a project that was expected to be done eventually it was fast tracked by the Walker administration, because it would be needed to handle all that traffic created by the high-tech manufacturing colossus Foxconn had promised to build and now seems like a fantasy. Given the many delays in redoing I-94 in Milwaukee, its entirely possible the expansion of the freeway in Racine would have been delayed as well. Which arguably would increase the total bill for Foxconn to $1.57 billion.

To date the Village of Mount Pleasant and Racine County have spent $307 million of the projected $797 million, mostly on land acquisition and water and sewer infrastructure with smaller costs for operating expenses and financing the debt. All of those are sunk costs save for land acquisition, as much of that land may never be used by Foxconn and could be sold back to private buyers.

Whatever the final figure of the total state-local costs for taxpayers, it so far is a largely negative ledger sheet, as Foxconn has done no manufacturing and created few permanent jobs. A lawsuit filed last week by Daniel Hintz, and Hintz Real Estate Development Co., on behalf of Racine County and the Village of Mount Pleasant, charges that Foxconn “caused the municipalities and their citizens to lose the expected benefits of the promised development … an amount measured in the billions of dollars.”

The suit notes that Foxconn promised to build a manufacturing complex that “would generate economic output in Wisconsin of over $11 billion annually.”

Foxconn’s agreement with the state provided “that, by the end of 2019, 2,080 Full-Time Jobs were anticipated to be created and $3,307,000,000 in capital expenditures would be invested. WEDC’s initial review of the 2019 Annual Project Report reveals that, by contrast, the Recipients employed fewer than the minimum required 520 Full-Time Employees and had invested roughly $300,000,000 in capital expenditures.” the suit notes.

But in a joint statement, leaders from the Village of Mount Pleasant and Racine County made it clear they didn’t welcome the suit, saying Foxconn Technology Group “continues to fulfill all of its financial obligations under the local development agreement and is already the largest taxpayer” in both municipalities.

True, Foxconn’s deal with local officials in Racine County does require the company to pay $30 million a year in property tax payments, but not until 2023. That gives a company known across the globe for walking out of deals plenty of time to plot its departure. It seems remarkable that these official continue to insist Foxconn will live up to its deal, when it has now been more than three-and-a-half years since the deal was created and the company has yet to manufacture anything. Mount Pleasant’s annual budget was just over $15 million, yet the village and Racine County (whose budget was $151.6 million at the time) jointly approved a spending package that still stands at $797 million, a figure 53 times higher than the village’s budget. 

But it’s worth noting that the state Foxconn legislation helped convince these officials to take a huge gamble, by guaranteeing them state payment of 40% of any costs not paid for by Foxconn. That changed the risk-reward ratio for these local officials, and leaves state taxpayers even more exposed. They already have had to pay $164 million for new and expanded roads and highways while utility rate payers are being charged $357 million to construct high-voltage power lines and a new substation — all to serve what was supposed to be a massive, Silicon Valley-scaled high-tech manufacturing campus. But they will also have to pay 40% of any costs that Racine County and Mount Pleasant are stuck with, which at this point would be $319 million.

One thought on “Murphy’s Law: Local Costs for Foxconn Cut By 2%”

  1. kmurphy724 says:

    Appreciate the regular updates on this ongoing mess.

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