Bruce Murphy
Murphy’s Law

Foxconn Deal Is Still Costing Taxpayers

6 years after deal made, nothing has been manufactured, but price tag keeps rising.

By - Jul 6th, 2023 01:45 pm
Foxconn's groundbreaking ceremony in Wisconsin in June 2018, brought out then-U.S. House Speaker Paul Ryan, President Donald Trump, then-Gov. Scott Walker, Foxconn Founder and CEO Terry Gou and Christopher Murdock. The company can receive cash payments from the state because it has other refundable tax credits. It has no taxes to reduce because a manufacturing tax credit virtually eliminated them. Photo from the White House.

Foxconn’s groundbreaking ceremony. Photo from the White House.

This month is the six-year anniversary of the famous announcement by then-governor Scott Walker of a deal with the Taiwanese company Foxconn that was soon hailed as “the eighth wonder of the world” by then-President Donald Trump  The announcement came in late July of 2017: Foxconn promised to invest $10 billion in a massive factory to manufacture high resolution LCD screens that would employ 13,000 people, in return for which it would receive a $3 billion subsidy from the state.

Six years later Foxconn is still not manufacturing anything at the huge campus in Mount Pleasant in Racine County. The most recent development is that Microsoft has agreed to buy a $50 million parcel of the Foxconn campus to build a data center, but as with with all past announcements, the deal may not amount to many jobs created, even as it costs more for taxpayers.

Back in 2017 Walker and Republican legislators claimed the deal would only pay Foxconn for money invested and jobs created. But in fact state and local governments paid heavily for the upfront costs. The state spent $168 million on roads and highways needed for what was supposed to be a massive manufacturing campus, and the Village of Mount Pleasant and Racine County committed to spending $808 million for sewer, water and other costs and by 2021 had spent $258 million on this. Also, the American Transmission Company, pushed by Walker, installed high-voltage power lines and a new substation to service Foxconns promised campus at a total cost of $257 million, which is being paid for electric ratepayers in Wisconsin. That brought the total costs for taxpayers and ratepayers to build the manufacturing campus to $683 million, as Urban Milwaukee reported in 2021, with more costs likely to come.

The debt taken on by the Mount Pleasant village government amounts to 500% of its operating revenue, as Corrinne Hess has reported.

Under Gov. Tony Evers, the deal with Foxconn was drastically downsized, but only after all this spending was completed or committed. Yet even this kept the door open for Foxconn to collect $37.4 million in tax credits for investing $266 million at the site and creating 579 jobs during 2020 and 768 jobs and a capital investment of $77.4 million in 2021.

But there is still no evidence that Foxconn or these workers are actually manufacturing anything at the Mount Pleasant campus. Foxconn had promised a Gen 10.5 fabrication manufacturing facility, then cut that down to a Gen 6 fabrication facility, then dropped that idea entirely. It has floated plans to make electric cars, automatic coffee kiosks for airports, ventilators (during the pandemic) and to assemble servers for Google. It has asked employees for ideas and discussed fish farms, exporting ice cream, storing boats, cosmetics, designer handbags, gaming teams, dairy exports, and a project involving camera-festooned autonomous vehicles,” the tech publication The Verge reported.

Foxconn hired hundreds of workers toward the end of 2019, claiming them on its report to the state for the 2019 year, and then quickly laying the employees off early in 2020. One former Foxconn employee called it a pump and dumpoperation done to qualify for state tax credits. Urban Milwaukee reported on this tax loophole in 2020.

The new contract negotiated by the Evers administration appears to have closed this loophole, which has meant the workers are kept on the payroll for a longer period, but there’s still no evidence they are manufacturing anything. Mostly what has happened is that Foxconn has changed the name of its efforts, first switching from Gen 10.5 to Gen 6, and then for years saying that “its empty warehouse in southeastern Wisconsin is the centerpiece of an ‘AI 8K+5G’ strategy, without ever explaining what that means,” as The Verge reported.

Last fall the AI 8K+5G name was scrubbed from Foxconn’s Wisconsin website, in favor of a new name, the “3 + 3 Model for Transformation,” which a website illustration shows will combine Electric Vehicle,” “Digital Health,” and Fii Robotics” with 5G Solutions,” “Semiconductors,” and Industrial AI.” That would seem to leave room to manufacture or provide any of a long list of products or services, but as with all past names and announcements, there is no evidence of any such activity at the Mount Pleasant campus.

But in case you doubt that the company has made progress in Wisconsin, a website page on “Leadership’s shared Vision” explains that there has been a transition from Foxconn 1.0” in 2019, to Foxconn 2.0” and on to Foxconn 3.0” and is part of the company’s “everlasting commitment for better results.”

In May we learned that Microsoft plans to pay $50 million for 315 acres of the Foxconn land to build a $1 billion data center. That sounded promising, but under the deal with Mount Pleasant the $50 million will be paid to Foxconn, to reimburse it for money it spent to buy land. Meanwhile, local taxpayers will be on the hook to Microsoft, which will be eligible for up to $5 million per year based on improvements it makes to the land — this on a campus for which state and local taxpayers already spent hundreds of millions for road connections and sewer, water and electric infrastructure.

In return for the Microsoft subsidy there is no guarantee of a minimum number of jobs. Paul Englis, Microsofts director of global community research and engagement, told the Racine County Board of Supervisors that such centers typically employ 300 to 400 people, the AP reported, but The Verge, which regularly covers the tech industry, predicted that “given the highly automated nature of data centers,” the number of jobs created is likely “to be very few.”

Meanwhile, nothing has ever come of the technology centers Foxconn promised to build in Green Bay and Eau Claire and the company’s “North American headquarters” it promised to open in Milwaukee.  All three projects were announced more than five years ago and remain dormant. Given the seemingly vast purview of Foxconn’s 3 + 3 Model for Transformation,” you might think these satellite centers would be part of this effort. Alas, the three cities are never mentioned by the Foxconn Wisconsin website.

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5 thoughts on “Murphy’s Law: Foxconn Deal Is Still Costing Taxpayers”

  1. tomsabourin says:

    Con. It’s always been right there in the name.

  2. says:

    Where’s Prox’s old Golden Fleece Award? Why aren’t these film-flammers in jail?

  3. Mingus says:

    The State of Wisconsin should make a case that Foxconn intentionally engaged in making commitments that they never intended to keep and knowingly committed. The property should be seized in compensation for all of the taxpayers money that was used to acquire the site and all improvements. The State could then market the property to other manufacturers as a prime spot to locate. The Republicans who negotiated this boondoggle should be investigated for not doing their due diligence in research that would show that Foxconn historically backs out of deals they make.

  4. Joseph Alvarado says:

    Brings to mind the underpants gnomes business plan from South Park.

  5. Joy Adams says:

    Walker better never run for any office in Wisconsin again! We have terrible roads in Milwaukee because we were too busy paying for his eight wonder of the world!

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