Foxconn, Take Two
Wisconsin's new deal is less bad, but not good.
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The Foxconn deal is dead. Long live the Foxconn deal.
Taiwanese manufacturer Foxconn made a massive pact with Wisconsin in early 2017 under which it would have received more than $4 billion in state and local tax incentives and other benefits, in exchange for building a factory that would employ 13,000 people. In the years since, it became patently clear that Foxconn had no intention of fulfilling its end of the bargain, as the corporation constantly shifted plans for what products it would make, what kind of facility it would build, and how many jobs it would create.
Like so many of these deals, the initial announcement served its political purpose — with former President Trump gloating that the plant would be the “eighth wonder of the world” — while the actual benefits never materialized for local residents.
Wisconsin Gov. Tony Evers made renegotiating the deal a key part of his successful 2018 campaign against then-Gov. Scott Walker. As of this week, that renegotiation is complete and public. I’m going to break down the good, the bad, and the ugly in this second swipe at making a deal with Foxconn.
The Good: Voters Mattered. Evers was clearly given a mandate to renegotiate the agreement, and he did. The fact that Foxconn made hash of things and that the former president politicized the deal certainly helped put it on the radar in a way many of these arrangements are not, which made it a more salient political issue than it would likely have been otherwise. But regardless of how or why it happened, it’s still always a good thing when voters can voice their displeasure at public resources being used in ill-advised ways and see some subsequent action.
The Bad: The Deal Is Still Expensive. Here’s a handy chart from the Wisconsin economic development office comparing the old deal to the new, at least on the state level. (There are also local funds involved. More on that later.) Foxconn is now planning to create 1,454 jobs, making it eligible for about $80 million in tax credits. That still makes this the fifth most expensive subsidy deal in Wisconsin history, at a cost of about $55,000 per job created. That’s not great. The average Wisconsin subsidy deal costs half that amount per job created.
A renegotiation also allows Foxconn to move the goalposts and call whatever it does next a win. As Prof. Nate Jensen said in an email, “the company was nowhere close to complying with their original incentive agreement. So any amendment is, in some sense, in the company’s favor.”
Indeed, under the original contract, Foxconn would have seen little money going forward, since it was so woefully short of fulfilling its obligations and Wisconsin baked in some decent protections. It’s economic development office denied Foxconn access to a tranche of tax credits last year on those grounds.
Now the corporation gets another crack at it. Yes, the total available on paper is much lower, but there’s little reason to think that $80 million will be worth the cost to Wisconsin taxpayers, either, assuming Foxconn gets its act together, since these deals almost never pay off.
To put it more succinctly, Foxconn is getting a second chance it doesn’t deserve. There’s a world in which simply letting the initial deal play out while Foxconn fell on its face would save taxpayers money.
The Ugly: Local Taxpayers Are Hung Out to Dry. The state, as well as the village of Mount Pleasant, Wisconsin, and Racine County, made significant investments in land and infrastructure, as well as launching eminent domain cases to seize homes and land, in anticipation of Foxconn’s original plans coming to fruition. Those are costs — and trauma to homeowners — that won’t be recouped under any new deal.
Eminent domain compensation costs alone for Mount Pleasant are already in the hundreds of millions of dollars. The state’s new deal doesn’t alter any agreements with localities Foxconn has in place.
These localities took action anticipating a $10 billion investment by Foxconn, which has now been reduced to just shy of $700 million. Mount Pleasant’s promised public investments in the project were so expansive the town’s credit was literally downgraded as a result. There’s no plan to make those places whole, and Foxconn’s scaled-back design, even if it comes through with every cent it promises, won’t make up for what they lost.
“Foxconn should pay 100 percent of whatever costs the County and Village ever incur that are not covered by the remaining project,” said Greg LeRoy, executive director of Good Jobs First.
So, to sum it up: Voters were clearly unhappy with the initial Foxconn deal and they made it known at the ballot box, leading to a very much scaled-back version that puts them at way less risk, on paper. But they still aren’t going to reap much in the way of economic benefits, plus have already lost what they’ve sunk into helping Foxconn get to this point.
Mostly, this episode should serve as a warning against making these public arrangements with corporations in the first place, rather than a celebration about anything that comes out of the renegotiated pact.
ONE MORE THING: Pennsylvania is the latest state to work on a tax break for data centers, advancing one out of a House committee this week. As readers of this newsletter hopefully know by now, data center tax breaks are a scam that help Big Tech corporations build what they need to build no matter what. Pennsylvania Rep. Sara Innamorato had the right response to this one.
If you happen to live in Pennsylvania, write or call your state representative and tell them this bill needs to be voted down when it comes before the full House.
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— Pat Garofalo