DRIFTLESS - Almost 30 concerned citizens gathered in the Pippin Conference Room at UW-Richland on Wednesday, May 16 for a Foxconn Town Hall hosted by Wisconsin State Senator Jennifer Shilling and State Representative Gordon Hintz (D-Oshkosh). The purpose of the series of town halls held around the state was to explain the Foxconn deal to citizens, and provide accurate information about what it means to taxpayers outside the 21 Southeast Wisconsin counties expected to directly benefit from the project.
Foxconn Technology Group is the informal name of the Hon Hai Precision Industry Company Ltd. It is a multinational electronics contract manufacturing company headquartered in Tucheng, New Taipei, Taiwan. It is the world’s largest contract electronics manufacturer, and the fourth-largest information technology company by revenue. The company is the largest private employer in China, and one of the largest employers worldwide. Its founder and chairman is Terry Gou.
Foxconn has committed to building an up-to-$9-billion plant over six years to make liquid crystal displays for monitors, televisions and more to create up to 13,000 jobs. As an incentive, Foxconn will receive up to $2.85 billion in cash payments from state taxpayers over 15 years, and additional sales tax exemptions on construction materials for the plant valued at $150 million.
To get the full cash payments, Foxconn’s employment here must rise to 5,200 by 2022; to 10,400 by 2027; and to 13,000 by 2032. Workers must be paid at least $30,000 a year, and the average annual salary must be at least $53,900.
“Foxconn is the largest taxpayer giveaway to a foreign corporation in U.S. history,” State Representative Gordon Hintz said. “The whole thing was concluded, from start to finish between September and November of 2017, and there are still lots of questions and new hidden costs that come out all the time.”
According to Hintz, Foxconn proposes a $9 billion project in Racine County, and the state legislature has approved payments of up to $3 billion in taxpayer dollars. $1.5 billion is contingent on Foxconn actually spending $9 billion on the project, and the other half is contingent on Foxconn hitting their 13,000 jobs pledge.
Hidden costs, never approved by the legislature in the original proposal, include local incentives from Racine County and the Village of Mt. Pleasant, transportation bonding, and extension of utilities to the plant. These additional costs have caused the taxpayer price tag of the deal to increase by over 50 percent in just a few short months since the plan was originally approved, and Representative Hintz believes that we haven’t seen the end.
Racine County and the Village of Mt. Pleasant together have committed to $764 million in local incentives. However, there are a group of residents whose new, retirement homes, have been condemned to make way for the facility by eminent domain. The homes have been designated “blighted.” Those residents are fighting the designation in court.
Transportation funding for the project involves state bonding for $252.4 million to pay for the nearby expansion of Interstate 94. With interest payments, the total cost rises to $408.3 million.
“The legislature learned only recently that in order to finance the transportation part of the project, the state is shifting $134 million away from other state highway projects to do local roadwork to support the Foxconn project,” Hintz explained. “Because there had been some ‘budget savings,’ the actual cost is estimated at $90 million. This is $90 million being taken away from local road projects in the other 72 counties in the state.”
And last, so far, the American Transmission Co. has proposed the construction of a 14-mile, 345 kilovolt transmission line; a new 345/138-k-V substation; and a new underground 138-k-V line to connect a substation to a Foxconn-owned substation near the planned plant.
“The cost of the proposed power line will be passed from ATC to its power company customers, including We Energies,” Hintz explained. “We Energies is allowed by law to add these costs to its rate base, with the total cost estimated to be $140 million.”
High cost per job
Representative Hintz explained to the meeting participants that the cost per job created by the project would be $230,000.
“The dollar amount spent per job to be created is ten times more than the national average,” Hintz said. “And the Legislative Fiscal Bureau estimates that it will be 25 years, by 2043, before the taxpayers will get their money back.”
In the contract language, through 2022, Wisconsin could recoup all of the tax credit money if Foxconn lies to the state, shuts down its manufacturing operations, or moves them elsewhere. Beginning in 2023, those potential penalties to the company are capped at $965 million, and fall to $386 million by 2032. The state could also recoup up to $500 million beginning in 2023 and then steadily decreasing if Foxconn doesn’t hit the minimum job numbers.
“The offer to Foxconn is roughly 46 times greater than the previous record deal by Wisconsin to a manufacturer,” Hintz said. “In 2010, the state offered $65 million to Mercury of Fon du Lac in exchange for creating roughly 1,000 jobs and retaining roughly 1,900 more.”
“I don’t think the State of Wisconsin will ever make money on this deal,” according to Tim Bartik, an economist at the W.E. Upjohn Institute for Employment Research. “Once you account for public spending needs due to an increased population, the state will never even break even.”
The public spending needs referred to are those related to delivery of local services such as K-12 education, garbage collection, and the like.
Representative Hintz referred to the whole project as a risky, ongoing albatross that is a “bright shiny object to function as a re-election gambit.
“It’s easy to take a risk like this when you’re in a period, which if we make it until next year, will be the longest period of uninterrupted growth in U.S. history,” Hintz observed. “But it’s like this. The company will manufacture liquid crystal displays. Think back to 1988, and what you would think if I proposed to spend $4.5 billion dollars to create a plant that manufactured VCRs. This project is risky, because as we all know, technology is constantly changing.”
Throughout the development of this project, there has been a lot of discussion about the environmental impact of the plant. The main concerns have been water quantity, wetlands exemptions and air and water quality.
Perhaps the most attention about environmental impacts has come from the legislation passed exempting Foxconn from seeking DNR approval for construction activity on some types of wetlands, which can retain storm water, filter pollution and provide habitat for wildlife.
The legislation would allow Foxconn to perform construction in waterways without a permit and would waive the requirements for a state environmental impact statement and public hearing. There was an assurance, at the time the legislation was passed, that even though the DNR could not require this, the Army Corps of Engineers would retain oversight. However, the Corps has since said it has no jurisdiction over wetlands that will be filled.
“What this really means is that the public will have no say whatsoever in wetland impacts caused by the project,” Hintz explained. “However, the forces are lined up against this approach, and I believe that there will be lawsuits brought on this issue.”
Hintz explained that his area of the state has recently experienced catastrophic flooding, for instance last summer in Burlington.
“One of the most important services that wetlands provide is helping to control flooding,” Hintz said. “Water will go where it wants to go.”
The issue of the quantity of water being used is another source of potential litigation. Even though many experts agree that removal of seven million gallons of water per day from Lake Michigan is not a terribly significant amount on its own, one has to look at the cumulative impacts of all the ‘straws’ that are being or will be stuck into the lake.
Many also believe that the project’s commercial, for-profit nature constitutes a violation of the Great Lakes Compact, which is a 2008 agreement of eight states and two Canadian provinces that prohibits water from being diverted outside the Great Lakes basin. Wording in the compact says that new diversions must be for ‘public water supply purposes,’ which would ‘serve a group of largely residential customers.’
“Of the seven million gallons a day Racine would supply to Mt. Pleasant, 5.8 million gallons (83 percent) would be earmarked for Foxconn,” Hintz explained. “But in all, 2.7 million gallons (39 percent) would be lost, mostly through evaporation and the company’s manufacturing operations. That is below the five million gallons per day that would trigger other states to review the request.”
Then, there is the bigger issue of water quality. According to Representative Hintz, because the chemicals used in the manufacturing process are so unsual or toxic, the Racine wastewater treatment plant cannot accept the plant’s wastewater unless it is pre-treated in an on-site, wastewater treatment plant, owned and operated by the company.
“Who will make sure that the on-site treatment is effective and enforced?” Hintz asked. “One cheerful thought, though, is that even with the current sad state of our DNR and EPA, we still have regulations in this country like Foxconn hasn’t encountered before in other countries they’ve operated in.”
And last, there is the issue of air quality.
“The EPA has waived the air quality standard for the company,” Hintz explained. “But the Attorney General of Illinois Lisa Madigan is suing because Foxconn will be allowed to operate without stringent pollution controls close to the Illinois border.”
According to Hintz, the lawsuit challenges the EPA’s ozone designations, saying its failure to name Racine County as a ‘non-attainment’ area puts people at risk. The EPA, under administrator Scott Pruitt, left Racine County off its non-attainment list despite an agency staff analysis of ozone levels in Wisconsin published in December, which found that the county’s air exceeded federal ozone limits.
Wisconsin State Senator Jennifer Shilling summed up her thoughts on this massive giveaway of taxpayer funds.
“This seems like a re-election gambit, and the state’s small businesses are already saying that no such kind of assistance has ever been provided to them,” Shilling said. “And here we sit in one of our state’s two-year campuses whose future existence is threatened by this deal. The funds for this project are essentially coming out of the state’s budgets for the UW-System, and our transportation budget.”
Kriss Marion, candidate for State Senate District 17, currently represented by Senator Howard Marklein, attended the town hall meeting in Richland Center.
“My understanding is that where the workers are really going to come from is Illinois, where the el is going to bring millennials in from Chicago to work in the plant. How does that create jobs for Wisconsinites?”
Representative Hintz concurred, saying that Wisconsin has the fifth oldest population of any state in the country, and one of the critical challenges the plant will face is the current labor shortage.
Jack Franks, Co-Chairman of McHenry County in northern Illinois has been quoted as saying, “We [in Illinois] will get all of the benfits of this project without any of the burden.”
Alicia Leinberger, candidate for the 96th State Assembly District seat, currently held by veteran legislator Lee Nerison, was also present at the meeting. Leinberger commented upon the change that has occurred over time in the basic ethos of Republican Party principles.
“This whole project really flies in the face of traditional GOP principles that government should do what we can’t do for ourselves,” Leinberger said. “The Republican Party today is not our grandparent’s Republican Party.”