MADISON — The debate over state incentives to land the Foxconn Technology Group in Wisconsin will likely wrap up soon, with the Wisconsin Legislature expected to vote by mid-September. Here are some of the questions being asked as a decision nears:
The state incentive package would be $3 billion over 15 years. What guarantees will be put into place to ensure Foxconn invests the $10 billion and creates the 13,000 jobs it has planned?
Unlike some states that rely more on “clawbacks” after they have spent taxpayer dollars, Wisconsin takes a “pay-as-you-grow” approach to economic incentive packages. If Foxconn spends $3 billion and creates 3,000 jobs, the amount of state tax credits would be commensurate – and retroactive. Foxconn must part with money to get some of it back in the form of tax credits, which are based on economic activity that otherwise wouldn’t happen.
Clawbacks are still important, however. How would they be initiated and enforced?
A clawback is a provision in an economic development agreement that requires a company to repay any financial benefit gained for which it did not meet certain performance thresholds, such as job targets or capital investment levels. These provisions are most often included in contracts negotiated between governments and companies. Concurrent to the legislative debate, the Wisconsin Economic Development Corp. is drafting a contract that is expected to be completed by Sept. 30.
OK, but who watches the contract writers and makes sure that document is being enforced?
An amendment to the Foxconn package by the state Senate would give the Legislative Audit Bureau, an arm of the Legislature, the ability to audit contract compliance each year. The Senate has also included language that would more strongly tie Foxconn’s projected capital investments to job creation estimates.
This deal seems to have been, in no small part, a product of the evolving friendship between Gov. Scott Walker and Foxconn founder and chairman Terry Gou. What happens if one of those leaders rides into the sunset?
State negotiators are keenly aware that Gou turns 67 in early October and won’t work forever, even if his energy levels are legendary. However, the depth of the Foxconn management team engaged in the Wisconsin project – combined with investments already made or poised to happen – make a reversal highly unlikely. Foxconn wants to build North America’s first liquid crystal display plant in Wisconsin, a decision driven from the board of directors’ level on down. As for Walker, he’s all but certain to run for re-election in 2018 and won’t turn his back on a deal he started. His opponents will make doubly sure of that. Walker’s chief deputies on this deal, Administration Secretary Scott Neitzel and WEDC Secretary Mark Hogan, also remain in place.
I’m uneasy with the notion that governments compete for industry, foreign or domestic. Is Wisconsin getting on a treadmill it can’t stop?
Economic competition among nations, states and communities is nothing new. What’s new is that Wisconsin is finally getting better at it after years of not showing up on the radar screens of site selectors. The Foxconn deal is one of several national competitions under way right now, with Amazon announcing it will build a second headquarters and Toyota-Mazda looking to open a new U.S. assembly plant. Look for at least 20 states and cities to compete for one or both deals.
Why is it that so many Democrats seem opposed to the Foxconn deal and most Republicans are supportive? Isn’t job creation a bipartisan goal?
Some Democratic lawmakers would doubt Walker if he said the sun rises in the east, and it didn’t help their mood that President Trump took credit for the deal. However, the 2016 Democratic Party platform called for “fostering a manufacturing renaissance,” pursuing an innovation agenda and creating jobs for young people. A Foxconn presence in Wisconsin, with an entirely new industry and a statewide supply chain, could help meet all three goals. Most Republicans support the deal, but not all. For example, Americans for Prosperity – a group backed by Charles and David Koch – has come out against it.
If the Legislature passes the Foxconn package, the real work begins. Republicans and Democrats alike will need to ensure tax dollars are spent wisely and Wisconsin doesn’t mess up this chance to rebrand the state economy for decades to come.