In Wisconsin, future of ‘game-changing’ manufacturing facility — and state tax subsidies — is uncertain

Three years ago, Wisconsin lawmakers passed a bill (AB 1) granting computer component manufacturer Foxconn $3 billion in refundable tax subsidies and incentives to build a $10 billion factory in the city of Mount Pleasant.

Proponents viewed the deal as a game-changer for the state’s economy and manufacturing sector. Up to 13,000 people were expected to be employed at a facility that would produce flat-screen LCD displays. The 20-million-square-foot facility in Mount Pleasant would be one of the largest manufacturing campuses in the world.

However, Wisconsin officials recently announced that the Taiwanese company would not be receiving scheduled tax subsidies because it had failed to meet terms of its agreement with the state, in areas such as capital investment and employment.

Foxconn originally planned to build a Generation 10.5 LCD advanced-manufacturing facility, but is now planning to construct a Gen 6 plant. By the end of 2019, the company was supposed to be employing 520 people with wages of at least $30,000 a year. The Wisconsin Economic Development Corporation (WEDC) estimates that only 281 positions qualify under terms of the agreement.

Even prior to the state’s denial of the first installment of tax credits, negotiations between the WEDC and Foxconn had stalled this summer.

Wisconsin Rep. Robert Wittke, who is a member of the Assembly Committee on Jobs and the Economy and serves as vice chair of the Ways and Means Committee, expressed disappointment with the decision to reject the tax subsidies. He wants to work out a solution that protects the investments already made by the state and local governments (up to $400 million, mostly on land and infrastructure), as well as Foxconn.

“I believe there is always an opportunity to rework existing agreements as long as both parties are interested in forming a partnership,” says Wittke, who represents a district near the Foxconn development.

WEDC officials have said they are open to working on a new agreement that helps the development move forward.
The Foxconn deal has been controversial ever since it first was proposed in the Wisconsin Legislature.

At that time, critics raised concerns over the magnitude of the subsidies, as well as whether the state would ever see a return on its investment. One estimate from the Wisconsin Legislative Fiscal Bureau found that payback would take 20 years (this estimate did not include the impact of spin-off businesses resulting from the Foxconn plant).

Rep. Wittke was not in the Legislature in 2017. However, he points to safeguards in the legislation that protect the state and hold Foxconn accountable.

“This is a performance-based arrangement for both employment and capital investment,” he says. “No state tax benefits are paid out unless there is tangible performance. In addition, there are clawback provisions for those benefits after a number of years if performance is not maintained.”

Wittke believes the recent WEDC actions have been short-sighted.

“Both parties should be working more closely with local officials that represent the area where the project site is located,” he says. “If the desire is to truly make this successful, those on the frontlines can play a much bigger role.”
Wittke also points to benefits that the area has seen since the Foxconn development began: for example, a major freeway expansion that has spurred regional development; new employment in construction and related trades; and a boost to the area’s depressed housing market.

Does Wittke think the project can be salvaged?

“After meeting with local officials, yes, I see several paths forward,” he says. “Before anything moves forward, the disagreement between the WEDC interpretations and Foxconn must be resolved. … There are many more related benefits we see on the ground here. I am confident this project will be completed in some format that provides substantial benefits to southeastern Wisconsin, as well as the state.”