The Foxconntrot

Matt Kittle sat through the entirety of the Assembly committee hearing on the proposed Foxconn incentive package so you didn’t have to:

We’re ready.

That was the unified message of dozens of public and private-sector officials – from Kenosha to Wausau – in testimony Thursday before the Assembly committee leading legislation on a $3 billion state incentives package for the “once-in-a-century” Foxconn Technology Group economic development proposal.

“Ladies and gentlemen, close this deal. Make it happen,” urged Tom Christensen, administrator of the Racine County village of Caledonia, which could directly benefit from Foxconn’s plan to build a $10 billion liquid crystal display manufacturing campus in southeast Wisconsin.

Waves of supporters testified before the Assembly Committee on Jobs and the Economy during an all-day hearing that spanned deep into Thursday night.

There were critics to be sure, including the Wisconsin League of Conservation Voters and a “cannabis activist” who urged the committee to ditch Foxconn and subsidize the pot industry instead.

But the vast majority of those who testified laid out myriad reasons why they believe Foxconn would transform Wisconsin’s economy and why the state must act quickly to make it happen.

“The time to worry about Foxconn leaving is now,” said Tom Still, president of the Wisconsin Technology Council. “If this process takes too long, now is when they will leave. They will not leave after they’ve invested $10 billion.”

Still has forgotten more about business in this state than most people know, including most of the people whose comments you are about to read.

The economic impact figures command attention.

Secretary of Administration Scott Neitzel testified about the 10,000 construction workers who would be employed over the next four years, with an estimated $5.7 billion spent on construction over the period and an annual $1.4 billion spent in the supply chain. Neitzel also talked about the intangible human factors – personal connections formed during the negotiation process – that helped make the deal possible.

Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce, noted the estimated $15 billion in payroll over 15 years that Foxconn could bring to Wisconsin.

“I think that’s a pretty good return on investment,” Sheehy told committee members, noting the $1.5 billion the state would offer in job creation-based tax credits.

Wisconsin’s higher education community testified to what has been described as the “brain gain” the Foxconn project would foster.

“Foxconn would help keep these highly educated graduates in Wisconsin,” University of Wisconsin System President Ray Cross testified.

Foxconn Chairman Terry Gou and Gov. Scott Walker have said Wisconsin universities and tech schools and the “talent pipeline” they create are a strong selling point for Foxconn’s decision to build its first high-tech manufacturing plant in North America.

While gushing at the potential, higher ed leaders took the opportunity to remind lawmakers that colleges and tech schools are going to require more money to create the programs and facilities needed to turn out the engineers and skilled technicians necessary to feed a massive workforce.

Asked if the university system would need more funding in this budget, Cross said now’s the time to make investments that will pay off in a few years.

“It takes us a while to turn a big aircraft carrier,” he said of the UW System.

Local government officials in Kenosha and Racine counties were unified in their support for an unprecedented economic development project expected to be located in their backyard. But they, too, urged the state to come up with the funding they’ll need to get Foxconn off the ground.

Kenosha County and city officials said the local governments involved should be included in any “clawback” provisions to recoup costs should the deal go bad. And they asked for changes to the tax incremental finance laws to include public buildings, such as fire and police stations. Foxconn isn’t merely building a plant; it’s constructing a city unto itself, to be situated on some 20 million square feet and populated by thousands of employees.

The bill puts state taxpayers on the hook for local development costs under a “Moral Obligation Pledge.” The Legislature would, if called upon to do so, pay up to 40 percent of the principal and interest of a local government’s obligations.

The deal, as written, would include $1.5 billion in tax credits, in return for creating 13,000 jobs. Payroll tax credits would be distributed on full-time jobs paying between $30,000 and $100,000 per year. Another $1.35 billion in tax credits would help ease the company’s capital costs. And $150 million in sales and use tax credits could be drawn on purchases of building materials, supplies and equipment used in the construction of the complex.

Neitzel and others who helped craft the incentives package assert it’s a “pay-as-you-grow” proposal, meaning Foxconn wouldn’t be able to collect on the tax benefits until they invest in capital – human and structural.

But critics insist there are better things Wisconsin could spend $3 billion on.

Robert Kraig, executive director of the left-wing Citizen Action Wisconsin, asserts that health care, education, or clean energy would create significantly more jobs than Foxconn’s development plan. Of course, no other Fortune 500 company (Foxconn is #27) offered to transform Wisconsin’s economy.

Kraig, in his usual bombastic way, hammered the Wisconsin Economic Development Corp., the agency charged with administering much of the economic development package. WEDC does indeed have a troubled past, particularly in tracking incentives and holding wayward firms accountable. Kraig said putting WEDC in charge of the incentives package is a “scandal waiting to happen.”

Citizens Action is a big advocate of expanded welfare benefits and other liberal causes.

“We often hear that we don’t have the resources to invest in health care and higher education, but when a multi-national company comes knocking we find $3 billion for them,” Kraig said.

Proponents of the bill say that kind of thinking is disingenuous at best. The return on investment, they say, is even more significant than the billions of dollars Foxconn would bring to Wisconsin.

“We could go from flyover to destination state pretty quickly because of this,” Still, of the technology council said.

Here’s the thing Kraig and other critics fail to grasp. There is no money available for tax incentives of any sort if Foxconn isn’t coming here. The only reason those tax incentives are worth doing is if Foxconn comes to this state. No Foxconn, no Foxconn tax incentives, and therefore no, at minimum, $170 million of annual payroll, for beginners.

Opponents testified that they fear the process is moving too fast. The Assembly introduced the bill Tuesday, scheduled a hearing two days later, and the Jobs and Economy Committee could vote on whether to move the bill along by early next week. There are, however, several more steps in the legislative process, not the least of which is action from the traditionally more deliberative Senate.

Mark Hogan, secretary and CEO of WEDC, said it’s important to secure passage by the end of September in order to meet Foxconn’s aggressive construction and production schedule.

“Foxconn is ready to go,” he said. “They would like to be hiring for some operations without even having construction in place.”

Environmentalists spoke in opposition to the bill’s provisions exempting some regulatory requirements from the project. The project loosens permit requirements involving wetlands and environmental impact statements, although the Department of Natural Resources testified that the bill only streamlines the regulatory process and limits duplication. The federal environmental requirements would be as rigorous as always, according to state agents.

But Jennifer Giegerich, of the Wisconsin League of Conservation voters, testified that her organization is concerned about the removal of wetlands, even though Foxconn would be required to replace 2 acres of wetlands for every acre it disrupts.

“We want to make sure our economy is as healthy as our air and our streams,” Giegerich said.

Madison resident Tammy Wood voiced a number of misgivings about the bill. Principally, Wood told the committee the state should be investing in a higher calling.

She said Wisconsin should put its money on pot, not Foxconn. Wood, vice chairwoman of the Progressive Caucus of the Democratic Party of Wisconsin, pointed to places like Colorado and the booming legal marijuana market.

“The cannabis industry is set to employ more people by 2020 than manufacturing,” Wood said, adding that many of the jobs are so easy kindergarten kids could work in the cannabis industry – although she says she doesn’t believe in child labor.

“I know you’re passionate, but if we could stick to the bill and not the cannabis industry,” state Rep. Adam Neylon (R-Pewaukee), chairman of the Jobs and Economy Committee, urged Wood.

Reefer madness aside, supporters of the incentives package insist the time is now to positively affect Wisconsin’s economic future for generations to come.

The Foxconn deal “will provide significant dividends to the state of Wisconsin for years to come,” Neitzel said.

Even those who are supporters of legalization or at least decriminalization should turn a highly skeptical eye on promises of waves of legal marijuana money. There is, you may note, no Democratic legislative leader, let alone Republican legislator, willing to take on the cause of legal pot.

As I wrote last week, a few Democrats, but not very many, have not engaged in knee-jerk condemnation. Another has sort of modified his stance, as James Wigderson reports:

Madison Mayor Paul Soglin, a possible candidate for governor, is walking the tightrope on the Foxconn development. On the one hand, Soglin is making it clear he’s opposed to the deal by calling it “over the top.”

“I’m fearful if that becomes the standard for job creation in Wisconsin, the whole state will suffer,” Soglin said according to the Wisconsin State Journal. Soglin said an incentive package of $600 million to $1.2 billion would be “more in line with national standards.”

On Facebook, Soglin has been more vocal against the deal, posting seven articles opposed to the Foxconn deal with misleading information. Our favorite is the one that says in a quote highlighted by Soglin, “This isn’t even cost-effective socialism.” Like Soglin’s favorite country, Cuba?

Commenting on one article, Soglin wrote:

Imagine 100’s of millions of dollars going to public schools, the UW, infrastructure like high speed internet. Imagine all the people with all the great jobs in a great state. Not tax cuts for the rich; and ordinary people left to pay for this. We are about to see what a rigged economy does to all the people when more is given away than is created.

In his next Facebook post, Soglin tapped his inner John Lennon:

Imagine all the people with access to great public schools, great colleges and universities, high speed internet, great roads and transit, great healthy food, great health care, great jobs….imagine all the people….

Imagine if we were spared that awful song.

Imagine Madison without state government and the UW System. Imagine Soglin actually having to work to bring in business, if Comrade Soglin would even lower himself to do that.

But now Soglin also has to deal with the possibility that Foxconn is looking to build facilities in Madison or Fitchburg. He would like Foxconn to consider the recently-closed Oscar Meyer plant as a possible location. However, Soglin said, “we are not at all interested in participating in a race to the bottom in regards to competing with financial incentives that are not viable for this community.”

What Soglin is not addressing is that Foxconn would not even be looking in the Madison area for a location if it wasn’t for the state’s offer of nearly $3 billion in incentives for Foxconn to locate a $10 billion facility in southeastern Wisconsin. Soglin is acting like the two developments are separate when in reality its all a part of one huge economic development.

What Soglin should say, if he’s really opposed to the bill currently being considered by the legislature, that he’s opposed to Foxconn locating anything in his city. Soglin would rather have a shuttered Oscar Meyer plant as a monument to his opposition to capitalism than any Foxconn offices or factory in his city. Because that’s the real message of his opposition to the Foxconn deal. Ironically, Soglin may get the economic development he claims he wants despite his best efforts and the efforts of the Madison Democrats in the legislature to oppose it.

At the ribbon cutting ceremony, Soglin can thank Governor Scott Walker.

Soglin also won’t tell you about Madison’s experience with Democrats’ favorite non-governmental employer, Epic Systems of Verona. Epic Systems started in Madison, grew substantially, then moved to Verona because of Soglin’s refusal to “race to the bottom in regards to competing with financial incentives that are not viable for this community.” It could be said that Madison’s loss is Verona’s gain, except that a substantial number of Epic’s employees still live in Madison while using (and not paying for) Verona’s government services.

As it is, Madison (and Milwaukee) talker Vicki McKenna adds:

This isn’t serious. First, he wasn’t actually contacted by Foxconn or anyone else. A site selector sent out letters saying “hey, if you have undeveloped parcels of land, let us know….” So what does Soglin do? He stunts a presser about Oscar Mayer (the company left on his watch, he was caught with his pants down, never even realizing they were thinking of leaving), and wants to capture a little bit of the Foxconn enthusiasm that Walker is generating–bcause he thinks he can beat Walker in the next gov’s race.

If he were actually serious, he wouldn’t be holding a press conference. He would get a team of good Econ-Dev people to work with WEDC and really try to make the Oscar Mayer property attractive. Saying “we may consider TIF, but we’re not going to give it away” is the tell that all of this is bullsh*t. No one wants that property. You just may HAVE to give it away. As for TIF, if you don’t say “of COURSE we’ll bring some TIF proposals to the table”, then forget about even being on the list at all, let alone the short list.

Which brought this response about the Oscar Meyer facility:

Heinz moved it to a new plant because it was inefficient for them, so please Foxconn fix this? Hilarious.

Then there’s this …

… which prompted this Facebook question:

Ummmmm. If “average wages” (stated to be $53k annually) won’t pay the bills, how will $15/hr ($31.2k per annum)?

 

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