OutFox(conn)ed

The Chicago Tribune editorializes:

Illinois recently got a humiliating rejection notice from Foxconn, the Taiwanese tech giant. Foxconn picked Wisconsin over struggling Illinois and other states for the proposed site of a $10 billion LCD panel factory that will employ up to 13,000 people. These mega-projects don’t happen every day, so Foxconn’s decision hurts because job growth is the only way to solve Illinois’ fiscal crisis: More jobs means more tax revenue.

What really stings, though, is how the winning site is just across the state line in southeast Wisconsin. It’s as if Foxconn settled on the Midwest as a location and then decided: We want to be as near as possible to Illinois without actually being there.

Foxconn Chairman Terry Gou gave an interview to Steve Jagler, the business editor of the Milwaukee Journal Sentinel. Gou gave Jagler eight reasons why Foxconn chose Wisconsin. Two of them were — literally — proximity to Illinois: First, Wisconsin is conveniently located in the central U.S., “close to Chicago, a global hub,” the Journal Sentinel reported. Second, Wisconsin has the transportation and logistics to accommodate Foxconn’s growth, and is … near O’Hare International Airport. Feel free to smack your forehead.

Now play along as we study more of Foxconn’s list of Wisconsin attributes to see how many also match Illinois. A manufacturing mecca? Yes, that’s Illinois, too. Strong university and technical college systems? Yes. Energy reliability? Yes. Proximity to Lake Michigan water supply? Well, duh. Foxconn also likes Wisconsin because it’s home to allied companies such as Rockwell Automation, but Illinois is just a quick drive south.

The final reason Foxconn picked Wisconsin over Illinois is the difference-maker: government cooperation and competence. The Journal Sentinel wrote that Gou believed “the responsiveness of the public and private partners in Wisconsin far exceeded those of other states.” Gou singled out the cooperation of Gov. Scott Walker, U.S. House Speaker Paul Ryan, R-Wis., and local business groups: “These key people pushed very hard.”

In other words, Foxconn liked everything about Illinois, but Wisconsin officials convinced Gou they made the best business partners. How could that be? Wisconsin will provide $3 billion in tax benefits over 15 years, but incentives are the norm and Illinois, one of seven finalists, was willing to offer some. National politics could have been a factor, given that Foxconn would benefit from pleasing President Donald Trump, who hopes to win Wisconsin again in 2020. But companies don’t make huge investment decisions just to make a president smile.

Here’s the takeaway: Foxconn chose the state that has stable government, healthy finances and pro-growth policies for employers. Illinois has none of the above.

This state is deep in debt and badly run. A 10-ton anvil dangles overhead in the form of at least $130 billion in unfunded pension obligations. Taxes are too high, yet Illinois still can’t pay its bills on time. Republican Gov. Bruce Rauner recognizes that Illinois isn’t competitive. He wants to cut onerous regulations and make other reforms to attract business investment, but he’s been stymied by House Speaker Mike Madigan, Senate President John Cullerton and their Democrat-controlled General Assembly.

None of this is secret. Business leaders looking to invest see Illinois, with its worst-in-the-nation credit rating and embarrassing Springfield stand-off that left the state without a budget for two years, and they cross Illinois off their lists. They don’t trust Illinois government and don’t want to be paying taxes here when the day of reckoning comes for the pension crisis.

Larry Gigerich of Indiana-based Ginovus, a site-selection firm, tells us Illinois will continue to miss opportunities until it stabilizes its public finances. Political leaders also will need to convince investors that tax increases and other necessary pain will be temporary, lest they scare off business permanently — and residents, too, we’d add.

But to accomplish anything, Gigerich notes, Illinois officials can’t continue to undercut each other. “It looks like the legislature and leadership are just trying to run the clock out until the next election,” he said. “People don’t think that is the right way, or a sophisticated way, of running government. And that has really hurt with chief executives looking at Illinois, saying, ‘There is no adult in the room’.”

Nevertheless, Wisconsin liberals persist in opposing Foxconn. To them, Facebook Friend Tim Nerenz writes:

If someone cannot grasp the difference between allowing a person or a firm to keep what they have earned (the tax credit) and taxing more from one person to give money to another (the way she describes it), they should not be allowed to display such ignorance as a feature columnist in a prominent paper. If Foxconn goes forward or if it is struck down by a Dane County judge it will not cost Emily a penny or save her a penny respectively. What it will do is provide up to 13,000 people who do not write ignorant columns for the MJS with the opportunity to earn an average of $54k and bring additional international investor attention to Wisconsin and add many billions in new tax revenues – even after the credits have been applied. What is troubling to Wisconsin’s progressives is that something good is being done in spite of them, and with private capital over which they have no control and which was not confiscated from rich Republicans in the suburbs.

Nerenz recalls the incentive package given to the Italian owner of Marinette Marine:

… former Governor Jim Doyle … gave Italian shipbuilder Fincianterri Marine (Marinette) $50 million in refundable tax credits for a $100 million investment in 2010 and here is how it was reported : “The company would receive the state tax credits only as it makes its own plant and personnel investments, which could reach $100 million, Doyle said. ‘Nobody’s handing over $50 million in cash.’ Doyle credits 50% of a foreign investment – good. Walker credits 30% of a foreign investment – bad.

 

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