Xenophobic Democrats

Jerry Bader brings up modern Democratic racism:

Here is how the Merriam-Webster online dictionary defines “xenophobe:”

one unduly fearful of what is foreign and especially of people of foreign origin.

Merriam-Webster may want to consider including the Democratic Party of Wisconsin logo with that definition. In response to Governor Scott Walker’s Monday signing of the Foxconn incentive package, a quartet of democratic legislative leadership issued a news release criticizing the deal. It appears the group didn’t want anyone to miss the fact that Foxconn is a “foreign corporation.” the phrase is used seven times in the release:

  • giveaway to a foreign corporation (par. 1)
  • $3 billion in cash payments to a foreign corporation (par. 2)
  • special loopholes for a foreign corporation (par. 2)
  • second fiddle to a foreign corporation (par. 3)
  • Giving $3 billion to a foreign corporation (par.4)
  • a foreign corporation ties the hands (par. 5)
  • offered to a foreign corporation (par. 6)

That’s one mention for each paragraph with a bonus second mention in paragraph two. You can read the release here: Senate Dem Leadership release – Statement on Foxconn Signing 9.18.17

Meanwhile, the liberal group One Wisconsin Now joined in on the fear of foreigners fest. While OWN’s statement includes a mere three uses of the word “foreign,” they also exhibit a fear of people from a strange and mysterious land to Wisconsin’s south:

There is nothing in the proposal that guarantees that workers in the new plant come from Wisconsin, meaning taxpayers will be subsidizing jobs for workers from Illinois and other states.

Of course, it’s entirely possible and indeed likely that out of state residents would relocate to Wisconsin to take Foxconn jobs; especially if they come from a state that doesn’t border Wisconsin. While an influx of residents to Wisconsin is and of itself a good thing, there is evidence that the Foxconn development will benefit the entire state. The Milwaukee Journal-Sentinel reported that business leaders upstate, including the La Crosse and Wausau areas expect the ripple effect of Foxconn on the state economy to benefit residents in their region.

Perhaps Wisconsin Democrats will next take aim at restaurants that serve French wine and Russian caviar.

The left has used the “foreign corporation” “Taiwanese company” and “Chinese economics” narratives to argue against the state doing business with Foxconn. Democrats have argued the deal is a bad one for the state. But they also plan on running against Governor Scott Walker’s jobs record in 2018, which gives them an ulterior motive to oppose Foxconn.

Walker signed the $3 billion incentive package into law a Gateway Technical College in Racine County Monday, where the $10 billion Foxconn facility is expected to be located.

James Wigderson adds:

Since the deal with Foxconn was announced by Governor Scott Walker, Democrats have been running around complaining about a Chinese company getting a subsidy from the state of Wisconsin. (Actually, the company is Taiwanese.) They’re complaining about China more than President Donald Trump did during the 2016 campaign. …

We’ve already commented on the odd opposition to Asians by Democratic gubernatorial candidate Tony Evers, the state Superintendent of Public Instruction. If the Democrats have a problem with foreigners, specifically Asians, perhaps they should just say so. Asian American voters would probably like to know if the Democrats are still the party of Franklin Delano Roosevelt and his internment camps.

Because judging from the anti-foreigner rhetoric, Wisconsin Democrats would be thrilled to give $3 billion in incentives away to a corporation as long as it’s incorporated within the United States. It’s just the color of the skin of the executives at Foxconn that has the Democrats upset.

Oh wait, Democrats don’t like workers in Illinois, either. They’re suddenly concerned that large manufacturing facilities too close to the Illinois border might attract the wrong element. We’re not sure what that wrong element from Illinois might be, Cubs fans?

Have the Democrats been to Janesville lately, or Lake Geneva? There are Cubs fans wearing team jerseys everywhere. If we were going to build a wall on the state line, apparently something the Democrats now favor, it’s too late. Chicago-style hot dogs are now regular fare in most Wisconsin cities.

Perhaps would be happy if we created a 100-mile economic exclusion zone along the border with Illinois preventing any economic activity in the region so people from Illinois couldn’t get jobs in Wisconsin. Presumably 100 miles should be enough to deter all but the most die-hard commuters. While we’re at it, we can tear up the Amtrak tracks coming north from Chicago, too.

Of course, Democrats weren’t worried about those annoying people from Illinois invading our state when General Motors in Janesville was temporarily bailed out under President George Bush and President Barack Obama (the plant closed anyway). Nor did Democrats object to Illinois workers possibly benefitting when former Governor Jim Doyle, also a Democrat, offered General Motors $200 million in incentives to build a new factory in Janesville in 2009 (it didn’t work).

And when Amazon built in Kenosha, keeping out fans of the Chicago Bears wasn’t an issue then, either. But then, General Motors and Amazon are American companies. If Toyota or Hyundai wants to build another auto plant in Janesville or Kenosha, then the Democrats are ready to keep the foreigners out.

I also wonder how many Democrats opposed Gov. James Doyle’s incentive package for Marinette Marine, owned by an Italian company.

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Selling Foxconn after the sale

Right Wisconsin reports:

Speaking to the Independent Business Association of Wisconsin (IBAW) Manufacturing Summit in Milwaukee on Friday, Department of Administration Secretary Scott Neitzel took the opportunity to address some of the concerns of the critics of the Foxconn legislation that recently passed the legislature.

Neitzel addressed the question of what happens if Foxconn does not follow through on its promise to create a $10 billion manufacturing facility in southeaster Wisconsin. “The state isn’t just going to issue them a check for $3 billion,” Neitzel said. “The way the $3 billion is given out, it’s over time, over a 15 year period.”

“Part of it is the capital investment, which is $1.35 billion,” Neitzel said. “$1.5 billion is based on employment, about $150 million is just a sales tax exemption for construction materials while they’re building it.”

The tax credits will only be given as Foxconn reaches the capital investment and employment targets in the agreement with Wisconsin.

“It grows as they grow,” Neitzel said.

The project is expected to create 10,000 construction jobs for the project and will create as many as 22,000 “induced jobs” from the economic activity statewide. The facility will hire 3,000 permanent employees to start, with growth of up to 13,000 permanent jobs. One estimate has the state receiving $3.90 for every $1 invested by the state. Once completed, the Foxconn development could have a $7 billion annual impact on Wisconsin’s economy.

Neitzel said from a personal perspective, the people that the Walker Administration dealt with were completely sincere in their dealings with Wisconsin. “They continue to work with the local communities,” Neitzel said. “They are talking to people about how they can integrate themselves into the community. They are making a commitment for the long term.”

In answer to the concern about how long it will take before the state “breaks even” on the investment, ” Neitzel said, “Government doesn’t usually spend money to make money.”

“Under the most, what I would call, conservative estimate, it breaks even the fiscal bureau said in 25 years,” Neitzel said. “What do we get for that from a society perspective?”

Neitzel said the Foxconn deal will create “high-paying, family-supporting jobs.”

“Another thing we want, is we want to give our best and brightest a reason to stay in Wisconsin,” Neitzel said. “We want to attract the best and brightest from around the United States and around the globe to come to Wisconsin.”

The new Foxconn manufacturing campus will also spur entrepreneurial activity and small business growth, according to Neitzel. It will also bring more venture capital to Wisconsin.

“With Foxconn here, the venture capital community now has Wisconsin at closer to the upper tier than we have ever been,” Neitzel said. “That’s a good public policy objective.”

Neitzel praised the legislature for improving the Foxconn bill before they passed it.

“It went to the Assembly. They made changes. They were all improvements,” Neitzel said. “That bill then went to the Senate. They made changes. They were all improvements. The bill that is before the governor, which he will sign soon, is a very, very good bill.”

“[The bill] allows us to accommodate Foxconn and to protect the environment and to make sure that the taxpayers of Wisconsin are protected,” Neitzel said.

Neitzel said that opponents of the Foxconn legislation are treating the development as just another manufacturing facility. “What it really is, is bringing a whole new industry to North America and planting it right here in Wisconsin,” Neitzel said. “So the whole supply chain has to come with Foxconn. They have to create a supply chain in North America and in Wisconsin.”

For example, Neitzel said, wherever the plant is built, there will have to be a glass plant right next door.

 

The state hits parents in the pocketbook

The MacIver Institute has bad news for parents, with school starting statewide by tomorrow:

Back-to-school shopping in Wisconsin is once again more expensive than in neighboring states thanks to the state’s minimum markup law, which outlaws sale prices that are too low.

The minimum markup law, formally known as the Unfair Sales Act, bans retailers from selling merchandise below cost. The law, originally passed back in 1939, also requires a 9 percent price markup on specific items like alcohol, tobacco and gasoline.

Unfortunately, Wisconsinites are forced to pay for this archaic law that’s still on the books despite ongoing efforts to repeal it.

According to advertisements obtained by the MacIver Institute from late August, Walmart stores in Milwaukee charged higher prices for a number of back-to-school items compared with other Walmart stores in Minnesota, Iowa, and Michigan.

Families in Milwaukee buying basic items like composition books, markers, and crayons can expect to pay anywhere from 12 to 146 percent more than shoppers in St. Paul, Minn., Dubuque, Iowa, and Kalamazoo, Mich.

Some common school items cost on average 90 percent more in Milwaukee. Crayola Crayons posted the single biggest price variance, costing almost 150 percent more in Milwaukee than in cities in neighboring states.

Parents picking up a Composition book in St. Paul, for example, only paid 50 cents. That same Composition book cost 56 cents in Milwaukee. Crayola markers cost 97 cents in St. Paul, but thanks to the archaic minimum markup law, those same markers cost $1.97 in Milwaukee, a 103 percent difference.

Walmart’s circulars boast that their great sale prices mean “$10 goes far,” but it goes a lot farther if you’re not shopping in Wisconsin. A basic shopping list would cost 90 percent more for a Milwaukee back-to-school shopper than in nearby states.

Shoppers in Illinois have previously enjoyed the same lower prices as other Midwestern states, as pointed out by the MacIver Institute last year. But this year, possibly thanks to the state’s recent draconian tax increases, families from Rockford to Chicago are joining Wisconsinites in paying inflated prices.

Efforts to repeal the antiquated minimum markup law stretch back several years.

In 2015, Sen. Leah Vukmir (R-Wauwatosa) and Rep. Jim Ott (R-Mequon) introduced a bill that would have eliminated the Unfair Sales Act. Unfortunately, the repeal bill did not receive even a public hearing in either house.

Another effort earlier this year by Rep. Dale Kooyenga (R-Brookfield) to reduce the minimum markup as part of a transportation funding package also fell flat, so the law remains on the books.

Vukmir, Ott, and other legislators haven’t given up. Earlier this year, they were joined by Sen. Dave Craig (R-Town of Vernon) and Rep. Dave Murphy (R-Greenville) in introducing a modified repeal bill.

This latest effort to relieve Wisconsinites from the burden of higher prices, however, has received the same silent treatment as previous repeal efforts.

Even though minimum markup repeal has hit a wall in the Legislature, a 2015 poll found that Wisconsinites are tired of paying higher prices and want the law taken off the books. The poll was conducted by reputable research firm Public Opinion Strategies and found that 80 percent of respondents had an unfavorable view of the minimum markup law when told “Wisconsin residents are required to pay more for many on-sale items than residents in neighboring states simply because of this 75-year-old law.”

Wisconsinites were just as angry when told that “the law forbids retailers from selling to consumers below cost and also requires that gasoline retailers sell gas to consumers with a minimum 9 percent markup, meaning Wisconsin drivers have to pay more for gas here than drivers do in other states.”

Some retailers have used the law to file complaints with the Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) against competitors who were offering items for too low of a price. In 2015, MacIver first reported on numerous complaints filed against Meijer, a privately owned Michigan-based grocery and supercenter chain of stores with more than 200 locations nationwide, as it made its first foray into the Wisconsin market.

The minimum markup law also makes illegal in Wisconsin many of the discounts received on popular national bargain hunting days like “Black Friday” or “Amazon Prime Day,” which in Wisconsin could better be called “Amazon Crime Day.”

Foxconn, pro and con

With a vote on the Foxconn incentive package reportedly set to take place today, the Wisconsin Policy Research Institute looks at the pros and cons of what is likely to be approved today:

Much of the discussion thus far about Foxconn Technology Group bringing an LCD screen manufacturing plant to southeastern Wisconsin has focused on the deal itself and the money that could flow out of — and eventually into — our state Capitol.

That’s important, and we synopsize the key numbers below. But the sheer size and scope of the deal raises unprecedented questions about everything from job creation and impacts on economic growth in the decades ahead to how free markets and economies work best, most fairly and efficiently, for everyone in the long term.

There are smart people coming down on both sides of this one, and the divergence of opinion stems at least partly from how far down the road (no, not just I-94, though that’s a question as well) one thinks he or she can clearly see.

As a key analysis of the deal by the nonpartisan Legislative Fiscal Bureau states, “Technological advances and changes in Foxconn’s market share, operating procedures or product mix could significantly affect employment and wages at the proposed facility over time.”

The impending legislative decision — the Assembly is expected to vote Thursday, but no vote has yet been scheduled in the Senate — will require peripheral vision as well, and that’s always the blurriest. Proponents call the deal “transformational.” Opponents worry about the precedent it would set and all the other roads and businesses that exist — or might want to — in other parts of our unique state.

To help shed light on a complex deliberation, we’ve asked three of the smartest economists in Wisconsin (or with Wisconsin roots) to share their thoughts prior to action in Madison. Their initial takes — one skeptical, one largely sanguine and one against — are summarized below, along with an analysis of the prospects for Taiwan-based Foxconn and LCD technology.

Why Wisconsinites should be skeptical by Andrew Hanson
Taxpayers should ask, “Is this a good deal for us?” Among the reasons why it’s not: The billions of state dollars could be used for economic development with a better track record, the economic-multiplier estimate for the Foxconn plant is extremely generous and the deal sets an ill-advised precedent for other large employers in Wisconsin.

Fiscal costs certain, but a potential for large gains by Noah Williams
The high upfront costs must be weighed against the potential that Foxconn may help Wisconsin develop as a hub of high-tech manufacturing, which could generate gains far beyond the direct jobs created.

There are better ways to create jobs and growth by Ike Brannon
Governments aren’t very good at figuring out which businesses are likely to grow and which are likely to fail. What governments can do is create an environment that’s conducive to small and medium-sized businesses to invest, grow and expand.

What will the future of LCDs mean for Wisconsin? by Robert S. Anthony
Will technology inside the plant be obsolete the day it opens? While Foxconn has shown itself to be a smart and agile company, its future here depends on how it reacts to the ever-evolving display industry.

Finally, we synopsize key points being made by Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce and, in the interest of full disclosure, a Wisconsin Policy Research Institute Board member.

Sheehy concedes that in general there is risk in granting individual corporate economic incentive packages in a market-based economy. But he argues that for most every state, incentives are a necessary tool in the competition for jobs and capital investment and asks, “What is Wisconsin supposed to do, disarm?”

The Legislative Fiscal Bureau memo, worth reading in its entirety, includes a wide variety of points:

• Foxconn agrees to build a $10 billion facility over six years and create up to 13,000 jobs, with a reported average salary of $53,875.

• The state will provide up to $3 billion through two types of tax credits (which can mean cash payments) and a construction sales tax exemption. Foxconn could be eligible for the maximum if employment reaches 13,000 positions by 2021 and remains at that level.

• A Foxconn payroll tax credit over 15 years would relate to any employee with wages of at least $30,000 and up to $100,000. It could amount to $1.5 billion.

• A Foxconn capital expenditures credit would be paid over seven years and could amount to $1.35 billion.

• It is believed that Foxconn would be able to claim the 7.5 percent manufacturing and agriculture credit.

• The bill would create a sales and use tax exemption. Based on estimated capital expenditures of $10 billion, Foxconn and its contractors would save $139 million. “However, since it is highly unlikely that Foxconn would locate in the state without the incentives provided under the bill, this amount should not be viewed as a state revenue loss,” notes the LFB analysis.

• The state could make up to $10 million in grants to local governments for development costs related to infrastructure and public safety.

• The bill would authorize $252 million in bonds for use in the I-94 North-South corridor project. If fully issued, estimated general fund-supported debt service payments on the bonds would be $408 million.

To estimate how long it will take for state government to recoup its investment, the LFB made a variety of assumptions. Much of the following is taken directly from the LFB analysis:

• Average annual employment of approximately 10,200 construction workers and equipment suppliers earning an average total compensation of approximately $59,600 (including benefits) per year during the four-year construction period.

• Nearly 6,000 indirect and induced jobs created during the construction period, with an average total compensation of $48,900.

• Indirect and induced construction-period jobs generating increased state tax revenues equal to approximately 6.3 percent of the additional gross wages.

• Indirect and induced jobs associated with the project totaling 22,000 beginning in 2021. Average annual wages for these individuals are estimated at approximately $51,000. Total ongoing wages are estimated at $1.12 billion annually, and related state taxes are estimated at $71 million per year. Smaller impacts are estimated in calendar years 2017 through 2020 as the project ramps up. (A new report paid for by the Wisconsin Economic Development Corp. adjusted job-creation estimates outside the plant, with fewer long-term jobs expected but more short-term jobs expected during construction.)

The LFB  analysis says: “Based on these figures, DOA projects that the cost of the refundable state tax credits under the bill will exceed the potential increased tax revenues until fiscal year 2032-’33. As of the end of that year, the cumulative net cost of the incentive package is estimated at $1.04 billion. Beginning in 2033-’34, payments to the company would cease and increased state tax collections are estimated at $115 million per year.

“DOA estimates that the project’s break-even point would occur during the 2042-’43 fiscal year.”

“It should be noted,” according to the LFB, “that the analysis focuses only on the impacts of the Foxconn project on the state treasury, but does not account for other benefits to the state’s economy and residents.” These include Foxconn’s $10 billion investment, employment opportunities for the state’s workforce and adding a new sector to Wisconsin’s manufacturing economy.

MMAC’s perspective

The Metropolitan Milwaukee Association of Commerce points to this bigger picture. MMAC says tax revenue is only one long-term measure — wages and benefits paid to Wisconsin workers during construction and during operation of the complex should also be considered.

• During construction: Based on a $10 billion capital investment, the project would create over 10,200 new jobs for prime and sub-contractors and equipment suppliers; over 1,700 jobs for suppliers and another 4,200 jobs that would result from new household expenditures — a total of over 16,200 jobs with $3.6 billion in labor income over the four-year construction period, according to an EY Quantitative Economics and Statistics analysis, paid for by Foxconn.

• During operation: If Foxconn employment reaches 13,000, the EY analysis projects over 11,400 jobs among suppliers. The household spending from those direct and indirect jobs would produce another 10,800 jobs. The total ongoing job impact could reach over 35,200 and total annual labor income of $2 billion, under those assumptions.

Ultimately, according to MMAC, a $10 billion Foxconn investment with 13,000 jobs could have a cumulative impact of $78 billion to Wisconsin’s gross domestic product over 15 years.

WPRI has an underlying and guiding belief in the efficacy and promise of free markets and limited government that allows the private sector to flourish. We espouse sound public policy that ensures opportunity and enables prosperity. Our function today — and in the weeks ahead — is to provide the best information possible to legislators, who are being asked to make one of the most important and impactful decisions of their careers. We urge them to consider all potential benefits and ramifications before voting.

These are legitimate points. An excerpt from Brannon:

In my first year as a professor at the University of Wisconsin-Oshkosh in the mid-1990s, I had a colleague who spent his summers consulting for a small tech firm with a couple hundred employees called Epic Systems. At the time, the state was vigorously giving subsidies to manufacturing companies to come to the state or not leave the state, while benignly ignoring companies like Epic.

Today, Verona-based Epic employs nearly 10,000 people, most of whom live and work in the state and most of whom have skilled, well-paying jobs that any state would kill to attract.

There are better ways to attract new jobs than to give billions of dollars to one large manufacturer. The state can do more to attract entrepreneurs.

A lower tax rate on businesses would be one way to do this. And doing more to encourage foreign-born students — who are much more likely to start businesses than U.S. born-students — to remain in Wisconsin would pay dividends in the long run, I believe.

Neither reform would produce immediate returns, but they would plant the seeds for the next Epic Systems and leave the state less dependent on the fortunes of one company or industry.

Brannon doesn’t point out that Epic is in Verona and not Madison, where it began, because Verona gave Epic tax incentives to move that Madison refused to give. Paul Soglin won’t mention that in his potential loss for governor.

Brannon is correct though naïve because he doesn’t mention how politics works. Encouraging foreign-born students to remain here misses the fact that the Trump administration is trying to slam the door on immigration. There is, sadly, no real support for severely reducing business taxes even in the supposedly pro-business GOP. When politicians feel they must make pledges of job creation to get and stay elected, well, that’s how we have the system we have today.

Illegitimate points are illustrated by Sen. Van Wangaard (R–Racine):

M.D. Kittle brings up an illegitimate issue brought up by opponents:

Opponents of Wisconsin’s potentially massive economic development deal with Foxconn Technology Group like to point to Pennsylvania’s tale of heartbreak at the hands of the Taiwanese tech giant.

That’s certainly how the Washington Post painted the picture earlier this year when Foxconn, in the first few weeks after President Trump’s inauguration, announced it plans to invest billions of dollars in the United States and create as many as 50,000 jobs.

In 2013, the post reported, Foxconn Chairman Terry Gou pledged to build a $30 million factory in Pennsylvania’s capital, Harrisburg, and hire 500 workers.

“But the factory was never built. The jobs never came,” the Post morbidly reported.

True. The deal didn’t go down.

But the story, and others like it, left out some very important details, according to a guy who has gotten to know Gou and Foxconn over the past several months: Gov. Scott Walker.

In a key way, Foxconn didn’t leave Pennsylvania; Pennsylvania left Foxconn, according to administration officials.

After Democrat Tom Wolf unseated Republican Gov. Tom Corbett in 2014, Foxconn saw the writing on the wall, Walker said.

“In the case of Pennsylvania, they changed leadership, they changed who the governor was,” Walker told MacIver News Service Tuesday on the Vicki McKenna Show, on NewsTalk 1130 WISN in Milwaukee.

“I jokingly, but only half jokingly, say, it’s probably a pretty good reason not to change who the governor is for the next few years,” Walker, who is expected to run in 2018 for a third term, added.

The Badger State’s proposed $3 billion incentives package would no doubt play a big part in sealing Foxconn’s plan to build a $10 billion high-tech manufacturing campus in southeast Wisconsin – a development project that could ultimately create 13,000 jobs at what would be Foxconn’s first North American manufacturing operation.

But Walker said Wisconsin offers Foxconn intangible benefits that other states cannot, chief among them, stability.

Pennsylvania Gov. Tom Wolf, billed as “The most liberal Governor in America,” brought into office an agenda of big tax increases and stiffer government regulations on business.

“The idea that the new governor, with new terms, a new potential business climate, might come in, was something that was a grave concern for (Foxconn), and so they backed away,” Walker said.

Foxconn, too, slowed its investment in Brazil, as the South American nation reeled under corruption and the impeachment and removal of its president.

That point, too, is not noted in the Washington Post story, which all but accuses Foxconn of being a deadbeat business. Foxconn, according to the newspaper, “spoke of a $10 billion plan in 2011” in Brazil.

“In Brazil, Foxconn has an iPhone factory, but its investment has fallen far short of expectations,” the Post reported.

Gou has made it clear that Foxconn needs to be in the United States. The proposed southeast Wisconsin operation would make super-high-definition liquid crystal display panels to be used in various industries. The United States remains the largest consumer market in the world, and “Made in the U.S.A.” is critical to Foxconn’s growth prospects, the chairman told the Milwaukee Journal Sentinel late last month.

Gou pointed to Wisconsin’s advantageous geographical location, its transportation and logistics strengths, and its vibrant university and technical college system. He said Wisconsin has the assets to again become a center of manufacturing.

“You have a good foundation,” he told the newspaper.

Walker said Foxconn wanted to be in the middle of the United States, near a major market like Chicago, “but not in the state of Illinois.”

“Rather, in a state like Wisconsin, where we balance budgets, we have a fully funded pension system, we have a rainy day fund that’s 165 times bigger than when we took office, we have a business climate that went from the bottom 10 to the top 10,” Walker said.

The Washington Post piece suggests Gou and Foxconn are nothing more than big corporate teases — that Pennsylvania isn’t the only state that has loved and lost a potential Foxconn development deal.

But, as Walker administration officials have pointed out in recent weeks, if Pennsylvania truly was broken-hearted about Foxconn’s departure, why was it so heavily courting the deal that Wisconsin appears to be on the brink of landing? Pennsylvania was noted as several states in the running for the Foxconn project.

What’s not been widely reported is the fact that Gou’s $10 million commitment to Carnegie Mellon University in Pittsburgh for robotics research didn’t end after the Pennsylvania economic development deal fell apart.

“Foxconn said its $10 million donation … was ‘moving forward very successfully,’ with half of the funds having been spent four years later,” the Washington Post reported.

Walker blames politics for the half-truths about Foxconn in Pennsylvania and elsewhere.

“As we know with other issues, there are some people who are so bothered by the idea that we might have success here, particularly because they somehow think it might be beneficial to me or to some future campaign,” the Republican governor said.

“The bottom line is this is just good for Wisconsin.”

The most important point to be made is that none of what is in the Foxconn package is money the state would have were it not for Foxconn. There would be no infrastructure spending and no tax breaks if Foxconn wasn’t coming to this state. This is money that does not exist right now.

 

Possibly the best thing Walker has ever done

While political geeks were obsessing over Foxconn and the state budget, Eric Bott writes:

Gov. Scott Walker and Wisconsin are once again showing conservative reformers nationwide how to get the job done. This month, lawmakers sent Walker the first state version of the REINS Act to be passed by a legislature, and Walker, who has championed the reform, is expected to sign the bill soon.

The REINS Act, introduced by state Sen. Devin LeMahieu (R-Oostburg) and state Rep. Adam Neylon (R-Pewaukee), restores much-needed transparency to the rule making process by requiring that the costliest of regulations receive approval from the full legislature before taking effect. The need for this reform is clear.

Our jobs and our businesses have become so heavily regulated by unaccountable government agencies that a 2016 survey of U.S. small business owners revealed that an average of “4 hours per week is spent dealing with government regulations and tax compliance, which totals to over 200 hours per year.”
This growing regulatory burden at the federal and state levels represents a threat to both our economy and our democratic institutions.

Under the REINS Act, any regulation costing businesses, local governments or the public $10 million or more over a two-year period will require approval by the legislature.

It’s a change that’s long overdue.

In 2010, the Wisconsin Department of Natural Resources promulgated strict new limits on phosphorous released by factories and wastewater treatment plants. The “Phosphorus Rule” is now estimated to cost more than $7 billion over the next 20 years.

According to the state’s economic impact analysis, “When fully realized, the cumulative impact of these additional costs are expected to result statewide in lower Gross State Product (“GSP”), reduced wages, fewer jobs and a smaller statewide population.”

No elected official ever had the opportunity to cast a vote on a regulation that will cost Wisconsinites billions of dollars and directly affects some of Wisconsin’s biggest industries, including cheese making, food processing and paper mills.

Had the REINS Act been in place, this rule would likely have been stopped, or at least made less costly and more effective. And any legislator who approved it would have been held accountable to voters.

The REINS Act also allows the Wisconsin legislature to request independent economic impact analyses to ensure that state government cost estimates for proposed regulations are accurate. This is key to preventing rogue agencies with their own agenda from gaming the system.

By limiting the power of state agencies to unilaterally impose costly rules, these reforms will provide long-term regulatory certainty to Wisconsin businesses. Over time, an improved and honest regulatory environment will attract new investment and jobs.

Gov. Walker deserves tremendous credit for championing this bill. It’s rare for a governor to acknowledge that the executive branch has become too powerful and return power to the people – but that is exactly what Gov. Walker is doing.

As a further check on executive overreach, the bill gives the legislature the ability to indefinitely suspend existing administrative rules. Thanks to these measures, future governors will not be able to circumvent the legislative process and enact their costly agendas by executive fiat. …

The bill will do much to restore democracy to the administrative rules process, improve transparency and allow citizens to better hold elected officials accountable.

It will also serve as a model to other states seeking to cut red tape. No American should be subject to the arbitrary whims of the regulatory state, and legislation like the REINS Act can help counter this growing threat.

Walker signed the bill into law yesterday, saying, “One of our top priorities for Wisconsin is ensuring government services are effective, efficient, accountable, and operate at good-value for the citizens of our state. This bill allows for more input from citizens and stakeholders before a new rule is drafted, ensures expensive or burdensome rules are subject to legislative scrutiny and approval, and creates additional oversight over state agencies.”

The reason this law is grossly overdue is explained by the MacIver Institute:

A brand new report has found that Wisconsin’s administrative code contains nearly 160,000 regulatory restrictions. The report was published by the Mercatus Center at George Mason University, a market-oriented academic research center.

It would take the average person 667 hours, or almost 17 weeks, to read the 2017 Wisconsin Administrative Code, assuming that person spent 40 hours per week reading at a consistent rate of 300 words per minute. Utilities, food manufacturing, and chemical manufacturing are the top three most-regulated industries in Wisconsin, according to the report.

Law through administrative rule is one of the worst features of state government because the Legislature never has an opportunity to vote on the law. That is fundamentally unconstitutional, regardless of what the administrative rule is. If it’s a needed rule, the Legislature should vote on it.

Foxconn’s ROI

Matt Kittle reviews the proposed Foxconn agreement:

A new memo from the nonpartisan Legislative Fiscal Bureau details a hefty state commitment to the mammoth Foxconn economic development plan with a lengthy break-even schedule.

But the LFB acknowledges it has no way of accounting for all the potential positive economic impacts the proposed Foxconn manufacturing campus could bring.

The analysis, released Tuesday, was among state agency memos breaking down the fiscal impact of the proposed $3 billion in incentives tied to the estimated $10 billion project.

Foxconn would receive a total of $2.9 billion in tax credits over the 15-year lifetime of a specially created Electronics and Information Technology Manufacturing Zone (EITM) – if the world’s largest manufacturer of liquid-crystal display panels comes through on constructing its first North American plant in Wisconsin and fills all of the proposed 13,000 jobs, at an average annual salary of $53,875.

An incentives package bill introduced last week in the Assembly provides Foxconn with refundable tax credits for each job it creates paying between $30,000 and $100,000. The credit would be based on 17 percent of the company’s payroll in the EITM zone, for a total of up to $1.5 billion in tax benefits.

As the LFB points out, Foxconn plans to have about 1,000 permanent positions in Wisconsin this year (at an estimated payroll of $13.8 million), with plans to increase its workforce to 13,000 positions and a total annual payroll of $700 million by the beginning of 2021.

State payments of the payroll tax credit are estimated to begin in 2018-19, at $2.4 million, rising to $119.1 million annually between fiscal years 2023 and 2033. That assumes Foxconn’s workforce remains at 13,000 from 2021 through 2033.

And Foxconn would be eligible for a refundable credit of up to 15 percent of its capital expenditures in the zone. Aggregate payments for the capital tax refund could not top $1.35 billion. Credits would be paid from the state’s General Purpose Revenue appropriations.

State capital tax credit payments to Foxconn would total $192.9 million annually in fiscal years 2020 through 2026, according to LFB.

“The company would receive the full amount of credit, even if it has little or no Wisconsin income or franchise tax liability,” the LFB analysis states.

The state Department of Administration projects the “cost” of the refundable state tax credits under the incentives package would exceed the potential increased tax revenue until fiscal year 2032, when the last EITM payroll credit is paid.

But as project supporters note, the tax benefits wouldn’t exist without Foxconn building and hiring in Wisconsin. They call it a “pay-as-you-grow” economic development proposal.

In that vein, Foxconn and its contractors would save $139 million through a sales and use tax exemption, according to the LFB report.

“However, since it is highly unlikely that Foxconn would locate in the state without the incentives provided under the bill, this amount should not be viewed as a state revenue loss,” LFB notes.

In a Break-Even Analysis, the DOA projects the state wouldn’t begin making money on the Foxconn deal until 2042. The Fiscal Bureau notes such a timeline must be viewed cautiously.

“(A)ny cash-flow analysis that covers a period of nearly 30 years must be considered highly speculative, especially for a manufacturing facility and equipment that may have a limited useful life.”…

The Fiscal Bureau memo cautions that its analysis focuses on the impacts of the Foxconn project on the state treasury. It does not take into account the other “benefits to the state’s economy and residents.”

While Foxconn would receive up to $1.5 billion in capital expenditure tax credits and sales tax exemptions, the incentives would “induce private investment of $10 billion from Foxconn alone, for a leverage ratio of $6.70 of private investment for each $1 of public outlay. The payroll credit would spur a leverage ratio of 5.9 to 1. And those ratios climb higher when indirect and vendor-related jobs associated with the project are factored.

“Most state expenditures do not result in private investments of this nature,” the LFB report states. “The project would also provide greater employment opportunities for the state’s present and future workforce, and add a new sector to the state’s manufacturing economy.”

Then there are the trades jobs needed to construct a dozen or more buildings on the proposed 20 million-square-foot manufacturing footpad. DOA estimates peg an average annual employment of some 10,200 construction workers and equipment suppliers earning average total compensation of $59,600 during the four-year construction period. Total income is estimated at $2.4 billion.

Another 6,000 indirect and related jobs are estimated to be created during construction, with average compensation of $49,900, according the Fiscal Bureau report. The total increased state tax revenue – primarily income and sales taxes – associated with the construction period is estimated at nearly $190 million.

DOA estimates a total of 22,000 indirect jobs and those secondary positions (suppliers) supporting Foxconn’s operations will be created, with combined annual wages of $1.1 billion per year beginning in 2021.

“The way to judge this project is not by government revenues, not by government figures. It’s what it means to our overall economy,” said state Rep. Adam Neylon (R-Pewaukee), chairman of the Assembly’s Jobs and Economy committee. The committee held a hearing on the bill last week.

Foxconn “will grow our GDP, it will have a tremendous impact on our economic activity in the state. A lot of people will benefit because of this incentives package. We have a situation where we will be attracting talent instead of losing it,” Neylon added. “It’s a mistake to think that government revenue is the end goal. The ultimate goal is economic benefit, not how much more state government can take in and spend.”

Neylon said his committee still plans to vote Thursday on the bill, with amendments. The lawmaker says he has received at least 50 amendment ideas on the legislation since the bill was introduced last Tuesday, from technical matters to more significant issues such wetland relocation.

“I think reading these new fiscal analyses reaffirms a lot of what we were told during the public hearing and what we were led to believe,” Neylon said. “It also exposes some areas we are working on to clean up or clarify or make sure there are safety nets in place within the language of the legislation.”

Facebook Friend Christopher Scott replies:

who is going to be the first Wisconsin Conservative blogger/ Radio show host to point out. That you have Democrats politicians who swore up and down how great of deal the Buck’s arena is, but are the same ones now telling us the FoxConn deal is bad. When the FoxConn deal has a higher return in our investment. I am waiting for SOMEONE, ANYONE in this state to knock that one out of the park right now. It’s right there for the taken. Show the world how slimy these democrats are.

Well, wait no more, Christopher. We’ll even throw in this graph comparing Foxconn and, perhaps, Foxconn Arena:

 

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.

 

Why Wisconsin needs more billionaires

The New York Times writes about Beloit’s Diane Hendricks:

When Diane Hendricks sees something she doesn’t like here, she buys it.

A bankrupt country club. A half-empty mall. Abandoned buildings. The rusting foundry down by the river.

Beloit used to be a town that made papermaking machines and diesel engines. Ms. Hendricks thinks it can be a place where start-ups create the next billion-dollar idea, and she is remaking the town to fit her vision. She can do so because she is the second-richest self-made woman in the United States, behind only Marian Ilitch of Little Caesars Pizza, according to Forbes magazine.

“I see old buildings, and I see an opportunity for putting things in them,” says Ms. Hendricks, 70, who got her start fixing up houses here as a single mother and made her billions selling roofing felt, copper gutters and cement with her late husband, Ken.

Now Ms. Hendricks is fixing up Beloit.

She took the library from its historic location downtown and resurrected it inside a failing mall at the edge of town, replacing the original with a performing arts center where dance and music students from Beloit College can study and perform each year. Then she scooped up nearly every building on a downtown block and knocked each one down, making way for a sushi restaurant, a high-quality burger joint and modern apartments with marble countertops and exposed-brick walls.

She called the complex the Phoenix. “It looks like we’re beautifying the city, but we’re really beautifying the economy,” she says, casting her piercing blue eyes out of the window of her office in Ironworks, the old foundry complex she converted into a commercial space.

She has wooed several start-ups, persuading them to set up shop in the old foundry building — one with the help of Wisconsin’s governor, Scott Walker, who personally called the co-founders on her behalf.

Ms. Hendricks, a major Republican donor, was briefly thrust into the national spotlight a few years ago when she was recorded asking Mr. Walker to break up the labor unions. He then introduced a bill limiting the ability of public workers to bargain over wages. In response, protesters occupied the halls of the Capitol for weeks.

Not long ago, Beloit’s economy was ugly. Like many American cities — Detroit, Youngstown, Gary — it had fallen victim to the damage that is wrought when one major industry vanishes from town, reversing local fortunes.

Beloit is different today. That’s because this town of nearly 37,000 has a billionaire who has gone to great lengths to help it turn a corner.

In a nation with countless struggling towns and small cities, Beloit is not a model for economic revival that is easily replicated, although a few others have tried.

In Kalamazoo, Mich., a group of well-to-do town “elders” pay for every public school student in town to go to college. And Columbus, Ind., has become an architectural mecca thanks to the support of J. Irwin Miller, whose family made its riches manufacturing engines.

Ms. Hendricks’s project has not been cheap.

Buying and fixing up the foundry alone has cost Ms. Hendricks around $40 million, according to Rob Gerbitz, the president and chief executive of Hendricks Commercial Properties. The Phoenix complex has cost $7 million (with a $1 million assist from the city).

And, of course, money doesn’t solve everything. Ms. Hendricks’s overhaul faces challenges big and small, including skepticism. Early on, some residents joked about giving the city a new name: Hendricksville. Unemployment remains stubbornly high, as does poverty.

Her activities on Beloit’s behalf are complicated by the fact that not everyone agrees with Ms. Hendricks’s political views. She was an early supporter of Donald J. Trump’s presidential campaign here in Wisconsin, a state with a history of progressive politics, and that has pitted her against some current and former students at Beloit College, a liberal arts school and one of Beloit’s other big employers. (Ms. Hendricks sits on the college’s board of trustees.)

“Diane Hendricks is the most powerful woman in Wisconsin,” says Charlie Sykes, a former talk-show host in Milwaukee.

In Beloit, she’s so influential that some worry about what would happen if someday she walks away. “Will the kids take over?” asks Rod Gottfredsen, a local barber, referring to her seven adult children.

Mr. Gottfredsen has had a front-row seat to Beloit’s travails for nearly 40 years. He’s been cutting hair and trimming beards since 1978, when he took over Austin’s Barbershop on one of Beloit’s main streets downtown.

On a clear June day, one of Ms. Hendricks’s sons, Brent Fox, is in his white Ford Super Duty truck driving through the lush tree-lined streets around Beloit College. This is the neighborhood where Ms. Hendricks and her husband got their start a half-century ago, buying and fixing up homes, in the 1960s.

“Mom wanted me to show you these,” Mr. Fox says as he stops outside two Craftsman-style homes where trucks marked CCI, a Hendricks-owned construction company, are parked. “One of the biggest problems we find is suitable housing stock, so we decided to buy old, stately houses,” says Mr. Fox, who is also the chief executive of Hendricks Holding Company.

“As long as we can break even or make a dollar, we’ll keep doing it,” he adds.

Mr. Fox drives north, past Beloit’s industrial sites, through the town’s history. The red roof of ABC Supply comes into view, overlooking Beloit from a slight hill. When the Hendrickses bought the property in the 1990s, it was an abandoned factory that had once made diesel backup engines for military submarines.

We pass the Eclipse Center, which in its heyday in the 1960s was the biggest mall in Rock County. By the 1980s, it had become better known for a notorious double murder at the Radio Shack. The place was half empty when the Hendrickses stepped in.

He stops at the Beloit Club, a beleaguered country club near the Rock River, which cuts through the town. Ms. Hendricks bought it several years ago, possibly saving the club from an ignominious fate as a gravel pit.

“From a business perspective, it was a horrible decision,” he says of the purchase. But if Beloit was to be reimagined as a modern city, the thinking went, it needed a club for golf.

Beloit’s Hendricks-fueled revival happened largely by chance.

Ms. Hendricks grew up 200 miles away from Beloit, on a dairy farm, with eight sisters. As a child, she yearned to work outdoors on the farm, but her father forbade it. A surprise pregnancy at 17 and her short marriage to Mr. Fox’s father brought her to Janesville, to work briefly in the Parker Pen factory, where women assembled fountain pens.

Soon she divorced. She had to find a way to support herself on her own, as a single mother. She switched to selling real estate, and had gotten her broker’s license by the time she turned 21.

Before long, she had found a business partner, a roofing contractor who had dropped out of high school, named Ken Hendricks. Together the two bought old houses in Beloit, fixed them up and rented them out. They married in 1975 and moved on to buying industrial spaces at around the same time. They found a rundown sugar beet plant in Janesville, 20 miles up the road from Beloit.

When Mr. Hendricks went to a Janesville bank to finance the purchase of the plant, he was turned away. “The banker said, ‘We don’t do business with entrepreneurs, and we don’t want your business,’” Ms. Hendricks recalls.

It was a turning point. The couple turned their backs on Janesville, focusing instead on Beloit.

They would move from renting local apartments to starting ABC Supply in 1982, buying up distributors nationwide.

Beloit at the time was on the cusp of a steep decline after successive economic blows, among them the grinding to a halt of Fairbanks Morse, a diesel engine maker and a onetime major employer.

Like struggling cities and towns across the country, Beloit went through a period of Band-Aid-like efforts. By the 1980s, local businesses were petitioning the city to change its image by cleaning up the riverfront, where vacant stores sat along the banks of the river, and by reviving the withering downtown. The initiatives barely made a dent.

Into the 1990s, at least, the town still had its foundry, Beloit Corporation, by that time owned by a Milwaukee company, Harnishfeger Corporation. At its height, Beloit Corporation had employed more than 7,000 people building papermaking machines. Late into the night, the flickering light from the welding in the foundry would light up the Rock River.

In 1999, the foundry went bankrupt, leaving behind an empty, sprawling complex the size of 15 football fields. Beloit’s downtown became a bleak landscape of “decayed, bombed-out buildings,” recalled Jeff Adams, who moved to Beloit to teach economics at Beloit College in the early 1980s and was involved in early initiatives to try to fix the town.

But if Beloit was sinking, the Hendrickses were riding high. Their business was booming, and they saw opportunity in the desolation.

One day, a few years after Beloit Corporation went bust, the two were riding their Harley-Davidsons past the abandoned factory and noticed someone wandering around the property. They stopped to ask what he was doing. The man, Samuel Popa, turned out to be looking for a place to put his aluminum business.

On a whim, the Hendricks decided to buy the 800,000-square-foot building. They knew it had the potential to one day become commercial space, perhaps residential, too. They ended up becoming a partner in Mr. Popa’s company, American Aluminum Extrusion.

Next, they bought the old mall on the edge of town, which they planned on turning into “a community and civic center,” Ms. Hendricks says.

Around the same time, Ron Nief, the director of public affairs at Beloit College, and two of his friends had an idea that in almost any other dying industrial town would not have gotten out of the starting blocks: Let’s start an international film festival.

They approached Beloit’s billionaire benefactors about the idea, and in 2006, the festival opened on a frigid Wisconsin weekday in January.

Despite the fact that its debut occurred the same week as the much more famous Sundance Film Festival, it has thrived. Jon Voight, Melissa Gilbert and David Zucker, the director of “Airplane!,” have attended

Mr. Nief recalls a conversation with Mr. Hendricks, who had told him to aim high with the film festival idea. Mr. Nief said to him, “It needs to be special, but it doesn’t need to be, say, the Toronto Film Festival,” referring to the giant on the festival circuit.

“Ken said: ‘Why not? Why don’t you want to be the biggest and the best in the world?’” Mr. Nief said.

But tragedy struck one evening, just days before Christmas in 2007. Mr. Hendricks fell through the roof of his home after inspecting some renovations; he died from the injuries.

Mr. Hendricks’s death led residents in Beloit to worry that Ms. Hendricks would sell ABC and abandon the couple’s efforts to revive the town.

Then came the 2008 economic crisis. Housing and construction, the very businesses on which the Hendrickses’ fortune had been built, suffered through one of the worst downturns in decades.

ABC pulled through, and grew in part by buying its biggest rival, Bradco. Today ABC is a private company and the largest wholesale distributor of roofing, windows, siding and gutter materials. It has 715 stores across the United States and employs 656 people in Beloit alone.

Ms. Hendricks also began putting to use the industrial buildings that she and her husband had bought over the years. She turned the foundry into a commercial space with high ceilings, dubbing it Ironworks, and turned to a political ally, Mr. Walker, to help attract at least one tenant.

The move worked.

“I had 17 employees at that moment, and the governor of Wisconsin told me my business mattered to him,” recalled Kerry Frank, the co-founder with her husband, Dude Frank, of Comply365, which makes software used by airline pilots to complete their flight paperwork. Started in the Franks’ basement, the company is now housed in Ironworks and counts Southwest Airlines among its biggest clients.

In 2011, after Illinois created a new law to collect sales tax from online shoppers, the Rockton online coupon company FatWallet needed to find a Wisconsin town for its headquarters. Ms. Hendricks worked with the city to make Beloit, just over the state border, FatWallet’s first choice. The company is now based in Ironworks.

“The advantage here in Beloit is that the same type of engineer that you hire in Silicon Valley can have a large house,” says Ryan Washatka, general manager in Beloit for Ebates, FatWallet’s parent company.

Still, few people in the start-up world outside of Wisconsin know much about Beloit. It certainly was not on the radar of Chris Olsen, a former executive at Sequoia Capital, the Silicon Valley venture capital firm, whose Ohio venture capital firm Drive Capital is now one of Comply365’s biggest investors.

After several airlines told him to look at Comply365, Mr. Olson found himself looking at a map. “I didn’t even know where Beloit was,” he jokes.

In part to address problems like that, Ms. Hendricks has sent members of her property company, Hendricks Commercial Properties, to Madison to talk to venture capitalists. “Candidly, I wasn’t looking at Beloit,” said Joe Kirgues, a co-founder of Gener8tor, a tech incubator, who one day found himself at a table with Ms. Hendricks’s team.

He said the pitch to him had boiled down to: “Tell us what resources you need.” Today, Gener8tor has an office in Ironworks and is working with several local start-ups.

Mr. Bierman credits Ms. Hendricks for providing a vision of how things can be. Still, he says, “I worry a lot.”

While he does see signs that what Ms. Hendricks has built can be sustainable, “We’ll know a lot more once we get through the next recession,” he said.

For now, around 1,000 people currently work out of Ironworks, according to Mr. Gerbitz of Hendricks Commercial Properties. “Our goal is to get to 5,000, which was what was lost when Beloit Corporation went away,” he said.

Ironworks today is a far cry from its foundry origins. At AccuLynx, the software firm, there is a giant slide running down from the second floor to the first, a video-game console and a giant gold bell that is rung when sales are made.

AccuLynx’s founder, Rich Spanton, described the day his grandfather, who had worked at the foundry as a superintendent for nearly a half-century, visited the building, where he had spent a career assembling steel parts for paper machines. He was astonished at what he saw.

“He walked in,” Mr. Spanton recalls, “and he said, ‘Jeez, we couldn’t have gotten any work done if this had been our office.’”

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)?

 

A lonely Democrat on Foxconn

Unlike the vast majority of Wisconsin Democrats, the writer of Caffeinated Politics is not a partisan idiot and is willing to take on his party when it’s wrong:

The Foxconn development plan would be the largest green-field investment by a foreign-based company in our nation’s history.

With a $10 billion investment by Foxconn which will directly stimulate 13,000 jobs, with a large number of spin-off developments and jobs, means this is the powerhouse proposal Wisconsin needs.  While there are always hurdles and bumps in such planning the attempts by some to sour the good news should be kept in perspective.  There are always naysayers.

So I was not surprised about the negative comments which came from some members in my party.  To hear some of my fellow Democrats snort over the Foxconn deal makes me wonder how hard they want to be in the majority again in this state?  After all, packaging state resources into a powerful program to create jobs over a wide array of communities is the smartest thing to have emerged from our statehouse in a very long time.  And my party needs to get on board this plan and provide hearty support.

The seeming lack of awareness about spending money today for a larger and smarter pay-off in employment and tax revenues tomorrow seems lost on some legislators.  For too long other states were more than willing to make inroads where Wisconsin was hesitant to tread.  That was a damn shame.  And while I have many legitimate complaints about policy moves from Governor Walker I must say his work with this massive plan makes me smile.   This is exactly how state government needs to operate in the world in which we live. …

I genuinely believe this is a plan that will not only create jobs, but lift spirits, and allow for a larger part of the state to also receive benefits from other investments.  For instance, I am heartened to learn the ways UW-Madison is seeking research relationships with Foxconn.  With that in mind, I would love to see this legislature also pass a meaningful venture capital bill to help seed the new ideas and small businesses that can be spun off from the Foxconn deal.  I do not wish to think small anymore when it comes to where we might head economically in our state.

While I am most confident this huge incentive plan can be marshaled to completion, I also know we need to design our incentive package smartly.  I am mighty concerned about the environmental impact that this business could have on our state. For instance, I am not pleased with the  possible discharge of production materials into the wetlands surrounding the company. I understand the need for a company to make profits but respect to our land, air, and water must not be disregarded.  There is no wiggle room for a cheap way out of making sure the environmental regulations of our state are not undermined.

With all the work and effort that Walker and his administration have already undertaken to get the state to this point with Foxconn makes me confident that true safeguards can be guaranteed in regard to environmental issues.   If Walker can achieve those standards with this massive job creation, and revenue producing venture his election in 2018 is all but assured.  This development proposal is that large–both to the state as a whole, and to the Governor’s political future.

There have been many reasons to take rhetorical slaps at Walker, and I have made many over the years at Caffeinated Politics.  But there is a time for politics, and then as I always say, there must be a time to do the work of governing.  So I must decry the tone that some have used about this deal.  I get the fact that at the statehouse partisanship is king, and logic is often left at the parking garage.   But after all that we have been through with employment woes, slack wages, and divisive government the time has come to take a breath, step up, and do the state’s business.