Sep 12, 201712:13 PMInside Wisconsin
with Tom Still
As Foxconn debate in Legislature nears close, here are a few oft-asked questions
(page 1 of 2)
The debate over state incentives to land the Foxconn Technology Group in Wisconsin will likely wrap up soon, with the Wisconsin Legislature expected to vote by mid-September. Here are some of the questions being asked as a decision nears:
The state incentive package would be $3 billion over 15 years. What guarantees will be put into place to ensure Foxconn invests the $10 billion and creates the 13,000 jobs it has planned?
Unlike some states that rely more on “clawbacks” after they have spent taxpayer dollars, Wisconsin takes a “pay-as-you-grow” approach to economic incentive packages. If Foxconn spends $3 billion and creates 3,000 jobs, the amount of state tax credits would be commensurate — and retroactive. Foxconn must part with money to get some of it back in the form of tax credits, which are based on economic activity that otherwise wouldn’t happen.
Clawbacks are still important, however. How would they be initiated and enforced?
A clawback is a provision in an economic development agreement that requires a company to repay any financial benefit gained for which it did not meet certain performance thresholds, such as job targets or capital investment levels. These provisions are most often included in contracts negotiated between governments and companies. Concurrent to the legislative debate, the Wisconsin Economic Development Corp. is drafting a contract that is expected to be completed by Sept. 30.
Okay, but who watches the contract writers and makes sure that document is being enforced?
An amendment to the Foxconn package by the state Senate would give the Legislative Audit Bureau, an arm of the Legislature, the ability to audit contract compliance each year. The Senate has also included language that would more strongly tie Foxconn’s projected capital investments to job creation estimates.
This deal seems to have been, in no small part, a product of the evolving friendship between Gov. Scott Walker and Foxconn founder and chairman Terry Gou. What happens if one or the other of those leaders rides into the sunset?
State negotiators are keenly aware that Gou turns 67 in early October and won’t work forever, even if his energy levels are legendary. However, the depth of the Foxconn management team engaged in the Wisconsin project — combined with investments already made or poised to happen — make a reversal highly unlikely. Foxconn wants to build North America’s first liquid crystal display plant in Wisconsin, a decision driven from the board of directors’ level on down. As for Walker, he’s all but certain to run for re-election in 2018 and won’t turn his back on a deal he started. His opponents will make doubly sure of that. Walker’s chief deputies on this deal, Administration Secretary Scott Neitzel and WEDC Secretary Mark Hogan, also remain in place.