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Sep 5, 201712:58 PMInside Wisconsin

with Tom Still

In today’s competitive world, government incentives are usually in the picture

(page 1 of 2)

As the Wisconsin Legislature nears another round of voting on the $3-billion incentive package to bring Foxconn Technology Group to the state, supporters of the deal find themselves sandwiched between two philosophical camps.

On the left are those who think government should spend predominantly on education, health care, and helping the poor, and not invest in attracting or retaining profit-seeking companies. That outlook fails to recognize those profit-seeking companies spark an economy that generates taxes for government programs at all levels.

On the right are economic purists who think corporations should fend for themselves in an Adam Smith world that no longer exists. To them, government subsidies are antithetical to raw capitalism. That approach ignores today’s competitive world, in which nations, states, and neighboring communities constantly seek an edge.

That economic competition isn’t new. Consider the city of Madison, where Mayor Paul Soglin has taken a dim view of the Foxconn package — even though Foxconn has taken a strong interest in the city’s health care research and tech-based companies, large and small.   

One of Madison’s longest-running economic development programs is tax incremental financing, which lets a community loan money to development projects with the expectation the loan will be repaid through the higher property taxes the developer or company will pay on the improved property.

Targeted at blighted areas when the Legislature passed a TIF law in the mid-1970s, it was later amended to pay for projects that create large numbers of jobs.

Since Madison created its first TIF district in 1977, it has invested $148 million and leveraged $1.6 billion in property value. That’s a double-digit return spread over about 47 projects over 40 years, with no insolvencies and only three that were withdrawn or shut down before the city invested heavily.

The latest TIF proposal on the city’s radar screen involves Exact Sciences, a company that was on its last legs when Kevin Conroy and Manesh Arora moved it from Boston to Madison a decade or so ago. Today it has 750 employees and is looking to hire about 200 more in the short term, evidence of the growing market acceptance of its Cologuard test for colorectal cancer.

Exact Sciences is preparing to move into the former Spectrum Brands headquarters on Madison’s Southwest Side, mainly to manage overflow in its current facilities. That site could eventually become home to Exact Science’s second processing laboratory — a project that would cost $57.3 million and create another 225 well-paid jobs.

However, the laboratory project depends in large part on whether the city of Madison approves a TIF district that meets a $2.5 million need within the company’s financing plan.

(Continued)

Sep 5, 2017 04:35 pm
 Posted by  Anonymous

One factor not discussed in the above is what services you are willing to sacrifice as part of the process and that of course depends on the scale of the deal. What if the deal requires in terms of subsidy enough money that you need to toss 50,000 people off medicaid or restrict rural ambulance services or set back a major highway project like 18-151 in one of the few major economic development zones in the state.
I think that rather than philosophy is what is driving a lot of the concern about the Foxconn deal. Let's say Foxconn goes through but the businesses here paying less than $20 a hour finds themselves with even fewer potential employees to hire because of cuts to welfare to work programs.
Those are the type of real world concerns people have -will our economic well-being and economic development be sacrificed for Foxconn. That and the unknown which is how much secondary business and benefit will come from a project where the direct benefit in terms of increased property taxes is deferred far into the future. And where a small investment in transportation (ie. a minibus line from the CNW station in Kenosha) gets Illinois workers in and the Greta Lakes Docks means supplies can come in from overseas. It is the real questions about all costs and benefits that worry most of us.

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Tom Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal.

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