Since the announcement that Taiwan LCD manufacturer Foxconn will build a factory in Wisconsin, the news has been full of numbers: the potential number of jobs created, the billions Foxconn will invest and the billions in tax incentives.
Critics want to know which estimates will become a reality, as well as what will happen if the numbers fall flat.
“There's definitely a difference between the hype and the small print,” Sen. Kathleen Vinehout, D-Alma, said on the talk show “UpFront with Mike Gousha.”
Vinehout was one of several guests on Sunday morning political talk shows “UpFront” and “Capital City Sunday” who dissected the Foxconn numbers. Vinehout highlighted critics’ concerns, saying the details of the deal need to be spelled out to protect against what might happen if Foxconn doesn’t come through.
Foxconn will invest $10 billion and create up to 13,000 jobs, initially hiring 3,000 employees. The state legislature is currently considering an incentive package bill that would give Foxconn $3 billion in tax breaks and exempt Foxconn from certain environmental regulations.
At an hours-long public hearing last week Thursday, some Democrats wanted more certainty that Foxconn will hold up their end of the bargain after Wisconsin invests $3 billion.
“What I think most voters are concerned about is, are we going to get what we are paying for?” Vinehout said.
Mark Hogan, CEO of the Wisconsin Economic Development Corporation (WEDC), said during the hearings that the $3 billion is contingent on Foxconn fulfilling its promises.
“I would like to again stress this is a pay-as-you-grow investment. These refundable tax credits will not go out the door until and unless the company meets the performance metrics that will be included in its contract with WEDC,” he said Thursday.
Vinehout said she didn’t find that statement reassuring, because that’s not specified in the bill or the memorandum of understanding with Foxconn signed by Gov. Scott Walker. She’s concerned about what will happen if Foxconn doesn’t live up to its promises.
“If we don't get it, can we get that money back?” Vinehout said. “Looking at the bill we may get it back, we may not get it back, it doesn’t say we shall.”
Jon Peacock, director of the Wisconsin Budget Project, appeared on “Capital City Sunday,” and said he didn't think the government would be able to recoup its investments, as there are not currently “enforceable clawbacks in place.”
He was particularly worried for local Tax Increment Finance (TIF) districts in the event of a Foxconn failure, as they “would really be left holding huge debts that they couldn't pay back.”
His comments on the segment were part of a look into a recent report by the Wisconsin Budget Project, a self-described nonpartisan nonprofit that analyzes topics concerning state taxes and budget.
The report focused only on the new credits for jobs and capital expenditures the bill would create for Foxconn, and not other costs associated with the project such as construction on 1-94 North-South, or any costs incurred by exempting Foxconn from environmental regulations.
It found that under the “best-case scenario,” wherein Foxconn would create 13,000 jobs that would last over 15 years, the cost to the taxpayer was just over $17,000 per job per year. But in another scenario with only 3,000 jobs lasting 10 years, Wisconsin would pay over $54,000 per job per year, the report said. Foxconn jobs would pay an average salary of $53,875 a year.
Host Greg Neumann noted that supporters say Foxconn will create as many as 22,000 off-site jobs, which would lower the cost per job.
Peacock said he generally avoids accounting for such multiplier effects, because although additional jobs will be created, if the state spends $3 billion on Foxconn, it’s not spending that money on something else that could also have multiplier effects.
Vinehout agreed that the money spent on Foxconn could take away other state spending.
“What’s it going to look like to the budget? How much are we going to have to cut schools, and health care, and local government and roads in order to pay for these tax credits?” she said. “That’s the math that the legislature needs to see.”
Peacock also said he wanted to correct a misconception, and clarify that the tax credits would not offset corporate taxes, since two existing tax breaks in Wisconsin make it unlikely that Foxconn will have to pay any corporate income tax.
“These aren’t tax credits the way most people think of them, these will be annual checks to Foxconn,” Peacock said.
He also questioned the power of such credits to keep Foxconn in Wisconsin.
“What’s to keep that company here when those subsidies go away?” he said.