Audit faults plans to credit Foxconn for work outside state

By SCOTT BAUER
Associated Press

MADISON, Wis. (AP) — Wisconsin’s economic-development agency needs to modify procedures to ensure tax credits aren’t awarded for Foxconn Technology Group employees who don’t do work in the state, which would violate state law and the state’s contract with the company, an audit released Wednesday said.

The report from the nonpartisan Legislative Audit Bureau comes before any credits have been awarded to the Taiwan-based Foxconn for the display-screen factory and campus that’s under construction in southeast Wisconsin. The first credits, up to $9.5 million, that could be distributed as part of a nearly $3 billion deal struck with the state could be awarded next year.

When state officials are counting Foxconn employees to gauge whether the company has met the terms the contract, they should be looking only at those working in Wisconsin, the audit bureau found. The Wisconsin Economic Development Corporation incorrectly wrote guidelines that would allow Foxconn employees who are not doing work in the state, but who are paid in Wisconsin, to be included in the tally, the audit said.

Awarding credits for out-of-state workers would run afoul of both state law and the state’s contract with Foxconn, the audit said.

The head of the economic-development agency, Mark Hogan, said in a letter to auditors that WEDC believed employees outside Wisconsin should be counted because they will be under the direction of Foxconn in Wisconsin, causing their wages to be subject to state income taxes.

But Hogan also said that WEDC will modify its procedures, if necessary, to comply with the contract and state law. The agency plans to tell lawmakers by the end of January about progress made in these efforts.

State Sen. Rob Cowles, a Republican and a chairman of the Legislature’s audit committee, said he looks forward to WEDC revising its procedures in accordance with the law. He said the report “uncovered a discrepancy that had the potential to cost Wisconsin taxpayers money.”

Democrats have been the loudest critics of the project, saying the state is spending too much. The credits are awarded in response to jobs created and money invested.

Foxconn has said it may invest up to $10 billion and hire 13,000 people over 15 years at its complex near Racine, but critics say they doubt the company will follow through on those pledges. Outgoing Gov. Scott Walker, a Republican, negotiated the deal and his Democratic successor, Tony Evers, has said he would like to reopen it.