Two years after Trump put a shovel in the ground, Wisconsin still waiting on Foxconn to come through

Ricardo Torres
Milwaukee Journal Sentinel

The Foxconn Technology Group project in Mount Pleasant was billed as an economic miracle worker for Wisconsin.

In 2018, President Donald Trump came to the village and, alongside then-Gov. Scott Walker and Foxconn founder Terry Gou, put a golden shovel in the ground and predicted the development would become “the eighth wonder of the world.”

Two years later, the project has been scaled back, and the company has failed to hire enough people to win even the first promised job-creation payments from the state.

And, two weeks from the Nov. 3 election, one of Trump’s signature promises for Wisconsin — part of a pledge to have a boom in manufacturing jobs in the state — is a long way from ever being fulfilled.

As originally described in 2017, Foxconn was to build a Generation 10.5 factory that would manufacture large LCD screens. The project was to bring about spending as much as $10 billion and deliver as many as 13,000 jobs.

In return, the GOP-controlled Legislature approved as many as $2.85 billion in subsidies if Foxconn met various benchmarks for hiring and capital spending. The company also received a $150 million break in sales taxes, bringing the total state package to $3 billion.

And with incentives from local governments, Foxconn could receive as much as $4 billion in all. Since the groundbreaking, the project has been downscaled to a Generation 6 factory, which involves smaller, less-advanced screens for smart phones, tablets and TVs.

And although the construction work has continued, Joel Brennan, secretary of the state Department of Administration, said the state has no clear understanding of what is planned for the Mount Pleasant site.

“The ongoing challenge, I think, has been for the state to understand and for Foxconn to be able to articulate exactly what they’re going to be doing in terms of their project,” Brennan said. “There have been challenges to them from a business standpoint, that’s ever evolving, and the marketplace is changing, and the last seven months have certainly have had a material impact on the economy in southeastern Wisconsin. … So all of those things have been part of the conversation.

“But the bottom line of the conversation is that the project that was outlined and was applied for (and) on which the legislation was based three years ago, is no longer the project that they’re engaged in.”

Renegotiating the contract

The state and Foxconn have been meeting to renegotiate the terms of the original agreement in response to the project’s now becoming a Gen 6 plant with fewer jobs.

Missy Hughes, WEDC secretary and CEO, said that is frequently done with companies when plans are altered. To qualify for job creation subsidies under the original deal, Foxconn needed to have hired 520 full-time employees by the end of 2019. WEDC said last week the company had only hired 281 people that would qualify.

Foxconn said it was surprised by the announcement and maintained it has hired more than 520 employees and spent more than $750 million at the campus.

“Foxconn came to the table with WEDC officials in good faith to discuss new terms of agreement which have consequential impacts to Racine County and the Village of Mount Pleasant, third party partners in this development project,” the company said in a statement. “WEDC’s determination of ineligibility during ongoing discussion is a disappointment and a surprise that threatens good faith negotiations.”

Hughes told the Journal Sentinel she is confident there is a path forward toward a new agreement, but said there had not been “a clear articulation of what Foxconn’s project is and how many jobs they will be employing and how much capital expenditures they will be investing in.”

“And without that information,” she said, “it’s hard for WEDC to use our tools to be able to support (Foxconn).”

Although Foxconn has received no jobs-related incentive money, its project has been supported by millions of dollars from Racine County and Mount Pleasant for land-acquisition and infrastructure costs.

The reduced project has given rise to a big problem for local governments — and quite possibly state taxpayers.

Because the size and value of the project is now lower, it will generate less than expected in property taxes. If it doesn’t generate enough to pay of the bonds used to finance infrastructure improvements, the state could be on the hook, based on a provision in the deal.

For instance, according to a June report from the non-partisan Wisconsin Policy Forum, Mount Pleasant alone has issued $203 million in bonds, which must be paid over the next 30 years. The state has guaranteed 40% of those bonds if the property tax revenue does not allow the city to pay them in full.

There have been other state costs as well.

In 2018, Wisconsin received a $160 million federal grant to expand the number of lanes on 18.5 miles of Interstate 94 between Illinois and Milwaukee County, a project that had been in the works for years but was adapted to meet Foxconn’s needs.

Brennan estimates the state has spent $250 million to support the project outside of the interstate expansion.

“The state has made a significant investment in the project already,” he said. “The state has honored its commitment by spending about $250 million on infrastructure, roads, all in preparation for the Generation 10.5 facility, which was Foxconn’s obligation to honor.

“So, the state and taxpayers have met their obligation.”

Work still goes on

For the most part, what has been constructed at Foxconn over the past two years has been the campus itself — several buildings, including one the size of five Walmart stores; a network of roads; a power plant and an eye-catching 100-foot tall glass-domed structure.

According to local officials, Foxconn has become the largest property taxpayer in Mount Pleasant, with its factory far surpassing the tax valuation of the houses that occupied the site before the company’s arrival.

After the news of the WEDC decision not to award job-creation subsidies to Foxconn, Racine County Executive Jonathan Delagrave, Mount Pleasant Village President Dave DeGroot and Racine County Economic Development issued a joint statement saying Foxconn has invested more than $500 million “in our community.”

“(Foxconn) made $8.4 million in tax payments at the end of 2019 and we expect those payments to be even greater in 2020,” according to the statement.

Foxconn has continued to work on what it has termed its “High-Performance Computing Data Center” — the giant dome. The building is to house operations of Foxconn Industrial Internet, or Fii, a subsidiary.

Brennan acknowledged the work being done by Fii, but noted it is not included in the 2017 subsidy agreement.

“The work that is going on with servers, the other work that they’re doing through Fii, I think there’s a lot of excitement, lots of opportunity there,” Brennan said. “But it’s materially different from where we started three years ago.”

That’s a “concern” that’s been raised with Foxconn, according to Hughes.

“As we continue conversations with Foxconn, we want to be sure that any entities that are investing in the campus are part of a future of some kind of agreement, if we’re able to develop one with Foxconn,” she said.

The production of screens has not begun, but during the coronavirus pandemic, the Foxconn factory has produced millions of masks and given them to the state.

State and Foxconn officials have also confirmed the production of ventilators, through a partnership with Medtronic, and the company is also producing computer servers that plan to be housed in its modular data center, dubbed FoxMOD.

In July, Mount Pleasant granted Foxconn temporary occupancy on the Gen 6 advanced-manufacturing factory to allow them to complete work on the interior.

At a village board meeting in July, Claude Lois, project manager for the village, said Foxconn hopes to have the advanced manufacturing operation “up and running, quite frankly, sometime in September.”

However, weeks into October, it remains unclear if Foxconn has met that timeline.

“There no manufacturing to speak of going on at that facility right now,” Brennan said. “I don’t know that there is a lot of certainty about what is going on there.”

At some point, special rocks were flown in from Japan and are now part of a Japanese garden outside the building.

“This is very traditional in their culture,” Lois said at the July village board meeting. “This is a big ceremony that they’ll do eventually at this site once they take full occupancy. At some point in time, I would assume yet this year, they’ll have a ceremony with this garden.”