Foxconn tax credits in jeopardy
MADISON, Wis. (CBS 58) -- Foxconn is at serious risk of not obtaining tax subsidies because its current development is not aligned with plans outlined in the original contract.
That’s the message state officials communicated to the Taiwanese company over months of letters and emails obtained by CBS 58. But the company refused to do so.
The story was first reported by The Verge.
Foxconn and its proponents – including former Governor Scott Walker and President Donald Trump – heralded the initial announcement of the company’s arrival in southeastern Wisconsin as a transformative moment for manufacturing in the region. The company initially laid out plans for a Gen-10 flat-screen plant in Mount Pleasant with the goal of employing 13,000 people with a large portion of those jobs being assembly positions that many manufacture workers could easily transition into.
But the company later noted market forces and demands as the reason it changed its plans to a Gen-6 plant to build smaller screens and a larger portion of the jobs offered being more high-skilled positions.
Despite the changing plans – those who initially negotiated the deal for the company to potentially attain $3 billion in tax incentives maintained that the contract is performance-based, therefore protecting taxpayers.
The drastic changes in what was set to be delivered, however, led to discussions of potentially changing the contract.
In an April 23 letter to Foxconn, Gov. Tony Evers notes that the company initially approached the state about making changes to the contract.
Thus ensued a back-and-forth detailed in letters and emails sent between state and Foxconn officials over the course of 2019.
In an Aug. 23 letter for Vice Chairman of Foxconn Dr. Jay Lee and Project Chairman for Foxconn Wisconsin Alan Yeung, Department of Administration Secretary Joel Brennan spells out its concerns with the company:
“This Administration wants your project to succeed and be incentivized by an agreement tailored to fit it. However, the present project is not the one certified under the 2017 contract and we do not want Foxconn to be deterred in pursuit of its present project by contractual details and claw-backs sized for the Gen 10.5 factory.”
In following letters to state officials, Foxconn reiterated its commitment to creating 13,000 jobs in the region and investing $10 billion in its Mount Pleasant development. The company argues that it is still working within the bounds of the contract and will continue to move forward with the current agreement.
But in an Nov. 22 letter, Secretary Brennan again emphasizes the reasoning for which he encourages the company to reconsider and negotiate a new contract:
“Unless we work to ‘right size’ the contract through the amendment process to fit the new project, there will be minimum job cutoffs, investment deadlines and claw-back risks that disadvantage Foxconn. Additionally, the cost to the state of incenting Foxconn to create the new jobs will likely be so much higher for the new project than for the one specified in the contract that there would never be a net benefit to the State, exposing both sides to valid criticism by the State’s taxpayers.”
In a statement to CBS 58, Foxconn says it can “confirm” that it’s in discussions with the state and will continue to work with Wisconsin, “in good faith.” The statement also says that the company is hopeful it will, “arrive at a mutually acceptable resolution” in order to continue with the development.
WEDC Secretary-designee Missy Hughes sent a statement to CBS 58 saying, in part, “we are asking Foxconn to come to the table so we can fully understand their plans, how they are evolving, how we can assist them, and how we can do this together in a way that WEDC remains accountable and transparent to the people of Wisconsin who have invested in this project.”
Foxconn has said it plans on beginning production at its Mount Pleasant site in 2020 but it’s not clear how today’s development will affect that timeline.