Foxconn bill includes another taxpayer risk

State commits to pay back local communities if plant infrastructure is built but plant itself isn’t

MADISON - Tucked in the multibillion-dollar subsidy bill to bring a Foxconn Technology Group plant to Wisconsin is an added risk for state taxpayers — covering up to 40% of local tax incentives if the deal goes south.

Wisconsin has already committed to up to $3 billion in state tax incentives that could be paid out in cash to Foxconn if the company comes through in creating up to 13,000 jobs, plus another $252 million for work on the Interstate 94 leg south of Milwaukee that would serve the flat screen display plant.

Now the state is also committing to backstop the undisclosed but likely sizable local incentives for Foxconn. In essence, the state would step in if local communities borrow money to build streets and sewers for Foxconn but the factory doesn’t move forward and the communities are left unable to pay their loans.

The state’s guarantee would not be absolute and would be only for local government spending for Foxconn that was pre-approved by state Administration Secretary Scott Neitzel.

But the bill contains a powerful commitment by the state to bail out local governments if the Foxconn deal goes bad.

“Recognizing its moral obligation to do so, the Legislature expresses its expectation and aspiration that, if ever called upon to do so, it would make an appropriation to pay up to 40%... of a local governmental unit’s obligations,” according to a bill summary from the Legislature’s nonpartisan budget office.

The Foxconn bill is expected to have a public hearing Thursday in the Assembly Committee on Jobs and the Economy, with a committee

vote next week and an Assembly floor vote in mid-August.

Assembly and Senate leaders are not seeing eye to eye on how quickly to pass the bill.

Senate Majority Leader Scott Fitzgerald (R-Juneau) said he wants to take up the stalled state budget before addressing the Foxconn legislation. The budget was supposed to be in place by July 1 and Fitzgerald said he might not want to hold hearings on the Foxconn legislation until the week of Aug. 21.

“It’s more important to get the state budget done,” he told reporters.

The local bailout commitment in the Foxconn legislation is separate from state tax subsidies for the deal that dwarf the previous record paid by state taxpayers to a manufacturer.

Wisconsin already waives almost all taxes on manufacturing profits in the state, so these proposed tax credits could amount to up to $200 million in annual cash payments to Foxconn for up to 15 years. When including a $150 million sales tax break for buying construction material, the state incentive package could total up to $3 billion.

The bill would also ease environmental regulations on Foxconn and provide lower utility rates for the company.

Walker spokesman Tom Evenson said the local bailout clause was similar to ones put in place for deals involving Lambeau Field, Miller Park and the Milwaukee Bucks arena.

“The bill provides reasonable assurances to local partners that invest their own resources in this once-in-a-generation opportunity,” Evenson said by email.

At a Tuesday stop in Milwaukee, Walker said at least one other state offered Foxconn somewhat more in incentives than Wisconsin, though it was not clear if that included the state’s tax exemption for manufacturers. The governor also raised the prospect Foxconn could develop sites in other parts of Wisconsin.

“Once they get interested in an area and region, they compound their interest in other things . ... I would imagine they’ll expand their scope of focus here in Wisconsin,” Walker said.

Later at the statehouse, Walker met privately with GOP lawmakers about Foxconn and afterward said he would be willing to accept modest, unspecified changes to the subsidy bill.

Trump hints at bigger deal

Also Tuesday, President Donald Trump said at a White House event that Foxconn’s U.S. investment could be three times bigger than previously announced. Foxconn CEO Terry Gou said last week his company was committing $10 billion in Wisconsin.

“He told me off the record he thinks he may go $30 billion — $30 billion, think of this — he may go (with a) $30 billion investment. But he told me that off the record, so I promised I wouldn’t tell anyone,” Trump said to laughter, according to video posted on CNBC.com.

Foxconn officials didn’t respond to questions about the new figure.

Supporters of the record jobs deal for Wisconsin say the state would win a keystone manufacturer that would bring worldleading technology and create up to 35,000 jobs after including suppliers and other businesses like restaurants.

Detractors say it would amount to a multibilliondollar bet on a company in a competitive and constantly changing industry.

Rep. Gordon Hintz (D-Oshkosh), a member of the Legislature’s budget committee, said he was concerned the bill could pass next week, leaving too little time for vetting it. He pointed out that Foxconn hasn’t even announced what community or communities in Wisconsin would get the plant.

“This is something that the state is going to be on the hook for long after this administration is gone,” Hintz said of the subsidies.

But Rep. Tod Ohnstad (D-Kenosha) acknowledged that communities closer to the plant are seeing its potential benefits.

“I gotta tell ya, people in Kenosha are very excited about this,” Ohnstad said.

Local governments could use a form of borrowing such as tax incremental financing to build massive infrastructure for Foxconn in what are now undeveloped fields.

Under TIF, a village or city would borrow money to build streets and sewers and then use the property taxes on the newly built private plant to pay off the loans. Once the debt is paid off, the municipality could start using the tax money from the property for public safety and other local services.

The Foxconn bill would lift a cap on the size of TIF districts, which currently is limited to 12% of the total assessed property value in a community. The bill would also allow the district to be paid off over 30 years rather than the current limit of 20 years.

Assembly Speaker Robin Vos (R-Rochester), whose district is in the running to land the Foxconn plant, told reporters Tuesday that the bailout provision would help local governments get lower interest rates on their bonds, likening the approach to someone cosigning a loan.

Vos downplayed fears that other businesses would start seeking Foxconn-sized subsidies of their own.

“Business I talk to big and small get that this is transformational,” Vos said. “Instead of others being put off by that, they’re excited about it because they know this is the sort of thing that will draw talent in from across the country and around the world.”