Foxconn factory uncertainty puts spotlight on cities’ corporate incentives

One year ago, the Taiwanese electronics company Foxconn scored a blockbuster $4 billion economic development deal to build a manufacturing plant in Mount Pleasant, in southeastern Wisconsin, promising to invest $10 billion in a plant that would create 13,000 jobs. Last week, Foxconn announced it may dramatically cut back hiring plans—even after city and county governments bought out local homeowners via eminent domain.

“This news is devastating for the taxpayers of Wisconsin,” said Wisconsin Rep. Gordon Hintz, one of several local leaders who swiftly condemned the corporate pivot. “We were promised manufacturing jobs. We were promised state-of-the-art LCD production. We were promised a game-changing economic opportunity for our state. And now, it appears Foxconn is living up to their failed track record in the U.S.—leaving another state and community high and dry.”

The exact contours of the plan remain unclear, leading some observers to claim Foxconn has pulled a “bait-and-switch.”

But what is clear is that a deal once touted as a big win for the state and the country—and a big political win for former Gov. Scott Walker and President Trump—is now in flux. How will this impact the record-breaking $4 billion incentive package, as well as public sentiment on these types of large-scale economic development deals, like Amazon HQ2, that bet part of a region’s future on a single employer?

“In New York and Virginia, as residents begin to reckon with the full cost of the Amazon HQ2 deals, Foxconn provides a vivid illustration of why subsidizing and becoming dependent on a big corporation is a super risky move,” says Stacy Mitchell, co-director of the Institute for Local Self-Reliance. “It’s much smarter to invest in education, infrastructure, local business, and smaller, incremental development projects—that’s where you get the bigger and more durable returns.”

“We’re not building a factory”

According to a widely circulated Reuters story from last week, the multinational electronics manufacturer is “reconsidering plans to make advanced LCD panels” in Wisconsin, and says “it intends to hire mostly engineers and researchers rather than the manufacturing workforce the project originally promised.”

“In Wisconsin we’re not building a factory,” Louis Woo, special assistant to Foxconn’s chief executive Terry Gou, told Reuters. “You can’t use a factory to view our Wisconsin investment.”

News stories from over the weekend offer differing accounts, including news that the factory project is being downgraded, as well as reassurances by current Gov. Tony Evers that the project is still moving forward. Foxconn has since stated it plans to build the facility, which will house advanced manufacturing and research teams, but didn’t specify the types and number of jobs that would come with this revised vision. This backtracking on backtracking is not welcome news in Racine County, which has committed substantial resources toward seeing it completed.

The impact on investments and local homeowners

While many of the tax breaks, which are directly tied to job creation numbers, haven’t been given to Foxconn, other investments, especially local funds for infrastructure improvements made by Mount Pleasant, are already in motion—the plant broke ground last summer—and may be harder to roll back if the plant’s status changes.

The city of Mount Pleasant and Racine county, for example, created a $764 million tax-increment finance district to pay for infrastructure upgrades that are currently underway. Mount Pleasant, a town of 26,000, has borrowed $355 million and spent $190 million already, according to the Milwaukee Journal Sentinel, hoping to recoup costs based on the additional taxes generated by Foxconn.

So far, roughly 4.5 square miles of farmland have been purchased as the site of the plant and surrounding facilities, according to Michael Farren, research fellow at George Mason University’s Mercatus Center. This includes homes and farms owned by local residents. Mount Pleasant even declared some of these properties blighted, which owners contested in court.

“It’s a miscarriage of something when people are pushed off their land to help private interests who don’t do what they say they’ll do,” Farren says.

Anthony B. Sanders, senior attorney for the Institute for Justice, says that for many locals who were forced to sell their homes via eminent domain, there isn’t much recourse.

“Once the homes have been taken, that neighborhood is destroyed, even if Foxconn falls short on projected job creation numbers,” Sanders says. “When you hear something that’s too good to be true, and it involves taking people’s homes without their consent, it’s usually too good to be true.”