Walker, Foxconn Sign $3 Billion Wisconsin Incentives Into Law

RACINE, WI — The ink is now dry on a historic deal signed by Gov. Scott Walker and Foxconn Technology Group Chairman Terry Gou, that pledges $3 billion in tax incentives to the company if Foxconn invests $10 billion on a new manufacturing campus in Mount Pleasant.

Walker and Gou sat at an oak table inside S.C. Johnson's Fortaleza Hall to sign the historic agreement, as the two were surrounded by officials including Speaker of the House Paul Ryan, S.C. Johnson Chairman and CEO Fisk Johnson on stage.

Witnessing the event were hundreds of local and state elected officials, and economic staff, seated below the "Spirit of Carnauba," suspended by wires from the two-story hall's ceiling. The twin-engine seaplane was used by early S.C. Johnson officials in the company's earlier days to secure a source of Carnauba wax that helped to build the company into the global cleaning products manufacturer that it is today.

Walker capped Friday's speeches with an exuberant address, at times hurriedly citing as many things as he could that stand to benefit from future construction and business development.

“13,000 good-paying, family-supporting jobs. That’s just the start and up to 22,000 jobs that are either induced or indirect because of it. All of you in this area, this region know, have heard the stories. All the people say, ‘I’m going to start to do business over there. I’m going to open a restaurant over there. I’m going to open a hotel over there. I’m going to build a new home over there,” Walker said.

Ryan was effusive in his praise for what Foxconn means to the area. “We’re going to look back at this day, at this moment, in the future and see that this was a very important turning point for southeastern Wisconsin,” he said.

Johnson welcomed everyone to the well-choreographed event - at one point pulling a wedge of Racine kringle from behind the podium to take a bite. In addition, Johnson pulled out a popular cleaning product to garner another laugh. "And remember to use Windex for flat-screens," he said.

Largest Incentives in State History

It would take state taxpayers a minimum of 25 years to break even on a proposed $3 billion incentive package that is designed to lure electronics manufacturer Foxconn to Wisconsin.

According to an analysis by the nonpartisan Wisconsin Legislative Fiscal Bureau, the cost of the tax credits would exceed potential increased tax revenues by $1.04 billion at the end of the fiscal year 2032-33.

After that year, payments to Foxconn would end and increased tax collections are estimated at $115 million annually. Their analysis, which was released Tuesday, implies that the break-even point would come during the 2042-43 fiscal year.

But it might not.

The Legislative Fiscal Bureau in its analysis said that any cash-flow analysis that covers a period of nearly 30 years must be considered highly speculative, especially for a manufacturing facility and equipment that may have a limited useful life.

Technological advances and changes in Foxconn's market share, operating procedures, or product mix could significantly affect employment and wages at the proposed facility over time.

Also, state law changes could affect the estimated amount of tax collections received from the additional economic activity, and any future state assistance that may be provided to Foxconn would affect the analysis.

Local Incentives

Racine County officials revealed last month that Racine's incentive package to lure Foxconn was approximately $764 million - a figure as staggering as the overall size of the project.

According to Racine County figures, that breaks down to the following uses:

$168 million for property acquisition
$175 million to finance the package
$160 million for water and wastewater infrastructure upgrades
$116 million for public safety and police upgrades
$100 million in Tax Incremental District Financing
$28 million held in contingency
$12 million for road upgrades
$5 million for fiber optic lines

And for all that, Racine County Executive Jonathan Delagrave said there will be no tax increases for county residents by way of a tax increment district to fund the project. By establishing a TID, a City or Village is able to capture the property tax revenue from new development inside the TID to pay for public improvements in and around the TID.

The county estimates that once the Foxconn TID closes, there will be $31 million in new tax revenue per year for the village.

Patch.com Images by Scott Anderson