State officials offered Foxconn Technology Group $1.1 billion in incentives before knowing the specifics of the company’s potential supply chain or seeing an economic impact analysis of what was then a proposed $6 billion project that would have created 8,000 jobs.
Those details are outlined in a June 26 letter from Wisconsin Economic Development Corp. secretary Mark Hogan to EY, representing the company. Just 16 days later, on July 12, Gov. Scott Walker and Foxconn chairman Terry Gou signed a handwritten document laying out the parameters of the deal, eventually announced at the White House on July 26.
Hogan’s June 26 letter also indicated the proposal included an additional $100 million to $150 million in local incentives. He pointed out the local incentives would continue to evolve as the company’s needs were defined and suggested separating state and local packages to simplify the analysis.
If the local package increases as much as the state incentives did, it could reach $270 million to almost $410 million.
Foxconn is considering potential sites in Racine and Kenosha counties, but isn’t expected to make an announcement until after lawmakers pass a bill enabling the incentives and a contract is signed with WEDC.
In his letter, Hogan told the company the incentives package would require special legislation. The state’s initial offer would have raised the refundable tax credits for job creation from 7 percent to 10 percent of eligible payrolls while maintaining the 10 percent level for eligible capital expenditures.
Hogan told the company the state was open to increasing those percentages more if the state received additional information it was looking for.
The legislation lawmakers are now considering would increase the job creation credits to 17 percent and capital expenditures to 15 percent.
Hogan wrote that once Foxconn gave the state the go-ahead it would take the state four to six weeks to finalize the legislation. Next week Wednesday will mark six weeks since the White House announcement. The Joint Finance Committee is expected to vote on the bill next week with the full Senate voting later in the month.
Hogan also pressed the company to provide EY’s economic impact analysis of the project, describing it as “critical for the state to substantiate the incentive proposals.”
The letter points out WEDC normally uses a ROI model focused on individual income tax from direct and indirect jobs.
“Given the magnitude of the company’s investment and the corresponding potential size of the incentives, it is important for WEDC to consider other factors in how it determines its ROI,” Hogan wrote.
He added details on how the company’s presence would attract additional supply chain companies “would provide invaluable information that would support the elevated incentive levels.”
Foxconn identified cost, speed and people as primary factors in its decision-making, the letter said. While the incentives addressed the cost portion, Hogan said state officials were confident “the Wisconsin model for addressing workforce requirements will be successfully implemented for the company.”
He also said the speed component was evident in the state’s response, with the governor and other state and local officials demonstrating their desire to move quickly.
As of the June 26 letter the company had already identified multiple potential locations with parcels of contiguous land exceeding 1,000 acres.
Hogan said steps were being taken at that point to secure options on the land. The Department of Natural Resources had also been brought in “to identify issues related to these parcels and establish an expedited timeline to address and resolve them,” Hogan wrote.
