When the Foxconn development was first pitched by then Gov. Scott Walker and the company’s former chief executive officer Terry Gou, local and state leaders were promised a manufacturing metropolis off I-94 in Mount Pleasant, one that would catalyze development of a 3,000-acre tax increment financing district.
In that initial development agreement, Foxconn executives agreed to invest $10 billion to construct a 20 million-square-foot manufacturing campus and create 13,000 jobs.
Five years later, Foxconn’s 825-acre Area 1 – one of four areas in a TID that had been planned with the expectation of other manufacturers flocking to the area – consists of four buildings: a 1-million-square-foot “advanced manufacturing” facility; a 300,000-square-foot “smart manufacturing center,” a 120,000-square-foot “multipurpose building” and a 100-foot-tall “high performance computing data center globe.”
Foxconn originally planned to manufacture LCD screens at the complex, but those plans never moved forward. Recently the company has been making servers, server racks and computer motherboards at the site, according to a source and a Milwaukee Journal Sentinel report.
Under the state’s original incentive package with the company, Foxconn could have received up to $2.85 billion in tax incentives if the company created 13,000 jobs and invested $10 billion in capital expenses in the complex. After Tony Evers was elected governor, the state renegotiated its deal with the company. The new incentive package offers the company up to $80 million in tax credits if it hires 1,454 workers and invests $672 million in capital spending in the complex by the end of 2025.
But the company faces another deadline – this one involving property values that will require the Taiwanese tech giant to pay millions more in property taxes whether or not the factory complex increases in size, value or production.
Under a TID agreement between the company and the Village of Mount Pleasant, “the improvements” in Area 1 – including parking lots and buildings – must be worth roughly $1.4 billion by Jan. 1, 2024.
Right now, Foxconn is paying about $10 million on the current assessed value of the improvements in Area 1, which sits at roughly $550 million.
If that value hasn’t increased to the agreed upon $1.4 billion by the deadline, the company will still have to pay its tax bill as if the land is worth that much. Based on the village’s current tax rate, that tax bill would equal $27 million.
That $27 million tax bill would come on top of $7.3 million in special assessment payments the company is also making annually to pay back the county for property acquisition costs.
Should the company default, the village and Racine County could be faced with an inability to pay off the more than $310 million in debt the entities issued to acquire the land and make infrastructure improvements.
Faced with questions from concerned residents, officials have noted that the company has so far made all of its payments, including a $60 million contribution in 2017 and would face forfeiting its current investments as well as the potential state incentives were it to default.
They’ve also pointed to protections in the development agreement. Those protections include the village’s ability to claw back development rights on the land it owns within the TID: about 100 acres in Area 1 and 1,471 acres in Areas II and III.
The village would also seek compensation to the fullest legal extent, according to an official project fact sheet, which would include taking possession of the land and assets in the Foxconn development.
Asked to respond to ongoing concerns about the potential for Foxconn’s default and what development potential exists for the Foxconn-owned land and the more than 1,500 acres of village-owned land in the TID, Milwaukee-based Mueller Communications, which has been staffed with handling Foxconn-related media inquiries for the Village of Mount Pleasant and other entities, provided this quote from Claude Lois, the Foxconn project director for Mount Pleasant:
“Foxconn has met every financial obligation under the local contract and the village fully expects that the company will continue to do so. We continue to be well-positioned to attract future investments in Mount Pleasant’s TID #5 and are particularly hopeful that a high-tech manufacturer will develop on this attractive, shovel-ready site.”
