MADISON — The Wisconsin Economic Development Corp. board on Wednesday approved a $3 billion contract with Taiwanese manufacturer Foxconn Technology Group, a deal the company’s CEO is personally backing should it fall apart.
The company plans to invest billions of dollars to build a massive facility in the Village of Mount Pleasant and hopes to employ as many as 13,000 workers when the facility is fully constructed.
The Taiwanese company’s chosen area, where acquisition specialists have been negotiating purchase agreements with property owners, is on 1,198 acres between Interstate 94 and Highway H and between Highway KR and Braun Road.
A second, 1,073-acre area directly north of that will be acquired for Foxconn expansion. A third, 622-acre area east of the manufacturing campus will be acquired for construction staging during the building of that campus, and in the future for other development.
Already the Village of Mount Pleasant and Racine County have approved transferring jurisdiction of road construction, in areas related to the Foxconn site, to the Wisconsin Department of Transportation.
Racine County Executive Jonathan Delagrave said the agreement is “one more step toward ensuring that Foxconn locates in Racine County. We continue to work on the local level to bring the project to fruition.”
Under the terms of the contract, released publicly for the first time Wednesday, the company will be able to collect up to $1.35 billion in construction-related tax credits if it creates a gradually increasing number of manufacturing jobs, up to 8,450 through 2025.
It will also be able to collect up to $1.5 billion in tax credits if it creates up to 13,000 manufacturing jobs by 2022 and maintains that number through 2032.
Though Gov. Walker and Foxconn CEO Terry Gou agreed earlier this year on a $10 billion investment by the company, the contract only requires the company to invest $9 billion in the state to be eligible for tax credits.
The jobs must pay at least $30,000 per year and average $53,875 annually. The job credits pay out 17 percent of the first $100,000 of salary, which is higher than 7 percent for the state’s typical enterprise zone job credits. The construction credits equal 15 percent of capital investment, up from 10 percent in a typical enterprise zone.
The company will be eligible to receive the first $10 million in job credits starting next year if it creates 1,040 jobs in the state. To receive any credits next year, the company must create at least 260 jobs. But if the company doesn’t earn the credits in a given year, they can be carried forward into subsequent years.
Foxconn’s ‘personal guarantee’
Within five years, the state can reclaim any credits it pays out if the company provides false information, leaves the state or ceases operations and doesn’t restart within a year. After that, if the company employs fewer than 6,500 workers the state can reclaim a sliding scale ranging from $965 million in 2023 to $386 million in 2032.
Compliance with the terms will be audited by an independent accountant based on a sample of the company’s workforce at the end of each year.
Gou is pledging to personally back 25 percent of the amount that would be refunded to the state should the company default. Publicly traded parent company Hon Hai Precision Products, the 27th largest company in the world, would back the rest.
After 2032 the deal ends and the state would have no recourse should the company reduce its Wisconsin workforce. The nonpartisan Legislative Fiscal Bureau anticipates the state will recover the $3 billion in lost tax revenue by 2042.
Wisconsin Technology Council President Tom Still said Gou’s personal guarantee, and connecting the construction tax credits to the company’s manufacturing workforce in the state during construction, are unusual for deals of this magnitude.
“It sounds like a pretty good belt and suspenders,” Still said.
Tax exemption similar to Bucks arena
The $2.85 billion in tax credits will mostly be paid from the state’s existing tax collections because Foxconn also will benefit from a state tax credit that almost eliminates state corporate taxes for manufacturers. The amount of that benefit to the company is unknown.
Foxconn is also receiving a sales tax exemption estimated to be worth $150 million, similar to the Milwaukee Bucks arena deal. And it is eligible to receive a $100 million incentive as part of a $764 million tax incremental financing district for infrastructure improvements offered by local officials in Racine County.
The WEDC board vote is the final layer of public oversight before the contract can be signed and construction can begin, likely some time next year.
The company is planning to manufacture liquid-crystal display (LCD) screens at the 20 million-square-foot Mount Pleasant campus starting in 2020.
The WEDC board received a copy of the contract Monday ahead of the vote, breaking with the agency’s past practice of only providing a staff report summarizing the deal.
The board had been scheduled to vote on the contract on Oct. 17, but the vote was delayed for unspecified reasons. After public pressure mounted on the agency to release the contract, the WEDC Board announced Friday the contract would be provided to board members.