Wisconsin Foxconn Deal Cost Taxpayers Millions—And It Will Continue To Cost More Millions
(Source: Flickr/Prachatai.)
Six years ago, former Wisconsin governor Scott Walker made a deal with the Taiwanese company, Foxconn. In exchange for a $3 billion dollar subsidy, Foxconn promised to build a $10 billion factory that would create 13,000 jobs. That promise still hasn’t come to pass, and there’s no evidence that it will. Now, on the sixth-year anniversary of this disastrous deal, journalist Bruce Murphy writes in the Urban Milwaukee that Wisconsin taxpayers are still paying the price of this failed promise.
When Walker announced the deal with Foxconn, Walker and legislators assured the public that Wisconsin state would pay Foxconn its subsidy in increments—and only as the company met hiring and job goals. But Foxconn exploited a loophole in the deal. The company created positions for employees that would only last until a subsidy payment was received. This loophole eventually came to an end, but only years later with the new administration.
Another aspect of the agreement with Foxconn: the Wisconsin state government was not transparent to the public about the upfront costs it and local governments would spend to prepare the land for what was supposed to be the world's largest Foxconn factory. These upfront costs were items such as roads, highways, sewer systems, and electric setups.
Journalist Lawrence Tabak details in his book, Foxconned, that this deal is an example of “how the economic incentive infrastructure across the country is broken, leading to waste, cronyism, and the steady transfer of tax revenue to corporations.”
In anticipation of 13,000 new workers, the Wisconsin Department of Transportation spent $168 million of taxpayer money for pavement that now “leads to nowhere.” Highway lanes were expanded, and rural roads became four-lane highways. Murphy reports that “the Village of Mount Pleasant and Racine County committed to spending $808 million for sewer, water and other costs and by 2021 had spent $258 million on this.” The American Transmission Company spent $257 million on power lines and a new substation.
By 2021, Wisconsin spent $683 million of taxpayer funds on a manufacturing campus that never came into full fruition. As time goes on, even though Foxconn publicly announced it will no longer be creating a ginormous factory, governmental entities are expected to spend even more. As reported by Murphy in 2021, at least another $552 million is projected to be spent.
In addition to spending public investment money before private investment, to make way for Foxconn, the state marked “3,000 acres of agricultural land, farm houses and scattered, neatly maintained single-family homes as ‘blighted.’” Then they claimed the properties under eminent domain and residents were forced to move. In 2018, Belt Magazine reported this and the lack of transparency the government provided. One local, “Robby Jensen, his voice breaking with emotion, pointed at the board [of the Community Development Authority of Mt. Pleasant, Wisconsin] as he said, ‘The Village is telling us our land is worthless, while at the same time you’re telling Foxconn it’s the best property in the world. I don’t know how any of you guys can sit here and do this.’”
“The debacle with Foxconn is a drastic and painful example of what happens when the government assumes a huge amount of risk and liability in an effort to attract large-scale private investment,” said Daniel Herriges, an urban planner and Strong Towns’ editor-in-chief.
Since the Foxconn deal slowly crumbled, the state has been trying to entice other large corporations to invest in the land already prepared for Foxconn. Most recently, Microsoft has stepped in and purchased $50 million of land for a data center. However, according to previous agreements, all those dollars will be paid to Foxconn.
Wisconsinites are likely to continue paying for Foxconn’s unmet promises for years to come, says Herriges. “Real economic development starts from the bottom up, finding the entrepreneurs already in your community and asking what incremental steps can be taken to support them. Too many local and state governments lack the perspective and humility to do that. The Foxconn mess may be the ultimate story in recent years of governments being seduced by silver-bullet economic fantasies, but it’s far from the only one.”
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