Wisconsin is denying Foxconn Technology Group billions of dollars in state tax credits until officials with the company come to the table to draw up a new contract for the Racine County project — once touted as the “eighth wonder of the world” by President Donald Trump.
Even if Foxconn were to receive state funding, the company could face financial penalties through claw-back provisions included in the existing contract if a new agreement isn’t reached.
In a letter sent Monday to the Taiwan-based company’s Vice Chairman Jay Lee, Wisconsin Economic Development Corp. Secretary Melissa Hughes said “Foxconn’s activities and investments in Wisconsin to date are not eligible for credit” under the more than $3 billion contract first signed back in 2017. The letter also underscores that negotiation attempts between the state and company this summer failed to result in a new contract.
“As we have discussed numerous times, markets, opportunities and business plans can and often need to change,” Hughes said in the letter to Lee, which was obtained by the Wisconsin State Journal through a records request. “I have expressed to you my commitment to help negotiate fair terms to support Foxconn’s new and substantially changed vision for the project.”
The news deals a major blow to the embattled Foxconn project, which Trump described as “transformational” for the state and national economy at a 2018 groundbreaking ceremony. It comes as Trump touts his economic record while trailing former Vice President Joe Biden in state and national polls in the Nov. 3 election.
Republican former Gov. Scott Walker signed the contract in 2017, and Hughes was appointed by Democratic Gov. Tony Evers.
In a statement on Monday, Foxconn said company officials “came to the table with WEDC officials in good faith to discuss new terms of agreement which have consequential impacts to Racine County and the Village of Mount Pleasant, third party partners in this development project.”
“WEDC’s determination of ineligibility during ongoing discussion is a disappointment and a surprise that threatens good faith negotiations,” Foxconn said in a statement.
The company reported in the summer it had created enough jobs in southeastern Wisconsin last year to receive state funds — despite being told almost a year ago that the $3 billion in tax subsidies would not be doled out until a new contract was drafted to match the project. State officials say tax subsidies agreed to in the contract are tied to jobs and capital investment for specific projects, which Foxconn is failing to deliver.
This year would have marked the state’s first payment of refundable tax credits to Foxconn. The company fell 82 jobs short of the minimum required to claim state tax credits in 2018.
Foxconn said it created more than 800 jobs in 2019, above the 520 minimum needed for state subsidies. However, under the contract the goal was to have 2,080 full-time jobs and more than $3.3 billion in capital expenditures by the end of 2019. Foxconn’s jobs report this summer also identified more than $415 million in capital investments — a considerable difference from the $280 million reported by Foxconn in April.
“Foxconn has not received any tax credits from the State of Wisconsin despite achieving employment levels above 520 people and investing $750 million in Wisconsin that includes over a half a billion dollars invested in Foxconn’s manufacturing park,” the company said in a statement.
In a joint statement Monday, Village of Mount Pleasant President David DeGroot, Racine County Executive Jonathan Delagrave and Racine County Economic Development Corp. Executive Director Jenny Trick said they were disappointed to see that the state would not be granting Foxconn any tax credits. Officials said the company had made $8.4 million in tax payments at the end of 2019.
“Despite investing hundreds of millions of dollars and hiring hundreds of people, into Wisconsin, Foxconn has received no tax benefits from Wisconsin,” Sen. Van Wanggaard, R-Racine, said in a statement. “Yet, Foxconn continues to develop a world class facility in Mt. Pleasant, and is quickly becoming a valued partner in southeastern Wisconsin’s economic rejuvenation.”
According to a project verification letter sent Monday, the company employed fewer than the minimum required 520 full-time employees and had invested roughly $300 million in capital expenditures. The report states that only 281 of Foxconn’s reported jobs would be eligible under the current contract.
Not adding up
Regardless of how many jobs were added, WEDC said in the letter, the state is unable to calculate job creation or capital investment tax credits because Foxconn has failed to carry out the project as promised.
“Dr. Lee, there is a path open for incentivizing additional development in the Zone on a win/win basis,” Hughes said. “Once Foxconn is able to provide more accurate details of the proposed project, such as its size, scope, anticipated capital investment, and job creation, WEDC would be able to offer support for the project with tax incentives as it does for many large and small Wisconsin businesses.”
Claw-back provisions in Foxconn’s original contract show that, if the agreement is not amended by the end of 2023, the company could face up to $500 million in recovery payments — if the company were to receive state aid.
Walker’s contract with Foxconn would provide incentives totaling as much as $3 billion over 15 years if the company reached the 13,000-employee benchmark and made a $10 billion capital investment in the state.
However, multiple updates to the company’s plans have resulted in a vastly different project, state officials have said.
While originally promised as a Generation 10.5 facility that would build larger panels for TV screens, the project has downsized to Generation 6, which would manufacture small screens for mobile phones, tablets, notebooks and wearable devices.
“Today’s announcement cements Foxconn’s legacy in Wisconsin as one of broken promises, a lack of transparency, and a complete failure to create the jobs and infrastructure the company touted in 2017,” Assembly Minority Leader Gordon Hintz, D-Oshkosh, and longtime Foxconn critic, said in a statement. “Looking to the future, I hope lawmakers will assess projects based on what is best for Wisconsin, and utilize rigorous, independent economic analysis based in reality, rather than chasing pie-in-the-sky projects reeking of short-term political motives.”
Foxconn officials first came to the state in March 2019 to discuss amendments to the contract. Late last year, Evers’ administration told the company it no longer was eligible for tax subsidies under the existing contract, and a new document would need to be drafted. While amending a contract is a common practice, officials have said the state cannot unilaterally change the agreement without Foxconn’s participation.
Last month, Peter Navarro, White House director of trade and manufacturing policy, told the State Journal he was confident that Foxconn’s project will “bear great fruit“ after the country recovers from the ongoing COVID-19 pandemic.
Keep up with the latest news on Foxconn in Wisconsin
Read more news coverage of Taiwanese electronics manufacturer Foxconn's decision to build a massive plant in Wisconsin.
The company's $3 billion contract with Wisconsin remains in question after state officials in December told Foxconn it no longer was eligible for tax subsidies agreed to in the original contract because the project has changed too much.
Gov. Tony Evers' administration has told Foxconn it no longer is eligible for tax subsidies agreed to in the original $3.6 billion deal with Taiwan-based electronics manufacturer.
There is no proof to suggest the Taiwan-based electronics giant has moved employees into the Capitol Square building it purchased from BMO Harris Bank for $9.5 million earlier this year.
The announcement comes a few weeks after UW-Madison reported receiving less than 1% of a $100 million commitment Foxconn made in August 2018.
Foxconn's partnerships with UW campuses have seen mixed success so far, with a UW-Milwaukee program drawing more student participation than announced, but developments appearing to progress slowly at UW-Madison.
Taiwan's main opposition party picked a pro-China populist mayor Monday as its candidate for the 2020 presidential race against an incumbent who often bashes Beijing.
The Taiwanese electronics manufacturer announced in mid-April the pending purchase of the property, which is at the corner of Main Street and Martin Luther King Jr. Boulevard and will be renamed "Foxconn Place Madison."
The meeting comes a day after Gou met with President Donald Trump to discuss updates to the southeast Wisconsin manufacturing project.
CEO Mark Hogan also declined to say if Foxconn officials first approached the state about reopening its deal.
Assembly Speaker Robin Vos on Thursday slammed the governor as "naive" and said it is highly unlikely the board of the WEDC would approve a change to the contract.
“The present contract deals with a situation that no longer exists," Evers said.
Terry Gou said he would make a decision "in a day or two" on a possible presidential bid, according to Taiwan's official Central News Agency.
Foxconn made the announcement Friday morning at Monona Terrace. Representatives from BMO Financial Group and UW-Madison were also in attendance.
A company statement said this marks the next phase of Foxconn's overall blueprint for its campus in Mount Pleasant.
Foxconn representatives did not answer a list of questions related to their partnership with Wisconsin’s flagship university.
"If they can’t work with the university to get the development talent that they need, they can no longer operate and then the entirety of the deal could fall through," a Foxhounds member said.
Bloomberg Businessweek interviewed 49 people familiar with the project, including company executives and former employees of the Racine County facility.
Evers told reporters he discussed the topic with Foxconn officials but doesn't believe the company is concerned.
Foxconn Technology Group reversed itself Friday saying it will construct a liquid-crystal-display manufacturing facility in southeast Wisconsin after President Donald Trump intervened amid news reports that put the future of the project in doubt.
Nikkei Asian Review Thursday reported the Taiwanese iPhone assembler's "$10 billion investment in display production in the state of Wisconsin has been suspended and scaled back as a result of negotiations with new Gov. Tony Evers."
The future of Foxconn Technology Group’s $10 billion high-tech manufacturing campus in southeast Wisconsin was cast into uncertainty Wednesday…
The figure falls short of the minimum 260 full-time jobs required under the state's contract with the company, meaning it will not receive any tax incentives this year.
Evers, who has touted his support for a $15 minimum wage in Wisconsin, also said he's open to creating exceptions to a $15 wage in rural areas and for teenage workers.
Foxconn Technology Group intends to invest $100 million in engineering and innovation research at UW-Madison that will help fund an interdisci…
His visit comes as he criticizes Harley-Davidson's decision to move some production overseas and as Foxconn scales back the initial size of its facility.
Foxconn says it's committed to spending $10 billion and creating up to 13,000 jobs.
Gov. Scott Walker says the funds can be absorbed in the existing budget from savings on other projects.
Foxconn CEO Terry Gou has agreed to back 25 percent of the tax credits deal should the company default on deal.
The state would no longer regulate wetlands or air pollutants except when required under federal law.
Gov. Scott Walker has signed a $3 billion incentive package designed to lure a Foxconn Technology Group flat-screen plant to southeastern Wisconsin.
It would be the largest ever subsidy by a U.S. state to a foreign company.
Gov. Scott Walker and Foxconn chairman Terry Gou signed the agreement on July 12.
Health care and education advocates and some Democrats are concerned how state incentives for Foxconn could affect the state budget.
The electronics giant would build TVs and other devices here using imported LCD panels until its Wisconsin LCD plant opened in about 2020.
The package of refundable tax credits and environmental regulation rollbacks now heads to the state Senate.
A liberal campaign watchdog group also is considering filing a complaint alleging Foxconn violated state lobbying rules.
Taxpayers will spend $1 billion more than the state receives in tax revenues for the first 15 years of the project, a state estimate shows.
Lawmakers will hear public testimony Thursday on a bill that gives Foxconn $3 billion in incentives.
Wisconsin taxpayers could be cutting checks to electronics manufacturer Foxconn sooner than 2020 if the company starts hiring scores of employees this year, the state jobs agency chief told the Wisconsin State Journal on Tuesday.
Gov. Scott Walker wants to exempt the firm from laws designed to prevent environmental damage, flooding and harm to drinking water.
Last week's Foxconn news was the rare announcement that won plaudits from both parties at the Wisconsin State Capitol.
The legislation also provides $250 million in bonding for the rebuilding and expansion of I-94.
For every ten jobs created at a massive electronics manufacturing campus planned to be built by Taiwanese tech giant Foxconn in southeastern Wisconsin, 17 more jobs will be created elsewhere in the state, an analysis shows.
Gov. Scott Walker on Thursday assured critics of his deal with Taiwanese tech giant Foxconn that the massive bundle of taxpayer-funded incentives Wisconsin has offered the company to build here will be tied to job creation.
The plant will create liquid-crystal display panels and could eventually employ as many as 13,000 people.
Foxconn CEO and founder Terry Gou and Pres. Donald Trump were joined by Wisconsin Gov. Scott Walker, Speaker of the House Paul Ryan, Vice Pres…
Dane County and much of Wisconsin could get a transformative economic boost if Taiwanese electronics giant Foxconn brings thousands of manufac…
The Wisconsin Senate’s top Republican said Thursday that the Legislature may have to pass a bill to help induce a Taiwanese technology company to bring a plant to Wisconsin.
Assembly GOP leaders, in a memo made public Wednesday, also urge business groups to offer their own ideas to resolve the state budget impasse.
The business news you need
With a weekly newsletter looking back at local history.