A key vote on the pending Foxconn contract was delayed last week because the state wouldn’t have been able to recoup taxpayer funds if the Taiwanese company didn’t fulfill its end of the deal, according to a member of the board overseeing the negotiation.
Wisconsin Economic Development Corp. CEO Mark Hogan declined to comment on the reason for the delay after testifying Tuesday before the Legislature’s audit committee.
WEDC board member Sen. Tim Carpenter, D-Milwaukee, declined last week in an interview with the Wisconsin State Journal to disclose details of why a scheduled vote on the contract was delayed. But he told the newspaper the issue was a “nuclear bomb” that would have left taxpayers exposed.
In an interview Tuesday with the State Journal, Carpenter offered more detail, saying Hogan told board members last week that the way the deal was structured the agency couldn’t guarantee it could protect taxpayers if the company violated the agreement.
“We could have given them all this money and we wouldn’t have been able to get it back,” Carpenter said.
The state is planning to give the company $3 billion in refundable tax credits in exchange for a $10 billion LCD-screen factory in Racine County, creating up to 13,000 jobs.
Carpenter said Tuesday he decided to discuss the issue in greater detail after Alan Marcuvitz, a lawyer advising the village of Mount Pleasant, discussed the matter with the village board Monday night. Marcuvitz said there were “technical issues” with the contract “because one of the companies is from overseas” and the issue had been resolved, according to the Milwaukee Journal Sentinel.
Carpenter said the problem was “more than a technical issue.”
Hogan told the State Journal on Tuesday that WEDC has retained the Foley & Lardner law firm and foreign counsel and is “going through the normal process we should go through to make sure we’re doing the appropriate due diligence.”
Democrats on the Legislature’s Joint Audit Committee urged Hogan to release the contract details publicly before the board votes on it. Carpenter has asked that the WEDC board be allowed to review the contract before voting, but as is common practice, the board will only vote on a staff review and summary of the deal.
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Hogan declined to change the process while defending the agency’s record on contracts.
“I don’t think that this audit reveals numerous examples of mistakes that were made in contracts,” Hogan told the committee. “This audit shows improvements that we’ve made at WEDC.”
Audit findings debated
The audit committee had been scheduled to meet Tuesday to discuss the latest state audit of WEDC, made public in May. The nonpartisan Legislative Audit Bureau reviewed 133 awards and found for a third consecutive biennial audit that the agency did not annually verify job-related information as required by law.
Gov. Scott Walker and the Republican-controlled Legislature created the agency in July 2011 to drive job creation in the state. Between then and September 2016, there were 192 awards that had been awarded and run their course, including 24 with expected job creation or retention results, the audit found.
The audit found the agency couldn’t be certain about the number of jobs created or retained as a result of those awards. It also found the agency can’t be certain about the accuracy of jobs information in its online database because it didn’t verify the information submitted by tax credit recipients, and didn’t contractually require grant and loan recipients to submit detailed information on job retention and creation.
Hogan said WEDC is close to signing an agreement with the Department of Workforce Development that will provide independent verification of its job creation data, which auditors recommended.
The audit also found the amount of uncollectable loans was $11 million in December 2016, up from $1.3 million two years earlier. Hogan said $2.3 million were loans forgiven because companies had fulfilled job-creation requirements, but Rep. Terese Berceau, D-Madison, pointed out that the audit found the agency can’t prove those requirements were met.
“Right now we can’t say this loan was forgiven because we know they created these jobs,” Berceau said.