Eco-Devo: A Story of Diminished Expectations

February 1, 2019

by Dave Penticuff

The best thing, we think, about Foxconn Technology Group’s now reconsidered plans for a U.S. manufacturing plant is that they apparently never considered my Indiana county for the project.

Where we would be if they had turned to our County Economic Growth Council for incentives to locate in our community? We’d be considerably poorer, no doubt.

Foxconn is becoming Wisconsin’s lesson to be learned, and an unfortunate part of the legacy left by former Gov. Scott Walker. Other politicians please note that trying to buy prosperity with a big economic development “win” can easily cause a loss at the polls come re-election time.

We think voters are catching on even if mayors, council members, legislators and governors are not.

Foxconn is reworking plans for its first U.S. plant, which promised a $10 billion investment and up to 13,000 jobs in southeastern Wisconsin. The incentive package from state and local government also ran into the billions.

The Chicago Tribune reports that the Taiwanese electronics manufacturer, which supplies Apple, said this week that it is considering adding research and development work to a facility originally designated for manufacturing.

“As we have previously noted, the global market environment that existed when the project was first announced has changed,” the company said in a statement. “As our plans are driven by those of our customers, this has necessitated the adjustment of plans for all projects, including Wisconsin.”

It’s true that much of the incentive package was based on performance by Foxconn. In fact, it fell short of employment projection for 2018 with 178 full-time jobs created. It did not claim its funds for 2018.

However, the community has made investments that will not be refunded should the project fail or be substantially downgraded from what was originally announced.

Plans have already been laid for related businesses to support the Foxconn plant, while landowners near the site considered plans to move out of the development’s way.

“Local colleges and universities also began training a pipeline of potential employees,” The Tribune reported. “Kenosha’s Gateway Technical College added an advanced manufacturing curriculum and new lab space. The school said at the time that the scale of Foxconn’s plans helped Gateway expedite the growth of its manufacturing program.”

The dollar amounts promised to Foxconn have been an ongoing concern for some taxpayers.“Everyone was saying, ‘Racine needs manufacturing jobs.’ That’s how it was billed,” one said. “I am for jobs, it’s just the amount of incentives promised for these jobs.”

Yes. It was breathtaking.

Michael Hicks, director of the Center for business and economic research at Ball State University, said in July 2017, after the Foxconn deal was announced, that Wisconsin taxpayers are on the hook for an awful lot should Foxconn actually build the plant it promised.

“In order to build a $10-billion plant in southeast Wisconsin, which is set to employ 3,000 folks earning just under $54,000 per year, Wisconsin sold the farm,” said Hicks. “The Walker administration offered $3 billion in tax incentives over 15 years, and expect local governments to offer property tax abatement, which will surely exceed $2 billion over 15 years. Thus, it appears, for every job Foxconn creates, Wisconsin taxpayers will be expected to pony up $66,000 in state and $44,000 in local tax incentives for the next 15 years. This is stunning. Wisconsin will pay more than $100,000 per job in tax incentives, each year, to create $54,000-per-year jobs.”

Hicks characterized the Foxconn deal as being worse than bad. “It might well be the worst large economic development deal in history.”

So, maybe, if the development morphs and shrinks and Foxconn continues not to meet employment goals, it would actually be the best thing possible for our fellow Americans in Wisconsin.

Learn from this, Indiana. Government is really terrible at picking winners in business but is fantastic at making losers out of taxpayers — again and again.

David Penticuff, an adjunct scholar of the Indiana Policy Review Foundation, is editor of the Marion Chronicle-Tribune, in which a version of this essay was published Jan. 31.



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