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Or more accurately, “The Trouble with the Republican Response to the Foxconn Proposal.”
Rep. John Nygren summed up the majority Republican sentiment following the announcement of Foxconn’s decision (or is it really a decision?) to invest in Wisconsin. When Sen. Minority Leader Jen Shilling tweeted her concerns, saying “$3 billion is a lot of money when we still don’t have a budget to fund schools, roads and health care. When’s JFC meeting next?” Rep. Nygren replied, “Come on Senator cheer for WI. I know you want to, don’t let politics get in the way.”
He dismissed her concerns.
Other Republican legislators have the same cavalier attitude. Sen. Dave Hansen of Green Bay cautioned, “Given recent accounts of how its workers are treated and Foxconn’s strategy of getting every last nickel and dime it can from taxpayers to lower their costs, Governor Walker and any legislator thinking of supporting what could be a $3 billion incentive package should be very wary.” In response, Rep. Dave Steffen, R-Green Bay opined, “To think that someone would actively cheer against this type of economic growth is insane.”
Scott Walker himself told the people concerned about the Foxconn proposal to “Go suck lemons.”
These are flippant and irresponsible answers to serious questions. The Foxconn proposal is totaling up to well more than $3 billion dollars of taxpayer-funded support. It should not be approached casually.
Yet Republican lawmakers, responding politically, thus far appear to be content to read the press releases from Foxconn and WEDC, which gloss over many of the critical issues in the proposal.
The draft bill detailing the scope of Wisconsin’s giveaway to Foxconn was released late Friday afternoon, along with Mr. Walker’s call for a special session to beginning today to pass the bill. Included in the bill are
- Potential direct payments to Foxconn. So far, the state has acknowledged that the Foxconn proposal could cost “up to” $3 billion. A relatively small portion of that ($150 million) is for a sales tax exemption on construction materials used in the construction of the facility. The remainder, $2.85 billion, would be for cash payments directly to Foxconn (called “refundable tax credits”), partly for “job credits” (17% of salaries for jobs paying between $30,000 and $100,000) and partly for construction. These cash payments would represent a direct payment from the state treasury in the amount of between $200 and $250 million per year should Foxconn reach its 13,000-job target, far more than the income tax revenue from those jobs. Furthermore, construction credits will be paid to Foxconn regardless of whether jobs are created! Finally, the agency tasked with ensuring that jobs have been created would be WEDC — yes, the same agency that has consistently failed to track job creation for much smaller firms.
- General purpose revenue bonding for highway construction. The bill includes $250 million GPR bonding for highway construction of I-94 north-south corridor (Illinois border to Milwaukee). This bonding is contingent on the receipt of federal highway funds for the project, and that is contingent on the Republicans actually passing a budget, as well as on federal approval.
- Additional grants to localities for infrastructure development. The draft bill also includes what is called a “sum sufficient” amount (that is, whatever is needed) to fund 40% of the infrastructure improvement required for localities to prepare the way for Foxconn. Infrastructure improvement identified in the bill includes water lines, sewage lines, wastewater facilities, and public protection. There is no estimate of what this might cost, to either the state or the local governments.
- Fast-track construction of infrastructure by localities permitted. The bill permits the locality creating the electronics and information technology manufacturing zone to use the design-build system when contracting for water and sewage systems, and for wastewater treatment systems. This process permits “developers to submit proposals to provide completed projects in these areas without following the bidding requirements for public works projects that would otherwise apply.”
OVERRIDING ENVIRONMENTAL PROTECTIONS
- Waiver of environmental protections. The bill exempts the development (and all the manufacturing facilities within the newly-created electronics and information technology zone) from preparing an environmental impact statement, deeming that “a determination regarding the issuance of any permit or approval for a new manufacturing facility within an electronics and information technology manufacturing zone is not a major action for the purpose of the environmental impact statement requirement.” Mr. Walker, WEDC, and Foxconn have bragged that the facility in question will be the size of 11 Lambeau Fields. How can its construction NOT be a major action, especially for a company with a history of doing environmental damage???
- Waiver of wetland and waterway protections. The bill allows the company to dredge and fill wetlands without state permits, allows rerouting of waterways, and restricts the DNR’s ability to regulate making other changes to navigable waters without a permit. This policy applies even to the operation of the FoxConn facility, and electronics manufacturing can do great environmental harm.
- Waiver of several rules governing utilities. The bill exempts the development from obtaining certificates of authority usually required by the PSC for construction projects, and permits the relocation of high-transmission lines without PSC approval.
WHAT THE BILL DOES NOT INCLUDE
- Money to support training. Yep. This bill is silent on training, even though Mr. Walker has said that the UW and the tech schools need to get going on training people for FoxConn right away.
- Requirements that the employees and construction companies be from Wisconsin. Nope, nothing about that in the bill either. Nor was this in the Memorandum of Understanding. If Wisconsin is going to put this much money into the bill, shouldn’t we at least be sure that the employees live in Wisconsin?
WHAT COULD GO WRONG? WHAT DOES DUE DILIGENCE REQUIRE?
“Conservative” Republican legislators — and Democrats, of course (I am talking to you, Peter Barca) — must approach FoxConn the way they would approach such a proposal if it were coming from a Democratic governor — that is, with due diligence. They need to consider what can go wrong.
So far, the Republican lawmakers have reacted to Scott Walker’s pronouncements, the words of Donald Trump and Terry Gou, a document prepared by WEDC that was written with the intent to sell the proposal, and an “economic impact study” from Ernst and Young. This study was contracted for by FoxConn, and was also developed with the intent to sell the proposal, and has limitations. (For instance, the Ernst and Young study includes as positive economic impact for Wisconsin the very sales tax on construction materials which is waived by the bill draft presented for the special session.)
Due diligence requires that lawmakers also consider those reports of potential drawbacks to the Foxconn proposal. What are those drawbacks?
- One of those drawbacks is the existing condition of the Wisconsin state budget, where a $1 billion shortfall in transportation funding exists right now, and the state is on target for a $1 billion structural deficit when it begins the 2019-21 biennium. No matter how quickly the Foxconn development proceeds (no site is yet selected, property has not yet been acquired) increased tax revenues cannot possibly keep pace with the cash outlays to Foxconn for the construction credit. So yet more state services will need to be cut.
- Foxconn has a poor track record in fulfilling its investment promises. The most well-known example of this is the case of Pennsylvania, where Foxconn pledged a $30 million investment that never materialized. (Scott Walker attributes this failure to a “change in governor.”) Foxconn has made similar promises, though none as large as in Wisconsin, in Arizona, Colorado, Indonesia, India, and Brazil.
- At least some of the benefits of the proposal will likely accrue to other states, while Wisconsin taxpayers foot the bill. Since the enabling bill and MOU do not require that Foxconn employ Wisconsin residents or that Foxconn use Wisconsin contractors for construction, and the site for the development will be close to the Illinois border, Illinois workers and contractors will reap the benefits of employment while Wisconsin taxpayers literally pay a portion of their wages. Already-trained Illinois workers will get jobs; nearby Illinois construction firms, or national firms, could get construction contracts.
- The state’s environment could be further degraded and despoiled. The draft bill removes all state input into Foxconn’s environmental impact, both during construction and during operation. DNR spokesman Jim Dick’s answer to concerns was nonresponsive: “the bill is about streamlining the process and since Foxconn hasn’t said where the plant will be built no one knows if any wetlands will be affected.” Apparently state residents should just ignore the possibility. And the fact that federal rules will still apply is no comfort: with Scott Pruitt leading the EPA, and Donald Trump as president, it seems unlikely that the federal government will present a formidable barrier to development that is environmentally destructive.
Consider that at the beginning of his tenure, Scott Walker would not support a commitment of less than $10 million per year to high speed rail. This commitment would have supported nearly the same number of construction jobs. This commitment came with a factory deep in the heart of Milwaukee, which the state lost to Indiana, along with about $50 million in contract settlement payments by the state. Had Scott Walker been willing to commit less than $10 million per year to high speed rail, Wisconsin would have had those construction jobs, would have had ancillary businesses, businesses would have been built on the Amtrak corridor, Milwaukee-Madison business links would have strengthened, traffic would have decreased on I-94, decreasing highway construction costs now and in the future.
But less than $10 million per year was too costly — and now $200 to $250 million per year is not? Please, Republican legislators, this bill must be approached not with cheerleading, but with deep scrutiny to ensure that the individual taxpayers of WI are protected. Wisconsin must not be the victim of Scott Walker’s Foxconn con.
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