On June 28, 2018, Foxconn officially broke ground on its massive manufacturing facility in Pleasant Prairie, Wisconsin. Foxconn is projected to be the largest manufacturing facility in Wisconsin history, reaching approximately 1 million square feet in size, employing an estimated 13,000 workers, and adding $51.5 billion to the state’s economy over 15 years.
However, since the day the Foxconn deal was announced, the project has been controversial for a number of reasons. For starters, Foxconn has a huge price tag, which includes approximately $2.85 billion in financial incentives provided by the state of Wisconsin to attract Foxconn to Wisconsin. Also, many people have raised concerns about the potential environmental impact of Foxconn on the surrounding area with respect to water quality, air quality and damage to wetlands. Finally, in today’s hyperpartisan political world, every issue has its supporters and detractors.
To help REALTORS® better understand some of the issues related to Foxconn, this article provides 10 questions and answers to address some of the most common areas of confusion related to the project. At this point in the project’s development timeline, the questions fall into three main categories: state incentives, return on investment and jobs, and environmental impacts.
State incentives
Question 1: How much did Wisconsin offer in state incentives to attract Foxconn to Wisconsin?
Wisconsin offered Foxconn $2.85 billion in state tax incentives if Foxconn meets all of its employment and capital investment goals. Foxconn will receive an additional $764 million in local government incentives, $139 in state sales tax exemptions, and $717 million in construction costs and grants. Thus, the total financial package for Foxconn is approximately $4.5 billion, with state tax incentives making up $2.8 billion of the total.
Question 2: Did Wisconsin offer more in state incentives than any other state?
In addition to Wisconsin, four states reportedly had a legitimate shot at landing Foxconn: Michigan, North Carolina, Ohio and Pennsylvania. According to news reports, Michigan offered Foxconn financial incentives with an estimated value of $3.8 billion. However, this included approximately $1.5 billion in existing tax cuts that any manufacturer that moves to the state would receive. Wisconsin offers similar tax incentives for manufacturers that move to the state, but those incentives were not included in the $2.85 billion incentive package.
Question 3: Will Foxconn receive all the state tax credits regardless of the number of jobs it creates or the size of its capital investment?
The state tax credits awarded to Foxconn are considered “pay as you grow.” This means that Foxconn will receive the tax credits only upon meeting various performance standards consisting of both jobs and capital investments in Wisconsin. The company can only receive the full $2.85 billion in credits after it has created and maintained 13,000 jobs and made the full $9 billion in capital investment. Each year, an independent accounting firm must verify that Foxconn has met the job creation and capital investment requirements before the tax credits are paid out. The contract reportedly contains taxpayer protection provisions that require the tax credits to be paid back if Foxconn defaults on the contract.
Return on investment and jobs
Question 4: What will Wisconsin’s return on investment be compared to the $2.85 billion state incentive package?
According to a study by the Metropolitan Milwaukee Association of Commerce, Foxconn will add approximately $51 billion to Wisconsin’s GDP over 15 years. Based upon the state’s $2.85 billion investment, this equates to approximately $18 of return for every $1 spent by the state on incentives.
Question 5: What is the annual salary for all of Foxconn’s jobs?
To qualify for the state tax credits, Foxconn must pay an average annual salary of $53,875 for all jobs associated with the company. Tax credits can be earned on jobs with salaries ranging from $30,000 to $100,000, and minimum annual job-creation numbers must be met in order for Foxconn to receive any jobs tax credits.
Questions 6: Will Foxconn only benefit southeastern Wisconsin, or will it benefit other parts of Wisconsin too?
While it undoubtedly will have a tremendous economic impact on southeastern Wisconsin, Foxconn also will provide economic opportunities and benefits for businesses and employees across the state. During the construction phase, 27 construction contractors from Dodge, Jackson, Marathon, Outagamie, Walworth and Wood counties have already received contracts. Foxconn estimates that it will directly or indirectly employ 800 workers from 60 counties in just the excavation phase of the project, which accounts for $100 million of the $10 billion in construction projects.
Foxconn recently announced that it will locate facilities in various communities around the state. In Eau Claire, Foxconn will create a technology hub that will employ at least 150 people. In addition, Foxconn will create an innovation center in Green Bay that will employ approximately 200 people. Finally, Foxconn purchased a building in downtown Milwaukee that will serve as the company’s executive offices.
Once the project is fully operational, an economic study by Ernst and Young estimates that Foxconn will spend about $1.4 billion annually in goods and services sourced from Wisconsin. For comparison, Oshkosh Corporation is estimated to have $300 million in annual supply chain purchases impacting over 700 companies in 140 communities. Thus, Foxconn will have an impact of more than four times that amount.
Question 7: What is the construction timeline?
Construction on the Foxconn manufacturing facility began in April 2018, with excavation being done on the 800-acre site. At the peak of the excavation, soil will be moved on site at an approximate rate of 1 million cubic yards per month, and 1,000 truckloads of aggregate per day will be carried to and from the site. In late summer or early fall of 2018, construction will commence on some of the multi-purpose buildings. By spring or summer of 2019, construction on the major manufacturing buildings will begin with final construction to be complete no later than December 2025.
Environmental impacts
Question 8: Is Foxconn exempt from any environmental regulations? If so, which ones?
Foxconn must comply with all state and federal air, water quality, solid and hazardous waste standards, and is treated the same as any other business in the state related to air permitting, stormwater control, hazardous waste, wastewater regulation and Great Lakes water use regulations.
Question 9: Will Foxconn contribute significantly to air pollution in southeastern Wisconsin?
Foxconn is not exempt from any state or federal Clean Air Act requirements and to date has obtained several air permits. The company also plans to use state-of-the-art technology to control and minimize air emissions.
In addition, the Wisconsin Department of Natural Resources (DNR) found that Foxconn’s contribution is not going to be a significant contributor to air quality issues in the region. Most of the pollution-causing ozone in Wisconsin comes from other states. Wisconsin has already cut emissions of the two main ozone-forming compounds — nitrogen oxides and volatile organic compounds — by 50 percent between 2002 and 2014. Based on the emission rates allowed in Foxconn’s air permits, the DNR estimates the highest possible relative increase in Racine County emissions to be less than 4 percent as a result of the Foxconn development, and the emissions would be just 0.07 percent of the nitrogen oxides and 0.1 percent of the volatile organic compounds emitted within the three-state Chicago metro area.
Question #10: Is Foxconn allowed to fill wetlands without any mitigation or regulatory oversight?
Foxconn is allowed to fill certain wetlands on the property but is required to mitigate wetlands at a higher ratio than other companies in the state. For every acre of wetland filled, Foxconn must restore two acres of wetlands. This requirement is more than the 1.2 to 1 acre ratio at which other companies are normally required to mitigate. The company has also paid more than $2 million into the Wisconsin Wetlands Conservation Trust In Lieu Fee program, which meets its mitigation obligation. The federal Army Corps of Engineers maintains regulatory oversight of all federal wetlands.
Foxconn will undoubtedly be a hot topic during the election this fall, with both opponents and supporters trying to influence how Wisconsinites feel about the project as well as elected officials who support or oppose it. As with other issues, it’s prudent to remain educated about Foxconn and the impacts on you, your community and the state of Wisconsin.
For more information about Foxconn, visit wisconnvalley.wi.gov.
Tom Larson is Senior Vice President of Legal and Public Affairs for the WRA.
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