Wisconsin Governor Scott Walker and Foxconn Technology Group Chairman Terry Gou signed a memorandum of understanding late Thursday that calls for up to $3 billion in government assistance and the sale of at least 1,000 acres of land.
The document marks the formal start of a project state officials say could eventually result in 13,000 jobs and $10 billion in investment from the Taiwanese manufacturing giant by 2020. Landing the factory, which will produce LCD display monitors, also gives a political boost to both Walker and President Donald Trump.
The state tax breaks and other incentives represent what Walker called the largest economic development project in Wisconsin’s history. In exchange, the company has promised to create jobs with an average salary of nearly $54,000.
Walker defended the size of the assistance from taxpayers, arguing it’s necessary if Wisconsin is going to "play in the big leagues" and compete with other locations.
"It’s comparable to just about every other major financial incentive like this for a major project anywhere around this country or around the world," he said at a Milwaukee art museum on the banks of Lake Michigan that was taken over for the evening by flat-panel screens, Wisconsin and Foxconn officials and a well-stocked bar.
Gou described Walker as a dogged salesman in his pursuit of the company. He said the Midwest’s work-ethic also appealed to him.
"An eagle cannot fly without muscle," he said, as he described the region with a reference to the code name he’d given the search for a site.
The Wisconsin package includes up to $1.5 billion in income tax credits for job creation, $1.35 billion in income tax credits for capital investment and up to $150 million in sales tax exemptions for construction material purchases, according to a document prepared by the state’s economic development agency.
The incentives, which would be spread over 15 years, would be pro-rated based on how much is spent and how many jobs are actually created, according to the Wisconsin Economic Development Corporation. There are provisions that would require Foxconn to repay portions of the tax credits if the jobs and investment aren’t kept in Wisconsin.
The state’s legislature needs to approve the package. Walker has said he expects legislation to be drafted in the next few days and that he’ll call a special session to review the deal as soon as next month. Walker’s Republican Party controls both chambers.
In a state with a long history of organized labor, union forces are making their own demands.
“In order for the Foxconn deal to be a real winner for Wisconsin, every worker at Foxconn must have the freedom to stand together in union to negotiate a fair return on work,” Phil Neuenfeldt, president of the Wisconsin AFL-CIO, said in a statement. “Real freedom is being able to collectively bargain so you can pay the bills, have high safety standards, and balance work with family life.”
Foxconn has said it hopes to increase its investment in U.S. manufacturing, with a focus on flat-panel screens. The company has told the White House it hopes the Wisconsin plant is the first of several in the U.S.
Economic development officials from Illinois, Indiana, Michigan, Ohio, Pennsylvania, Texas, and Wisconsin competed for the initial plant announcement. The company viewed its location decision at least in part through a political lens, one person familiar with the matter said.
An exact location for a plant Walker has described as equivalent in size to 11 Lambeau Fields (the home of the Green Bay Packers) hasn’t yet been identified, but Wisconsin officials have said the company is looking at two sites in Kenosha and Racine counties in the state’s far southeast corner.
White House Chief of Staff Reince Priebus has said he’d talked with Trump about the plant being locating in his hometown of Kenosha on the site of a former Chrysler factory.
Both locations being considered are in the congressional district represented by House Speaker Paul Ryan, whose relationship with Trump has at times been strained. Ryan, who is facing Democratic and Republican challengers in 2018, will be able to claim some of the credit for the added jobs after personally lobbying Trump and Priebus to help win the plant.
The deal is a huge political boost for Walker, who lost out to Trump in a bid for the 2016 Republican presidential nomination. He has indicated he plans to run for a third gubernatorial term in 2018. Walker’s office has said the plant would spur 22,000 additional indirect jobs ahead of the plant’s opening, including 16,000 construction-related jobs.
Even before the Foxconn deal, the state’s unemployment rate was below the national average of 4.4 percent. The 3.1 percent recorded in Wisconsin in June is already the lowest level since October 1999.
Walker’s embrace of taxpayer money for Foxconn is in conflict with his limited-government philosophy. He’s also previously backed public subsidies for a Milwaukee professional basketball arena and for Wisconsin-based companies such as Kohl’s, subsidies that would be described as "corporate welfare" by some in his party.
“I believe people create jobs, not the government,” the governor said in an April 2015 speech in New Hampshire as explored a presidential bid.