After months of negotiations, the state and Foxconn Technology Group have a new deal that is drastically different from the agreement signed in 2017, and the changes reflect the dramatic downsizing of the development in Mount Pleasant.
“We’ve resized the entire contract,” Missy Hughes, secretary and CEO of the Wisconsin Economic Development Corp. told reporters on Wednesday.
The key changes from Foxconn are a reduction in the number of jobs — from 13,000 to 1,454 — and a cut in the estimated capital investment from $10 billion to $672.8 million.
On the state side, the amount of taxpayer money that was on the line was as high as $2.85 billion under the previous agreement. That's been reduced to $80 million.
State and Foxconn officials made a number of additional notable changes to their agreement.
Change in purpose
Four years ago, Foxconn promised a Generation 10.5 thin-film-transistor LCD screen manufacturing facility capable of making huge display screens.
In 2018, Foxconn rolled back the size of the facility to a Gen 6 capable of making screens for TVs, smartphones and tablets.
Now, it seems like the company is abandoning LCD screens in exchange for a broader focus.
The changing nature of Foxconn's plans for the facility has been a point of emphasis for the Evers administration, and officials maintained if the company wasn't building the large facility originally promised, the work would not count toward tax credits.
“The original Foxconn agreement was unusual in that we were agreeing with them that they were going to produce a very specific item,” Hughes said. “As we’ve entered into the new contract with Foxconn, they have gotten the flexibility that they were seeking and we’ve been able to significantly reduce the taxpayer’s burden over the course of the 15-year contract that was originally entered into.”
The change gives Foxconn flexibility to manufacture different products and still be aligned with the contract in the state's eyes.
Foxconn Industrial Internet covered
Another major impasse between the state and Foxconn was the presence of the subsidiary company Foxconn Industrial Internet (Fii).
The Fii facility, a giant glass globe, can be seen from Interstate 94 in Mount Pleasant. The company is planning to manufacture computer servers from that location.
The state said the Fii was not included in the original agreement and did not count toward receiving tax credits.
Fii is included in the new agreement and the hiring and work done at that facility will now likely count toward tax credits.
Deals with local governments still in place
Foxconn has separate local agreements with both Racine County and the Village of Mount Pleasant under the state Department of Administration. In those agreements the state is backing up the bonds the local governments are taking out up to 40%. That means if Foxconn were to default for whatever reason and the local governments were burdened with the debt, the state would pay for 40% of the debt.
That moral obligation from the state remains in place for the local governments.
“With our new agreement with Foxconn we have a provision in there that before Foxconn receives payment on any tax credits they must be in good standing with the locals on their development agreement,” Hughes said. “We wanted to make sure that there wasn’t a situation where WEDC was authorizing tax credits for Foxconn but meanwhile Foxconn was not making payments to the locals.”
That also applied to the local tax incremental financing (TIF) district that has been set up in Mount Pleasant. In the coming years, Foxconn is going to pay taxes to Mount Pleasant and Racine on a valuation of $1.4 billion regardless of what is actually on the land. That agreement remains in place.
In the previous agreement, Foxconn could not be held responsible if it defaulted on its obligations due to catastrophic accidents, acts of war or terrorism, civil or military disturbances, or natural catastrophes.
Those reasons remain in place, but "pandemics, epidemics and quarantines" have been added to the list.