When Taiwan-based Foxconn Technology Group, the world’s largest computer electronics manufacturer and a major supplier for Apple Inc. /zigman2/quotes/202934861/composite AAPL -0.68% , breaks ground Thursday in Racine County, just south of Milwaukee and about 90 miles north of Chicago, it’s on its way to becoming the largest private-sector employer in Wisconsin — adding a projected 13,000 positions at full capacity.
As the project has gained traction over the past year, detractors have besmirched their own state as “Foxconnsin,” given the heavily sweetened deal for the private concern. Yet proponents of Foxconn /zigman2/quotes/204111604/delayed TW:2354 +1.50% living and working in the industrial and agricultural region can’t wait to watch the economic boost roll in for a state already sitting on a record-low unemployment rate near 3%.
Both sides concede that even with a potential payoff, there’s a cost , to the taxpayers of Wisconsin and perhaps politically for two of Foxconn’s biggest supporters, Gov. Scott Walker and President Donald Trump, whose narrow Wisconsin win helped seal a long-shot run for the White House.
Taking stock of Foxconn’s winners and losers offers a lesson for the pursuit of public-private partnerships in Wisconsin and beyond.
— A hog of a project? Groundbreaking for the $10 billion Foxconn complex is supported by $4.7 billion in taxpayer subsidies when the state’s $3 billion is added to the amount kicked in by municipalities around the 20-million-square-foot plant — a price tag that has gone up by $1 billion since the deal was announced last year. Some observers say it’s the best evidence to date of the manufacturing revival fueled by President Donald Trump’s “America First” policy. Yet, 30 miles away sits a Wisconsin, and arguably American, icon in Harley-Davidson /zigman2/quotes/207565294/composite HOG +1.56% , which just this week has said it’s moving some production of motorcycles overseas to avoid tariffs.
The state is on the hook for 40% of the public bonds that finance the local expenses, including roads and more, if the project falls short, The Wall Street Journal reports. The Wisconsin Economic Development Corporation, which negotiated the contract, told the Journal that the state had a personal financial guarantee from Foxconn Chairman Terry Gou to pay back part of the costs to the state if the company doesn’t fulfill its promises.
— Test of Trump populism? The contrasting news around the groundbreaking provides the backdrop for Trump’s visit Thursday. The president carried Wisconsin by less than 1 point — just under 23,000 votes. Only 44% of respondents in last week’s Marquette University poll approved of the job he’s doing, while 50% disapproved. Walker, meanwhile, faces a big field of eight contesting Democrats for governor in a tight 2018 race .
— Biggest incentives ever for a foreign company . Republicans in Wisconsin and farther afield were mostly unified in support of Foxconn, saying it is a once-in-a-generation opportunity to transform the state’s economy with this grasp at manufacturing-meets-technology. If paid out — incentives are tied to jobs and investment benchmarks, as Gov. Walker was emphasizing again Thursday — the bonus given Foxconn would be the most paid to a foreign company in U.S. history; it comes largely in the form of tax credits, including sales-tax exemptions.
But the citizens footing that bill aren’t entirely convinced. The Marquette poll released last week showed 46% think the state is paying more for the plant than is worth, while 40% think it will provide at least as much value as the state is investing. One group, called Good Jobs First, which is critical of the subsidized plant, points to the 25 years it is projected to take the state to break even on its own $3 billion part of the subsidy.
—Factory jobs on the line. “Betting that a high-tech product will even be here a quarter-century from now is like betting on modems or beepers or MP3 players,” said Good Jobs First Executive Director Greg LeRoy, who says Wisconsin taxpayers should consider the subsidized, and now shuttered, Dell plant in Winston-Salem, N.C.
New technologies such as the Internet of Things, analytics, advanced robotics, augmented reality and 3-D printing play to U.S. strengths, say manufacturing experts, but that can also mean traditional factory jobs won’t at all resemble their past.
— Build that wall? Illinois will be the big winner in this deal, proclaims LeRoy, of the Good Jobs advocacy group: “As someone who long lived in Chicago and consulted on job-retention efforts in southeast Wisconsin, I know that many of the people who will hire on with Foxconn will be Prairie State commuters.” Even Milwaukee is a little unsure of nearby job opportunities, as the company falls outside the city’s mandated hiring program that favors locals first .
—Big drinker. In a state that also leans on tourism, natural resources and agricultural revenue, Foxconn got a controversial workaround to meet its water needs. The Wisconsin Department of Natural Resources granted the company’s request to divert Lake Michigan water for its use— a move that’s leaving nearby states none too happy . Of the 7 million gallons that will flow to the factory daily, around 2.7 million will be lost mainly through evaporation, and the rest, according to the company, will be treated and then returned to the lake. Typically, factories that want to divert water from Lake Michigan must get approval from all eight states that surround the Great Lakes. Because Foxconn’s facility, which hasn’t been built yet, will be located just outside the boundaries of the Great Lakes Basin, it was able to apply for its water usage directly with the city of Racine.
There’s also a big reminder that comes with this project: the environmental bite that the smartphones Foxconn helps build can take, period.