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State, Foxconn say new deal reached for southeast Wisconsin manufacturing plant with fewer tax credits

State, Foxconn say new deal reached for southeast Wisconsin manufacturing plant with fewer tax credits

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After more than a year of negotiations, state and Foxconn Technology Group officials say they have reached a new agreement regarding the Taiwan-based company’s manufacturing plant near Racine that would provide Foxconn fewer state tax credits than originally agreed upon.

Specific details of the deal were not made public Monday, but may be released as early as Tuesday.

The embattled Foxconn project in southeastern Wisconsin has faced considerable scrutiny over the last three years for failing to meet expectations laid out in its original 2017 agreement. State officials told the company more than a year ago it would not be eligible for tax credits under the existing contract and a new agreement would be necessary.

[NFA] Major Apple supplier Foxconn may make electric vehicles at its high-profile but troubled plant in the U.S. state of Wisconsin, though could decide on Mexico, the chairman of the Taiwanese company said on Tuesday. Conway G. Gittens has more.

The new contract, which still must go through the Wisconsin Economic Development Corp. board of directors for final approval, would provide Foxconn with reduced tax incentives in exchange for a more flexible agreement. Details on the new contract were not immediately provided.

The WEDC board is scheduled to meet Tuesday afternoon.

In a statement Monday, Gov. Tony Evers said the new agreement “works for Wisconsin taxpayers while providing the support Foxconn needs to be successful here in our state.”

“I’m incredibly grateful for all the folks at the WEDC and Foxconn for their help working to find a solution that works for everyone, and I look forward to the amendment being approved by the WEDC Board of Directors,” Evers said.

A spokeswoman for Foxconn declined to provide details regarding the new contract and WEDC spokesman David Callender said the organization does not comment on pending contracts until taken up by its board.

“In response to unforeseeable economic conditions, Foxconn began formal negotiations with a desire to lower taxpayer liability in exchange for the flexibility to pursue business opportunities (that) meet market demand,” Jay Lee, Foxconn board member and vice chairman, said in a statement.

Assembly Minority Leader Gordon Hintz, D-Oshkosh, a member of the WEDC board of directors, said in an email he was encouraged that the state and company appear to have reached an agreement.

“State and local taxpayers have already spent over a billion dollars on a project with little to show more than three years later,” Hintz said. “It is my hope that any new contract brings better transparency and clarity from Foxconn going forward.”

Under Foxconn’s original contract, signed in 2017 by former Gov. Scott Walker, the company would earn incentives totaling as much as $2.8 billion in state credits over 15 years as the company hired upwards of 13,000 employees and made a $10 billion capital investment in the state. Other state and local incentives bring the total to $4 billion.

Former President Donald Trump, who attended the facility’s 2018 groundbreaking ceremony, touted the Foxconn project as the “eighth wonder of the world.”

However, Foxconn’s original contract is unique in that it specifies exactly what the company needs to build in order to receive state tax credits. That contract calls for a so-called Generation 10.5 facility that would build larger panels for TV screens, but the project was later downsized to Generation 6, which would manufacture small screens for mobile phones, tablets, notebooks and wearable devices.

Last October, WEDC secretary Melissa Hughes sent a letter to company officials stating that “Foxconn’s activities and investments in Wisconsin to date are not eligible for credit.” State officials have contended that the company is ineligible for tax credits, as the state has been unable to calculate job creation or capital investment tax credits because Foxconn has failed to carry out the project as promised.

Foxconn officials challenged the state’s refusal to grant state tax credits later that month, but also described ongoing conversations with WEDC on a new agreement.

It remains unclear what Foxconn would make under the new contract. Foxconn officials last year began hinting at the possibility of building electric vehicles, with manufacturer Fisker announcing in February a partnership with Foxconn to build vehicles. Last month, company chairman Young Liu said the Mount Pleasant factory was in the running, along with Mexico, to be Foxconn’s North American electric vehicle production hub — although no formal decisions have been made.

Foxconn has yet to receive any state dollars, but the project in Mount Pleasant already has cost the state more than $200 million in state and local road improvements, sales and use tax exemptions, grants to local governments and for worker training and employment. Foxconn officials estimated in October the company had invested $750 million in the state.

Foxconn officials in 2018 pledged $100 million to help fund a new UW-Madison engineering building and company-related research. Records show the university received $700,000 in the first two years of the deal — less than 1% of the company’s pledge.

Keep up with the latest news on Foxconn in Wisconsin

Read more news coverage of Taiwanese electronics manufacturer Foxconn's decision to build a massive plant in Wisconsin.

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Foxconn Technology Group reversed itself Friday saying it will construct a liquid-crystal-display manufacturing facility in southeast Wisconsin after President Donald Trump intervened amid news reports that put the future of the project in doubt.

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Nikkei Asian Review Thursday reported the Taiwanese iPhone assembler's "$10 billion investment in display production in the state of Wisconsin has been suspended and scaled back as a result of negotiations with new Gov. Tony Evers." 

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The figure falls short of the minimum 260 full-time jobs required under the state's contract with the company, meaning it will not receive any tax incentives this year.

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Evers, who has touted his support for a $15 minimum wage in Wisconsin, also said he's open to creating exceptions to a $15 wage in rural areas and for teenage workers.

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Foxconn Technology Group intends to invest $100 million in engineering and innovation research at UW-Madison that will help fund an interdisciplinary research facility for students and faculty to collaborate closely with the company’s Wisconn Valley Science and Technology Park near Racine.

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His visit comes as he criticizes Harley-Davidson's decision to move some production overseas and as Foxconn scales back the initial size of its facility.

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Foxconn says it's committed to spending $10 billion and creating up to 13,000 jobs.

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Foxconn CEO Terry Gou has agreed to back 25 percent of the tax credits deal should the company default on deal.

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The state would no longer regulate wetlands or air pollutants except when required under federal law.

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Gov. Scott Walker has signed a $3 billion incentive package designed to lure a Foxconn Technology Group flat-screen plant to southeastern Wisconsin.

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It would be the largest ever subsidy by a U.S. state to a foreign company.

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Gov. Scott Walker and Foxconn chairman Terry Gou signed the agreement on July 12. 

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Health care and education advocates and some Democrats are concerned how state incentives for Foxconn could affect the state budget.

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The electronics giant would build TVs and other devices here using imported LCD panels until its Wisconsin LCD plant opened in about 2020.

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The package of refundable tax credits and environmental regulation rollbacks now heads to the state Senate. 

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A liberal campaign watchdog group also is considering filing a complaint alleging Foxconn violated state lobbying rules. 

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Taxpayers will spend $1 billion more than the state receives in tax revenues for the first 15 years of the project, a state estimate shows. 

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Lawmakers will hear public testimony Thursday on a bill that gives Foxconn $3 billion in incentives. 

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Wisconsin taxpayers could be cutting checks to electronics manufacturer Foxconn sooner than 2020 if the company starts hiring scores of employees this year, the state jobs agency chief told the Wisconsin State Journal on Tuesday.

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Gov. Scott Walker wants to exempt the firm from laws designed to prevent environmental damage, flooding and harm to drinking water.

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Gov. Scott Walker says the funds can be absorbed in the existing budget from savings on other projects.

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The legislation also provides $250 million in bonding for the rebuilding and expansion of I-94.

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For every ten jobs created at a massive electronics manufacturing campus planned to be built by Taiwanese tech giant Foxconn in southeastern Wisconsin, 17 more jobs will be created elsewhere in the state, an analysis shows.

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Gov. Scott Walker on Thursday assured critics of his deal with Taiwanese tech giant Foxconn that the massive bundle of taxpayer-funded incentives Wisconsin has offered the company to build here will be tied to job creation.

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The plant will create liquid-crystal display panels and could eventually employ as many as 13,000 people.

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The package would not be included in the next state budget, a top lawmaker says.

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The Wisconsin Senate’s top Republican said Thursday that the Legislature may have to pass a bill to help induce a Taiwanese technology company to bring a plant to Wisconsin.

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Assembly GOP leaders, in a memo made public Wednesday, also urge business groups to offer their own ideas to resolve the state budget impasse.

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Evers told reporters he discussed the topic with Foxconn officials but doesn't believe the company is concerned.

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Bloomberg Businessweek interviewed 49 people familiar with the project, including company executives and former employees of the Racine County facility.

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Terry Gou said he would make a decision "in a day or two" on a possible presidential bid, according to Taiwan's official Central News Agency.

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“The present contract deals with a situation that no longer exists," Evers said. 

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Foxconn made the announcement Friday morning at Monona Terrace. Representatives from BMO Financial Group and UW-Madison were also in attendance.

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A company statement said this marks the next phase of Foxconn's overall blueprint for its campus in Mount Pleasant. 

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Foxconn representatives did not answer a list of questions related to their partnership with Wisconsin’s flagship university.

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"If they can’t work with the university to get the development talent that they need, they can no longer operate and then the entirety of the deal could fall through," a Foxhounds member said. 

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The company is possibly interested in space at 1 W. Main St., which is currently owned by BMO Harris Bank.

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Assembly Speaker Robin Vos on Thursday slammed the governor as "naive" and said it is highly unlikely the board of the WEDC would approve a change to the contract. 

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CEO Mark Hogan also declined to say if Foxconn officials first approached the state about reopening its deal.

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Gov. Tony Evers told CNBC during a June 27 interview posted online Tuesday that he believes the plant will have about 1,500 employees in place when production begins in May 2020.

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The Taiwanese electronics manufacturer announced in mid-April the pending purchase of the property, which is at the corner of Main Street and Martin Luther King Jr. Boulevard and will be renamed "Foxconn Place Madison."

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The meeting comes a day after Gou met with President Donald Trump to discuss updates to the southeast Wisconsin manufacturing project.

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The announcement comes a few weeks after UW-Madison reported receiving less than 1% of a $100 million commitment Foxconn made in August 2018.

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Foxconn's partnerships with UW campuses have seen mixed success so far, with a UW-Milwaukee program drawing more student participation than announced, but developments appearing to progress slowly at UW-Madison.

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The company's $3 billion contract with Wisconsin remains in question after state officials in December told Foxconn it no longer was eligible for tax subsidies agreed to in the original contract because the project has changed too much.

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Taiwanese electronics manufacturer Foxconn could use its Wisconsin factory to build ventilators needed to treat COVID-19 patients, according to the CEO of a medical hardware company that designs and makes ventilators.

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Foxconn Technology Group has challenged the state's decision earlier this month to refuse the Taiwan-based company's application for state tax subsidies for work taking place on the southeast Wisconsin facility.

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WEDC Secretary Melissa Hughes said "Foxconn’s activities and investments in Wisconsin to date are not eligible for credit" under the contract first signed back in 2017.

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President Donald Trump's top trade advisor Peter Navarro praised Wisconsin's controversial Foxconn manufacturing project, despite lingering questions surrounding the Taiwan-based company's contract for billions in state tax credits.

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