>> If I didn't get elected,
he definitely would not be spending $10 billion.
>> And for southeastern Wisconsin,
this is an absolute game changer.
>> From Washington, President Donald Trump and
Speaker Paul Ryan on Wednesday unveiled a plan
for a Foxconn plant in Wisconsin.
I'm Frederica Freyberg.
Tonight on "Here and Now" a first look at what we know about
that plan, and the closer look at the Foxconn Corporation
from a Beijing-based industry expert.
Then, a look ahead at options the legislature faces
to finance the incentive package for Foxconn.
Incentives pegged at $3 billion.
Later, a seller's market for property owners
in southeast Wisconsin as Foxconn eyes locations.
It's "Here and Now" for July 28th.
>> Funding for "Here and Now" is provided in part
by Friends of Wisconsin Public Television.
>> We just heard from President Trump and House Speaker Ryan
in Washington, giving a cheer for the prospect of a Foxconn
operation in the badger state.
Back at home, Governor Scott Walker held a Milwaukee welcome
party on Thursday evening.
Zac Schultz was there.
>> Governor Scott Walker and Foxconn chairman Terry Gou
signed a memorandum of understanding Thursday
taking the next step toward Foxconn's first factory
in the United States.
[cheers and applause]
>> Wow.
This is a big day for Wisconsin.
It is a big day for Foxconn.
>> The first phase of the $10 billion factory is expected to
be operational by 2020, and will produce liquid crystal display
panels, or LCD screens, for things like televisions.
>> With this deal, they will be made in America,
proudly in the great state of Wisconsin.
>> Wisconsin beat out several other states competing
for the factory.
And Chairman Gou credited Governor Walker
and the people of the state.
>> Why Wisconsin? People.
People should trust each other.
>> The deal won't come cheap.
If Foxconn creates the promised 13,000 jobs,
over the next 15 years, they will receive $3 billion in tax
credits from the state and more benefits from local governments.
>> Which is big.
It's bigger than anything we have done before.
But if you want to play in the big leagues,
it's comparable with just about every other major financial
incentive like this for a major project,
anywhere now in this country but around the world.
>> So far, most democrats like Minority Leader Peter Barca are
supportive of the proposal.
>> The opportunity is very exciting.
>> But he knows there are concerns about the size of the
tax credits.
>> I know that there will be some pushback.
There's no question about it.
On the other end of the spectrum,
it's not just the size of the package, you have to look at,
you know, the return on investments.
>> It's a really big number, but remember,
it's paid out over 15 years.
It's paid out only when people are actually hired and these are
way more than family-supporting jobs,
which is what we want in Wisconsin.
>> The next step requires the legislature to go into special
session and pass the state incentives into law.
Assembly Speaker Robin Vos says that will happen by mid-August
since the legislature won't have much say over the details.
>> I think most of the details have been negotiated with the
corporation, so of course we want to do our due diligence,
to see how they impact the taxpayer,
how we make sure there are guarantees in there.
>> The deal came together over the last few months and while
things are moving quickly, Governor Walker thinks the
impact on Wisconsin will last for generations.
>> This is something that will say to the world,
"We have arrived."
The eagle has landed
and it spread its wings and taken off again.
We are ready.
>> That was Zac Schultz reporting.
>> In tonight's closer look, we go to Beijing.
That's where we caught up with an economic development expert
in China who advises clients
on foreign technology strategy and acquisitions.
He is very familiar with Foxconn and its chairman.
He's also very familiar with Wisconsin,
having attended college and law school here.
Also working here for many years, including
as chair of the Wisconsin International Trade Council.
In a Skype interview, we started by asking Einar Tangen
his reaction to Wisconsin landing Foxconn.
>> I think it can be treated, if it's going to be forward,
as an opportunity.
The corridor between Milwaukee and Chicago
has been too long overlooked.
It could be the next site of a very,
very good tech corridor that could help
both Wisconsin and Illinois develop their attributes.
This is a wonderful area.
We'll see how it develops.
>> Do you think Wisconsin has the technologically trained work
force for this kind of operation?
>> Not currently, but you do have resources.
Quite frankly, I would advise that Wisconsin get together with
Illinois on this particular project because a lot of people
from Illinois are going to be filling the gap
that exists in these areas.
These are areas where, you know, traditionally blue collar
industries, some tech, but very, very small,
certainly not enough to fill the gap here.
I would expect people coming up from Illinois,
northern Illinois, coming there to work.
Illinois obviously has a very large tech corridor between the
universities in Wisconsin and Illinois.
I think there would be enough to fill the pipeline for a factory
like this.
>> You said you thought Foxconn would have expected closer to $5
billion in incentives to locate in Wisconsin.
Even at $3 billion in incentives that the Governor Walker
is announcing, in your mind,
is that a good deal for taxpayers and citizens?
>> Depends how you look to at it.
I think the average person will decide that no,
this probably is not a good deal.
They see the enormity of all the issues
going on with finance, health care, etc.
This is -- remember, a very region-specific benefit.
The idea that the state is going to support this area is going to
be a hard pill to swallow for those in maybe perhaps northern
Wisconsin who see very little of this kind of activity
and they are going to wonder why this money is being spent.
On the other hand, the business community will probably see this
as a long-term opportunity.
There will be real estate development.
There will be fortunes to be made.
There will construction.
There will be a lot of activity, perhaps economic multiplier
that justifies this.
>> As for Foxconn's business model,
its labor costs and worker conditions in China or
elsewhere, how does that translate to Wisconsin?
It's obviously very different here.
>> Yes. If you look at the other countries,
7 to 9 countries depending on how you want to count it,
that they are in,
low labor costs tend to be the common denominator.
Wisconsin, obviously is not going to be that.
>> Now, more specifically we've all read about conditions being
so bad at some of these Chinese factories that Foxconn had
employees dying by suicide.
What should we know about concerns over that kind of
extreme, that people are now raising?
>> Well, I think it would be very difficult to kind of have
the company town mentality that they had perhaps in China.
That, I think, was what drove a lot of these people.
These were mostly migrants coming from small rural villages
in China.
Perhaps a lot of shock involved there, a lot of overtime,
very closed system, very, very difficult.
But Terry is a very, very savvy businessman.
He's a guy who's going to watch very carefully
where the signs are.
I think the fact he has chosen Paul Ryan's district
is an indication that he is a very savvy businessman who
understands how politics works.
It has helped him in China and all of the other countries that
he's been involved in.
He does it at a very high level. He does it very well.
I don't think he'll be looking to antagonize people
in the United States.
I think he understands the conditions here
will be quite different.
You must pay overtime.
You must obey the rules.
>> As to the politics of this decision on the part of Foxconn,
clearly President Trump has declared
he wants things made in America.
Is Foxconn concerned enough about tariffs
cutting into profits that it's getting ahead of that,
and working to please the president by going into
a battleground state like Wisconsin?
Do the politics extend that deeply into this?
>> I would say absolutely.
Terry is very, as I said before, very, very savvy.
He's not going to miss a trick.
His business is so large and so worldwide
he cannot afford to lose markets.
You lose markets, you earn competition.
Right now he basically owns most of the market.
He wants to keep it that way.
This is a safety play, and it makes lots of sense.
President Trump is, as most people have realized,
very open to flattery.
He likes it when people throw around big numbers,
especially if they are promising jobs or made in America.
We'll have to see how it all works out in the end.
My guess is that this plant will not be the kind of assembly
plant they have in China, where they have tens of thousands of
workers toiling away, putting pieces together.
It's an LCD screen factory.
My guess is a lot of it will be automation
and as few employees as possible.
So yes, politics is definitely behind this.
And as I said before, I don't think it's a mistake that this
is being touted in Paul Ryan's neighborhood.
>> Some point to concerns that Foxconn made similar
announcements in Pennsylvania previously
and the plant never came to be.
Could that happen after the announcement about Wisconsin?
>> Well, it's obviously a concern.
This is a little splashier than most.
And they also have the president directly involved.
I don't know that you would want to play that kind of bluff game
with Donald Trump unless he thinks Donald Trump is not going
to be around in another, you know, year or so.
I think it makes more sense that he is interested in getting the
Trump organization on his side.
Building in America, as I said, as an insurance policy against
a trade war which is still quite possible.
>> You spoke earlier about automation in the plant,
having as few employees as possible.
But Wisconsin is talking about 3,000 jobs to start,
potentially ramping up to 13,000, plus spin off employment.
Do you think those kinds of numbers add up,
given your sense about automation?
>> I would find it hard to believe
that he would have those kind of numbers there.
I could see a highly automated factory being staffed at as low
levels as possible.
Remember, he's not actually producing a lot of his
components that are going into these LCD frames.
Those are going to be done elsewhere.
The glass, the boards, things like that.
I don't know exactly what they're going to be producing
there but it's not going to be all done on premises.
Therefore, you'll have a tremendous amount of suppliers.
They'll be people in shipping, things like this.
So, as I said, the up side opportunity if they go forward
with this is not necessarily looking what you are going to
get out of Foxconn, which is going to be very, very little,
but looking what kind of infrastructure you can build for
future innovation and creating kind of a new tech corridor that
could be very helpful, as I said, to Wisconsin and Illinois.
>> As to infrastructure, do Wisconsin's highways and rail
lines support this operation?
>> Well, interesting enough, this could be a catalyst to a
lot of the infrastructure needed because one of the things
Foxconn is going to insist on is that they have a mature
infrastructure to handle whatever they have.
And that is probably going to mean roads,
because everything comes out of Wisconsin,
despite having the Great Lakes there,
most of it is going by road and some by rail.
So, don't be surprised if part of the package is a series,
some monies being put towards
the infrastructure in southeastern Wisconsin.
As I said, though, this is very difficult for a lot of the areas
in northern Wisconsin who kind of see this,
all this excitement and say where's mine?
Our roads aren't being taken care of, and things like that.
So I think Scott Walker and his team is going to have to go
a little ways to show how this is going to benefit the entire
state, not just a small corridor between Milwaukee and Chicago.
>> That was Einar Tangen in Beijing.
As we've said, the promise of thousands of Foxconn jobs comes
with the price tag of $3 billion in state tax credits.
The largest incentive package in state history.
The memorandum of understanding between the state and
the company contains few details, but those are expected
in a full bill to be brought
in that special session of the legislature.
We turn now to a UW economist whose expertise includes
public financing of private industry projects.
Steve Deller is a professor
of agriculture and applied economics at UW-Madison.
Thanks a lot for being here. >> Thank you.
>> So, the Foxconn package dwarfs previous incentives
to attract or retain jobs.
What's your reaction to it?
>> Wisconsin historically has not played this game.
They will put together a reasonable package and say,
"Take it or leave it." But this particular one is kind of passes
that red line that we've had historically.
But, this is not just a cash give away.
This is the company has to hit a series of benchmarks.
And if the company doesn't hit these benchmarks,
the incentives don't apply.
And they can actually--the state can actually claw them back,
essentially saying, "You didn't do what you promised,
give us some of the money back."
>> So you feel as though that's enough of a protection with this
size of an incentive package?
>> Those kind of protections have to be in place.
Otherwise it is just a pure give away.
And that would be a bad deal for the state of Wisconsin.
The devil's in the details
and those details are starting to come out.
It appears as though most of the incentives are actually
tax breaks.
So this doesn't look as though it's going to be money out of
the pocket of taxpayers, but rather taxes that the company
and particularly the construction phase,
they don't have to pay those taxes.
>> Wisconsin already has the manufacturing and Ag credits,
which I understand reduces Foxconn's corporate income tax
rate to 0. 4%, but additionally they get
what I understand to be refundable tax credits,
which to my ear sounds like kind of cash in hand.
>> It is to an extent in that
it's taking away from their tax bill.
In the end, the company will probably be paying very low
in terms of taxes, particularly income taxes.
So, it is not money that we're giving back,
or giving to the company, it's money that we would
not be receiving if these incentives weren't in place.
>> In your first response you said we kind of crossed
the red line and you also described how previously
there were "reasonable kind of incentive packages."
So, what do you mean by crossing the red line
and do you think this is unreasonable?
>> It's the game that states start to play.
It's been referred to as the "new Civil War."
States will start bidding against each other
to attract a company like this.
And some states get wrapped up in that game.
They get so focused on winning the game that they sometimes
lose track that they are playing with taxpayers' money.
The state historically has not played that game.
They will do things like
we will invest in infrastructure if you need it.
We will invest in educational programs if you need it.
We will give you a deferment on some taxes,
but we are not going to get on that slippery slope
of playing that bidding game.
>> What's wrong with it if you win?
>> You actually can end up with the economic benefits
not outweighing the cost of the incentives.
>> What do you think in this case?
>> I think, the one thing that I was really worried about
is that property taxes were on the table.
And it appears as though they are not.
And the reason is because a lot of states,
when they get in the bidding games, one of the big ones is,
"You don't have to pay property taxes."
The problem is that's the local government
that gets hit with that.
And they get caught between a rock and a hard place.
>> I understood, though, some of these local districts,
like wherever this thousand acres might be
that the plant decides to locate on,
they may end up losing out on taxes even as
they make service improvements to sustain the company
because of TID or TIF districts.
>> It's a TIF district.
What a TIF district is the firm still pays property taxes.
But what those property taxes go to is dedicated.
For example, if the municipality finds that they have to do major
road improvements, or they have to do a major expansion of
a sewer plant or they have to build a new fire station,
they have to incur those costs up front.
And the way they do it is they often go to the bonding market.
They incur debt to do it.
The way they convince the banks, if you will,
to loan them the monies, they say,
"We have this revenue stream coming off of this property that
is going to be earmarked for paying for those improvements."
Now the problem, though, is the school district loses out.
Special districts, if there are any special districts in there,
they lose out.
It only goes to the municipality that imposes the TIF.
>> What about the idea of potentially putting more money
in for things like worker training at a certain point,
you know, because this is--
if these kinds of job numbers pan out,
that's a lot of people that have to be kind of trained up.
Can you imagine a scenario where the state would then go back
and kind of give more money?
>> That's the kind of investment
that the state should be making either way.
Whether it's specific to Foxconn or specific to the labor force
needs of the state in general, the state should be making
those investments.
Now, my one concern, though, is that the closer
that this plant is located to the Illinois state line,
a lot of those people taking those jobs are going to be
commuters coming up from the Chicagoland area.
People are willing to commute great distances
for good-paying jobs.
So, it depends on how many of those jobs are actually going to
people who live in Illinois.
>> In fact, Einar Tangen, whom we spoke with just before you,
described this idea of having to probably get
some of these employees out of Illinois to fill the gap
if these kinds of job numbers pan out.
Is that a reason why some people,
experts in economic development, talk about regional development
as opposed to this kind of states trying to win at all
costs against each other?
>> Exactly.
Ideally, Illinois and, because given the location of this
proposed plant, it would have been ideal if Illinois and
Wisconsin had kind of come together and said, "Hey,
we're going to tag team this and try to get it."
But there is an editorial in the "Chicago Tribune"
a few days ago that essentially said,
"Hey, this could be a win-win for Illinois.
Illinois is going to benefit from all those jobs
but they're not incurring any of the cost at all."
>> Is it too late to do such a thing?
>> I'm not sure Illinois is in a position to really do anything.
>> That's true. They are in a world of hurt.
>> They are in a real world hurt.
>> Back specifically to the credits,
they are projected to cost between $200 and $250 million a
year in this package over 15 years.
Isn't that the kind of thing the state could weather?
Is that too big a number?
>> I think they could weather that because you have to realize
that it's the firm that's not going to be paying those taxes.
It's the construction company not paying the sales taxes.
But you still have all the people that are going to be
working there are still going to be paying
sales tax and income taxes.
That's where the benefit's going to flow
into the state immediately.
>> Very briefly in the few seconds remaining,
your overall view of this tends positive?
>> It does.
When it first came out I thought, "Oh, no.
We made a terrible mistake."
But as details are coming out and the--
the idea that there are benchmarks in there.
Any job paid less than $30,000 doesn't count.
There's clawback provisions.
The local government is allowed to use a TIF.
I think as more details come out,
I think they thought this thing through.
>> Great. Professor Steve Deller, thanks very much.
>> Thank you.
>> According to the governor's office,
Foxconn is evaluating multiple sites in southeast Wisconsin
to build the plant.
The tech giant could make millionaires
out of even small land owners.
In Racine County, a real estate company has been busy helping
to put options to sell in place on parcels of land thought
to be under consideration for the $10 billion facility.
A requirement for an operation of that size,
at least 1,000 acres.
That's where our quadrant of land just off the interstate
near Racine comes in.
>> They did approach to ask if I was interested in selling.
>> Farmer Tom Fliess says his son farms the land inside
the area reportedly under consideration by Foxconn.
But he owns it.
Whether he's inclined to sell, he'll only say...
>> Time will tell, I don't know.
>> Many inside the area, thought to have been offered options
to sell, are keeping quiet about it.
It's an area of more than 1,000 acres,
roughly bound by Interstate 94 on the west,
Highway 11 on the north, Highway K on the east,
and Brown Road on the south.
Some land owners just outside the quadrant
have also been engaged.
>> A couple weeks ago is when I found out about it from one
of the farmers because they contacted him about selling his land.
So he let me know because his land surrounds mine.
>> If the options to sell are an indication,
the buyer thought to be Foxconn
is willing to pay way over market value for the acreage.
The owner of this 20 acres for sale,
says it's under option at $50,000 an acre.
He was asking $12,000.
If the option turns into a sale,
it makes it a million dollar plot.
Sherri Shaver lives across the road
from the 1,000 acres being eyed.
Looking that way, that would possibly be it, huh?
>> That's it right there for sure.
And it's a matter of how much
they are going to take on this side.
>> After tending her small country homestead for 23 years,
Shaver says she's sad about either prospect,
staying or leaving.
>> Well, it's been a shock, you know,
to think we're going to have a big old factory here.
And I might be looking at a factory across from me.
But then you know, they might buy me out,
so then I'll have to move.
>> As to the suitability of the land,
it's just off the interstate,
and is mostly wide open farm land.
There's a rail line just east.
One day this week, Department of Transportation traffic counters
were on-site at two of the crossroads of the location.
The local attorney representing land owners says he cannot
divulge information, and says he has very little of it anyway.
Despite not knowing details, people we talked with
are mostly sanguine.
Even as this once exclusively rural landscape
contemplates a mega electronics plant.
What do you think about the potential
of 10, 000 jobs in this area?
>> That's great for people.
I don't need 'em for neighbors, but that's fine
'cause I'm a farmer, you know.
>> We're told there is at least one major landowner
in that area who is not interested in selling.
But according to Assembly Speaker Robin Vos
in whose district that 1,000 acres sits, municipalities
can exercise "eminent domain" to buy them out.
Now to other news of the week in our Wisconsin look,
Foxconn is known for making products
for many electronics firms including Apple.
And this week Apple was also in the Wisconsin headlines.
That's because a federal judge ordered Apple, Inc.
to pay more than a half billion dollars
to the University of Wisconsin Alumni Research Foundation
for patent infringement.
Back in 2015, a jury found Apple guilty of
using WARF's patented technology in their iPhones and iPads.
And ordered Apple to pay WARF $243 million.
After the verdict, Apple continued using WARF's
technology which remained under a patent until last December.
As a result, the judge ordered Apple
to pay WARF an additional $272 million.
And that is our program for tonight.
More coverage of the Foxconn story next week.
I'm Frederica Freyberg.
Have a great weekend.
>> Funding for "Here and Now" is provided in part
by Friends of Wisconsin Public Television.