Wisconsin’s economic development board on Wednesday approved the key terms of a contract implementing a US$3 billion incentive package for a Foxconn Technology Group (富士康) plant in the state, including a personal guarantee from the company’s leader to protect state taxpayers.
The deal calls for Foxconn chairman and CEO Terry Gou (郭台銘) to personally guarantee one-fourth of any potential payback if the company fails to meet investment and employment benchmarks.
Wisconsin Governor Scott Walker and Foxconn officials planned to sign the contract today in Wisconsin.
The deal ties hundreds of millions of US dollars in tax credits to the number of jobs the Taiwanese electronics giant creates at the facility each year.
It also allows the state to recoup the money if the company fails to meet the benchmarks, key provisions sought by critics of the subsidy.
The Wisconsin Economic Development Corp’s (WEDC) board approved a staff summary of the contract on an 8 to 2 vote during a closed-door meeting.
Approval of the summary authorizes agency officials to complete the deal.
EXEMPTIONS
“The fine line was to balance the needs of the company and the needs of the state,” WEDC chief executive Mark Hogan said after the vote.
Foxconn officials want to build a US$10 billion flat-screen manufacturing plant in Mount Pleasant, about 40km south of Milwaukee.
The company has said the facility could employ between 3,000 and 13,000 people.
Walker signed a bill in September providing Foxconn with the unprecedented incentives package.
It provides the company about US$3 billion in refundable tax credits from next year until 2032, including US$1.5 billion in payroll tax credits, up to US$1.35 billion in credits on expenditures for fixed assets such as land and buildings and US$150 million in sales tax exemptions on construction equipment.
It also allows the company to build on wetlands and waterways.
Foxconn would qualify for the full amount of incentives only if it invests US$9 billion and employs 13,000 people, according to the terms the board approved.
SHORT FALLS
Under the terms, Foxconn must make at least US$9 billion in capital investments and meet annual job creation thresholds between 2019 and 2025 to collect the maximum annual capital investment tax credits.
If the company does not meet the job creation benchmarks, the annual tax credits would be reduced according to how far short the company falls.
The contract does not require Foxconn to hire Wisconsin residents, but does establish a maximum annual payroll credit and requires the company to meet minimum annual job creation targets to receive credits.
The jobs must pay at least US$30,000 annually and the company must maintain an average salary of US$53,875.
The state could nix the deal and demand its money back if the company supplies false information, leaves Mount Pleasant or simply closes its doors.
Hogan said the contract generally provides that the state could start the claw-backs if Foxconn’s job numbers drop below 6,500.
The company would be liable for 75 percent of the payback.
Gou would be personally responsible for 25 percent.
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