Democrats don’t like the Foxconn deal

What would they do with it if elected governor?

Foxconn chairman Terry Gou and Gov. Scott Walker hold up the signed contract awarding the company up to $3 billion in state incentives.

Last updated on July 2nd, 2019 at 09:12 pm

Ask top Wisconsin Democrats running for governor what they think of the $3 billion incentive package that Gov. Scott Walker signed with Foxconn Technology Group and they are quick to say they think it was a bad deal.

“How the hell did Walker get us such a horrible deal?” Paul Soglin asked.

Foxconn chairman Terry Gou and Gov. Scott Walker hold up a signed version of the incentive contract.

Kelda Roys called it “a slap in the face to Wisconsin businesses,” while Tony Evers said it is a “Hail Mary pass on the part of the governor.”

Andy Gronik said Walker “climbed right over the negotiating table” to Foxconn’s side and Dana Wachs called it a “huge gamble.”

Mike McCabe says it embodies “crony capitalism and corporate welfare” and Kathleen Vinehout said it is based on “flawed” policy.

Mahlon Mitchell said the process lacked transparency and Matt Flynn said “this whole thing is, in my view, corrupt.”

A February Marquette University Law School Poll suggests it makes sense for the Democratic candidates for governor to be against the deal. Nearly three-quarters of Democrats say the state is paying more than the Foxconn project is worth and almost half are very concerned about negative environmental impacts. Independents are less skeptical, but 52 percent of them think the state is paying too much

Regardless of the deal’s popularity, the reality is the signed contract gives Foxconn a chance at $3 billion in tax breaks and credits from the state if it creates 13,000 jobs and invests $10 billion in a Mount Pleasant LCD panel manufacturing campus.

The question, then, is: What would happen to the state’s Foxconn deal if a Democrat defeated Walker in November? The answer, in large part, depends on which candidate emerges from the party’s primary.

Flynn, an attorney and former chair of the Democratic Party of Wisconsin, says he plans on bringing litigation to rescind the contract, claiming it is unconstitutional.

“I think the best thing they could do would be to stop any activity on the project,” Flynn said, calling the election a referendum on the deal. “Foxconn is on notice.”

He called Foxconn “a company with yesterday’s technology” and the contract “a disaster for Wisconsin,” adding the deal encourages other companies to seek similar offers.

“Ultimately, companies are supposed to make a profit on their own,” he said.

Flynn acknowledged Foxconn’s ability to appeal directly to the state Supreme Court would present a challenge and he’s exploring a basis for federal jurisdiction.

Flynn isn’t alone in proposing a lawsuit to end, or at least alter, the Foxconn deal. Roys, a former state representative from Madison and owner of real estate brokerage OpenHomes, also said parts of the deal may be unconstitutional.

Wachs, a state representative from Eau Claire, and Soglin, the mayor of Madison, both said they expect Foxconn will violate the terms of the deal, providing an opening to renegotiate.

“I’m fairly confident that there are serious flaws in the contract and that (in all) likelihood both of the parties will be in violation when we get to January of 2019,” Soglin said.

But there are some Democratic candidates who feel going to court over the Foxconn deal may not be in the state’s best interest.

“To make the claim that we can litigate this deal out of existence, I do think that is being disingenuous,” said Gronik, a Milwaukee businessman.

“We do not have a good deal here,” Gronik said. “But people should appreciate Foxconn is going to happen, good deal or not.”

He said his experience in business appraisal and consulting positions him well to work with the company. He added that any business can project things with a sharp uptick in growth but “the magic is in determining what the actual reality is.”

“I want to understand a lot more about what they intend to do strategically,” Gronik said. “Let’s try to determine what they can, in fact, accomplish.”

Mitchell, president of the Professional Fire Fighters of Wisconsin, said he would have made the legislative and contract process more transparent and allowed for more public input. But he also said he’d want to be careful to not spend more money to get the state out of the deal.

“There’s more to it than just going in to rip up a contract,” he said. “There are a lot of things that still have to be figured out with Foxconn … you have to be pragmatic in this situation.”

Mitchell said he’s concerned there are “no firm requirements for this company.”

“That’s the scary part of it,” he said.

Evers, state superintendent of public instruction, said transportation projects tied to Foxconn may provide leverage to reopen negotiations, where he’d focus on wages, Milwaukee-area hiring, public transportation and building an energy-efficient plant.

“I would really focus on compelling them to be good corporate citizens,” he said. “I don’t believe they want to be viewed as bad actors.”

Vinehout, a state senator from Alma, said she would seek to renegotiate the deal to address “fuzzy words” that could give Foxconn wiggle room, pointing specifically to language on the required average annual wages. She would also direct the Wisconsin Economic Development Corp. to make sure the company is complying with all aspects of the contract “so they are actually delivering what they promised.”

But she stopped short of wanting to cancel the contract.

“I don’t know the answer to that, but it’s very important that we be mindful of the cost,” Vinehout said.

The candidates don’t have to look far for an example of a newly elected governor undoing the commitments of a predecessor. Walker’s decision to cancel a high-speed rail line from Milwaukee to Madison, and the state’s order for trains that would have run on it, eventually cost the state millions in a settlement with Spanish train maker Talgo.

“Even if we have to pay a small amount, it’s still much, much better than having to pay billions of dollars with very few safeguards in place,” Roys said of Foxconn. “We’re trying to save the state from a financial and environmental potential disaster.”

She added the Foxconn incentive money would be better spent in other areas and questioned if Walker had “sufficient information” on the company’s technology to make “a multi-generational bet.”

“The risk level, I think, would be more suited to a (venture capitalist) who has special expertise or knowledge in screen technology,” said Roys, a tech entrepreneur.

She added she’s not opposed to Foxconn or large companies, noting many of the state’s classic businesses have grown without the kind of package Foxconn is getting.

“If Foxconn wants to come to the state, we absolutely welcome them, but they have to follow the laws that every Wisconsin business has to follow,” she said.

While no one in the race has experience renegotiating a deal the size of Foxconn, Soglin pointed to Madison’s The Edgewater hotel project, which was in line for $16 million in public funding when he came in to office. Soglin cut the city’s offer to closer to $3 million and the project eventually moved forward without city money.

“At least I’ve had experience with this kind of event,” he said.

Wachs is the one candidate who has dealt directly with the Foxconn contract. He voted against it as a member of the WEDC board. Like Soglin, he expects the terms of the deal will be violated.

“When they break it, we’ll sue them and end it … or do our best to renegotiate,” Wachs said. “We cannot rig this system for one foreign corporation.”

He said he would emphasize giving preference to Wisconsin suppliers and vendors in negotiations and expressed concern the higher paying jobs at the campus could end up going to Taiwanese nationals.

“There’s nothing wrong with the Taiwanese,” he said. “(But) we need to make sure this is beneficial to Wisconsin.”

McCabe, an activist and former executive director of the Wisconsin Democracy Campaign, said the incentives offered to Foxconn “are no way to build a sturdy economy,” adding he would insist on enforcement of the current contract terms while seeking to amend the deal “to better protect wetlands and Lake Michigan, as well as the financial interests of Wisconsin taxpayers.”

He said he’d explore possibilities “to get taxpayers off the hook for payments to the company” but the most important thing is “making sure the mistakes made with Foxconn are not repeated.”

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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