Last updated on January 26th, 2022 at 12:29 pmSemiconductor chip manufacturing giant Intel Corp. announced plans Friday to build a massive chip manufacturing complex in Licking County, Ohio, just east of Columbus. Ohio officials say it’s the largest economic development project in the state’s history. The Santa Clara, California-based company is planning a more than
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Claude Lois[/caption]
“We didn’t leave any stone unturned. Our team worked on this process day and night,” said Claude Lois, Mount Pleasant project manager for the tax incremental financing district that includes the Foxconn site. “We believe, when it came down, they were talking to us and we knew one other state. Up until last week we were still in constant communications with them and trying to see whatever we could do to push them our way.”
“(Intel) used the word ‘finalist,’ frequently (to describe its consideration of the Mount Pleasant site),” said Jenny Trick, executive director of the Racine County Economic Development Corp.
Local officials say the fact that they came so close to landing the Intel deal indicates they made a strong pitch and that the Mount Pleasant-Foxconn site has strong attributes as a shovel-ready site with substantial infrastructure in place and an attractive location in between Milwaukee and Chicago.
“We had a site that was second (in the competition for the Intel project),” said Trick. “That’s an amazing thing to say. That we had a site that rose to this company’s consideration on all merits.”
But there’s no silver medal for second place in this competition. Bidding for economic development projects is winner take all.
“It doesn’t always work out as you wish,” Trick said.
Huge missed opportunity
So, here’s what southeastern Wisconsin almost got but missed out on: an initial capital investment of $28 billion, according to Sheehy, an initial 3,000 jobs with an annual average salary of $100,000, perhaps more than 1,000 contractors on the campus at a given time to work on the equipment, a massive supply chain that Intel’s chip manufacturing complexes need nearby (Sheehy says 30 or 50 suppliers may have set up operations in the area) and major plans for future expansion. Intel’s initial complex plans are for what it calls a “two-pack,” (two-building factory complex) which it expects to eventually expand into an “eight-pack,” he said.
Since M7 was formed in 2008, the group has claimed 117 economic development “wins” attracting companies to the area or convincing existing companies to expand in the area. Those 117 “wins” resulted in 24,000 new jobs, more than $1.4 billion in new payroll and about $3.3 billion in capital investment, according to Sheehy.
That’s a good track record, but the Intel project, with an initial capital investment of $28 billion, far exceeds all of those put together. Intel’s capital investment for its facilities is so high because of the extremely expensive equipment that it requires and because the buildings have to be built like cleanrooms, Sheehy said.
The Intel project even dwarfs the $10 billion capital investment that Foxconn had originally promised for what it said would be a 20 million-square-foot television screen manufacturing complex in Mount Pleasant. The company has come nowhere near to living up to that. Like Intel, Foxconn originally said it would have 3,000 jobs initially. Foxconn said it planned to eventually have 13,000 jobs in Mount Pleasant, but its projected average salary was $53,000, just over half of what Intel plans to pay.
Bottom line: Intel would have been a game-changer for southeastern Wisconsin, perhaps even more so than Foxconn’s complex would have, if it actually would have been built as originally proposed.
Sheehy said the Intel deal is the biggest he’s ever pursued and isn’t afraid to admit that losing out on it hurts.
“There’s no question, this stings,” he said. “Nobody wants to come in second.”
Air credits an issue, but not incentives
Intel hasn’t indicated why it chose the Columbus, Ohio, area instead of Mount Pleasant for its next chip manufacturing complex, local officials said.
The state and local governments offered incentive packages, which the company indicated were competitive, Sheehy said. The state incentives were based on current Wisconsin Economic Development Corp. incentive guidelines (already approved by the Legislature) and would not have required special legislation as was necessary for the unprecedented incentive package offered to Foxconn.
“I know from Intel that we had a very competitive incentive offer from the combination of WEDC and the village of Mount Pleasant,” Sheehy said. He declined to disclose details about what incentives were offered to Intel.
A WEDC spokesman also declined to disclose the incentive package that the state offered Intel, citing the organization’s practice of not discussing deals that have not been completed.
Tim Sheehy[/caption]
“If we can get to the final in a mega-project like this, there are lots of other opportunities for which this land, infrastructure, incentive and workforce package is going to sell well to,” Sheehy said. “The site down there takes all of the guesswork out of somebody putting a plant expansion down there. The pads have been put in place. The soil has been tested. The water infrastructure, the sewer infrastructure. The roads that are there, both in terms of the freeway being improved, as well as the access roads. The energy infrastructure down there. All of those are things that very few sites in the United States have at the magnitude in which we have them. There’s no question when (Intel) got off that site, they said ‘this is A-plus.’ They’re (looking at sites) all over the country. There are few sites that are prepared like this.”
Those site improvements were done mostly in hopes of seeing the Foxconn project reach its full potential. While the Foxconn operation hasn’t nearly reached its original proposal, the site improvements done for Foxconn could eventually attract a significant economic development.
“Absent all of that work for Foxconn, nobody with projects like (the Intel project) would be looking at that site,” Sheehy said. “So, the preparation that went for Foxconn, which admittedly hasn’t totally paid out there, set us up (to compete) for this Intel project, and I think it’s going to help us land something in the near future.”
Foxconn update
Foxconn has only built four buildings at its Mount Pleasant site, a far cry from the $10 billion, 20 million-square-foot campus it originally said it planned to build there.
The Intel pitch did not encompass any of the existing Foxconn buildings, Sheehy said. Even if Intel would have chosen its site, Foxconn would have maintained its existing Mount Pleasant operations.
Originally planned to make huge television screens, Foxconn then considered plans to make several different products in Mount Pleasant, including electric vehicles, though it chose a facility in Ohio instead for that product.
Foxconn is now manufacturing servers and server racks at its Mount Pleasant campus.
In 2021, for the first time, Foxconn qualified for tax credits from the state of Wisconsin. The company qualified for nearly $30 million in tax credits, including more than $2 million for creating 579 jobs and nearly $27 million for making a capital investment of $266 million in its Mount Pleasant complex during the year.
The company’s original deal, approved by Gov. Scott Walker and signed into law in 2017, offered it up to $2.85 billion in tax incentives if it created 13,000 jobs and made a capital investment of $10 billion.
Gov. Tony Evers and WEDC said that deal was null and void because Foxconn wasn’t making large television screens as indicated in the original deal. In 2021 they negotiated a new incentive deal with the company, worth up to $80 million if the company hits certain hiring and investment targets. Specifically, the new deal requires the company to hire 1,454 qualified workers at an average wage of $53,875 and invest $672 million in capital spending.
Mount Pleasant and Racine County agreed to provide $764 million in tax incremental financing for the Foxconn project, including funds for land acquisition and infrastructure upgrades.
The state’s original deal with Foxconn also allocated $250 million, which included $160 million in federal funds, to complete the widening and improvement of I-94 between Milwaukee and Illinois.
In addition, WEC Energy Group invested in power infrastructure upgrades to serve the Foxconn site.
Despite coming up short of its original grand plans, Foxconn is now the largest property taxpayer in Racine County, Lois said. Its property has an assessed value of $520 million. It will pay $9.6 million in property taxes to the TIF district this year and paid a $7.3 million annual special assessment in December to cover land acquisition costs, he said. (Foxconn will pay the special assessment for 20 years and also made an up-front $60 million payment to the village for land acquisition).
As part of its deal with the village, in 2024 Foxconn will be required to pay property taxes based on a $1.4 billion assessed property value (regardless of the property’s actual value), a huge increase from last year’s $520 million assessment. Those payments will enable the village to cover its debt on the TIF district, including the costs for the infrastructure that was extended to the Foxconn site, Lois said.
So far, “(Foxconn is) meeting all of the requirements of the development agreement (with Mount Pleasant),” he said. “They’re in compliance, they’re making their payments.
“From the village and county standpoint, we’re trying to assist them and help them in any way we can. Is it the original vision? No, it’s not. Has the market changed? It has. Is Foxconn adapting? I think they are as best they can. I know they are trying to hire as many people as they can. They are filling the facilities that they have. The challenge is always: what’s the market today? The technology market, it changes daily.”
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Foxconn's Mount Pleasant campus in August 2021. Photo credit: Curtis Waltz, aerialscapes.com[/caption]
Trick said Foxconn was a partner in the bid for the Intel project and was very supportive of it. The tax incremental financing district was always expected to have additional companies besides Foxconn, she said.
“When we had this opportunity, we made (Foxconn) aware of (the Intel project) and indicated we were going to run after this prospect hard, and they cheered us on,” Trick said. “This would fit nicely into a technology business park, which was envisioned.”
Now what?
While disappointed to lose out on the Intel deal, state and local officials said they wanted to congratulate Ohio and said they were glad the project landed in the Midwest.
“This type of manufacturing must happen in the United States, and it’s great that it’s happening in the Midwest,” said Missy Hughes, secretary and CEO of WEDC. “In Wisconsin, our takeaway is that investing in infrastructure gets us in the game with world-class companies, but investing in our communities, our education system, and our workforce … is what will win the day.”
Now state and local economic development officials have to dust themselves off, lick their wounds and get to work on pursuing the next opportunity.
“There’s no crying in economic development,” Sheehy said. “As of today, we’re back in the game again looking at other potential users. We’ve already reached out to multiple site consultants that we look at, where they have large projects, so they know that this property is now, in a sense, back on the market.
“I think once the word gets out that we were an also-ran (for the Intel deal) we’re going to get other people to say, ‘What did Intel see there that we’re not seeing?’ We want this to become more visible. Then we’re right back at it looking at other kind of adjacent types of industries and users. It could be advanced manufacturing, it could be batteries, it could be electric vehicles, pharmaceutics. There’s all sorts of adjacent industries that would have similar needs in terms of the space, the infrastructure, the ability to stand up a building really quickly because of what’s already been done (to the site). So, there are, I think, lots of opportunities. I would be shocked if we’re having this conversation a couple of years from now and those attributes haven’t matriculated into a very large project.”
[caption id="attachment_541236" align="alignright" width="300"]
Jenny Trick[/caption]
“I think this opportunity has given this site a little bit more recognition,” Trick said. “With the kind of company like Intel looking at this, I know that other companies will look at this site as well. The site selectors that have been involved directly and marginally around this project are very well aware of the site and now that they know of its existence, I think there’s going to be more activity. We’re already starting to work on a couple of different things. We certainly don’t want to sit idly by. We want to make sure that we are moving forward with some hot recruitment opportunities, so we are pursuing them actively with Milwaukee 7.”
“We now know -- we were pretty sure before, but we now clearly know -- we can compete with anybody,” Lois said. “Our site we have here is an impressive piece of property. We’re looking forward to the next opportunity.”
BizTimes Milwaukee associated editor Arthur Thomas contributed to this report.