M7 initially floated $5.1 billion incentive for Foxconn

WEDC released nearly 16,000 pages of documents Thursday

Foxconn chairman Terry Gou and Gov. Scott Walker hold up a memorandum of understanding spelling out terms of the company’s Wisconsin investment.

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

In an effort to provide an overview of large development projects in the U.S., Milwaukee 7 officials suggested Wisconsin might need to offer Foxconn Technology Group $5.1 billion to attract the company’s investment, according to a memo released Thursday by the Wisconsin Economic Development Corp.

Foxconn chairman Terry Gou and Gov. Scott Walker hold up a memorandum of understanding spelling out terms of the company’s Wisconsin investment.
Credit: Arthur Thomas

The seven-page May memo by Milwaukee 7 vice president Jim Paetsch was among nearly 16,000 pages of documents related to Foxconn released by WEDC on Thursday. Paetsch said Friday that those involved in the deal realized the Foxconn project “was a generational opportunity” and “the focus then quickly turned to what do we need to do to win.”

“That memo was intended to start to fram that discussion around what it was going to take,” Paetsch said. “It was intended to show what sorts of incentives were deployed to secure mega projects … and to use that as a jumping off point.”

Paetsch’s figure was based on offsetting $2.8 billion in increased capital costs for Foxconn to build in the United States and an estimated $2.3 billion in higher U.S. wages over a 10-year period. It also discussed the project as an $11 billion to $20 billion investment with upwards of 20,000 employees.

“Wisconsin’s incentive offer must come together quickly if we expect to win the Foxconn deal. The company understands the value it will be creating for the location it chooses and has made clear that it intends to move quickly,” Paetsch wrote, noting the company wanted a path to establishing site control by July 5.

Mark Hogan, WEDC secretary and chief executive officer, sent the memo to members of Gov. Scott Walekr’s staff, saying it did a good job of laying out what other states offered large projects.

“Please note, I do not agree with the recommendations regarding the size of incentive required in Wisconsin,” Hogan wrote in a May 31 email.

Documents released last year showed the state offered $1.1 billion in incentives on June 26 for a proposed $6 billion investment that would create 8,000 jobs. Just 16 days later, Walker and Foxconn Terry Gou agreed to the framework of the deal that was eventually announced, including a $10 billion investment with 13,000 jobs in exchange for a $3 billion incentive package.

The documents released by WEDC provide additional insight into the negotiations behind the Foxconn deal and how it came together.

For instance, Foxconn shortlisted two sites, a site southwest of I-94 and 38th Street in Kenosha County and the Fonk Farms site in Racine County, by early June. The Fonk Farms site is located just south of Highway 11 in Mount Pleasant and was incorporated in the Foxconn project area. It wasn’t until the end of June that officials started discussing the possibility of using land south of Braun Road, which is the site Foxconn ultimately chose.

Many of the emails deal with logistics of getting local, regional, state, site selection and Foxconn officials together for meetings and calls. Also included is a briefing memo for the delegation that traveled to Japan in early June that included advice on using chopsticks, bowing, the relationship between Taiwan and China and general meeting etiquette.

The Milwaukee 7 team also helped put together a dinner at Bacchus in Milwaukee for Foxconn chairman Terry Gou, 15 Foxconn executives, Walker, Hogan and area business leaders including Gale Klappa of WEC Energy Group, Blake Moret of Rockwell Automation, Todd Teske of Briggs & Stratton, Tom Westrick of GE Healthcare, John Schlifske of Northwestern Mutual, Helen Johnson-Leipold of Johnson Outdoors, Alex Molinaroli of Johnson Controls and Matt Levatich of Harley-Davidson.

“I’ve never seen an A-list like this one turn out,” Paetsch wrote in a June 29 email to Hogan.

The reception wasn’t all positive, however. On June 15, officials at Waukesha-based Generac wrote to WEDC officials indicating Aaron Jagdfeld, Generac CEO, was concerned Foxconn could displace Generac’s pending enterprise zone tax credit award. WEDC officials told Generac other projects would have “no negative impact” on the Generac enterprise zone.

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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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