Gov. Scott Walker and Foxconn chairman Terry Gou will sign the state's contract with Foxconn on Friday after the Wisconsin Economic Development Corp. board approved the agency’s staff review for the project on Wednesday.
[caption id="attachment_334020" align="alignright" width="450"] A protestor interrupts the WEDC board as members try to go into closed session.[/caption]
The board approved the review in closed session by a vote of 8-2. Sen. Tim Carpenter, D-Milwaukee, and Rep. Dana Wachs, D-Eau Claire, voted in opposition.
Protesters briefly interrupted the meeting and tried to force the board to release the contract, but police were called to clear the room.
Carpenter requested a roll call vote and a presentation on Foxconn before closed session. The roll call was held but no presentation was given.
The staff review forms the basis of the contract. WEDC usually does not release contracts for its awards until after they have been signed, but the agency released a draft Wednesday. While the staff review covers the major portions of the agreement, some language could still be changed before the agreement is signed. Gov. Scott Walker has said he hopes to sign the contract by the end of the week.
The contract will establish minimum job targets for the company to receive $1.35 billion capital expenditure tax credits and $1.5 billion in job creation tax credits. The company is planning to create 13,000 jobs as it builds a $10 billion LCD manufacturing campus in Mount Pleasant.
Foxconn will also need to create at least half of the 13,000 jobs it has touted as a target by 2024 to avoid potential clawbacks. A personal guarantee from Gou covers 25 percent of any clawback. Hon Hai Precision, the publicly traded company behind Foxconn, would be responsible for the other 75 percent.
[caption id="attachment_324915" align="alignright" width="311"] Foxconn chairman Terry Gou.[/caption]
Foxconn doesn’t have to meet any job creation targets to avoid clawbacks during the first five years, but WEDC could clawback 100 percent of awarded credits if the company provides false information, relocates to another state or ceases operations.
The company would have to have at least 5,850 jobs in Mount Pleasant by 2023 to avoid clawbacks. That figure is equal to 45 percent of the 13,000 jobs. It increases to 50 percent in 2024.
There are job creation targets for the company to hit to receive $1.5 billion in job tax credits. The minimum targets are based on percentages of the company’s planned job creation. Foxconn is planning to create 1,040 jobs next year and ramp up to 13,000 by 2022.
In the first two years, Foxconn would have to hit at least 25 percent of its target to receive any jobs tax credits. The minimum threshold increases in the following years, topping out at 80 percent in 2027.
If the company only hit the minimum targets each year Foxconn would receive $1.06 billion in job tax credits, a $440 million drop from the total $1.5 billion available for job creation.
If in any year Foxconn is short of its minimum job target, the company would receive none of the tax credits for eligible payrolls.
Foxconn will be required to have an average salary of $53,875, but WEDC officials said the board could decide to award credits anyway if the company is close to that figure. The officials said the minimum job threshold would not be revisited, although the company could carry some unearned credits forward.
The capital expenditure tax credits start in 2019 and require the company to hit its minimum job target to receive the maximum amount of tax credits.
Unlike the jobs tax credits, the company could receive capital expenditure tax credits without hitting the required number. The actual amount is based on a formula that subtracts the percentage of jobs actually created from the target percentage and reduces the maximum available by that percent.
For example, in the first year the company has to hit 25 percent of its job target to receive the maximum capital expenditure credits. If the company reached 20 percent of its target, it could receive 95 percent of the capital expenditure credits for that year.