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Incentives Big, But People Made The Foxconn Deal, Neitzel says

Comments | Posted in News | By MI President Brett Healy | Posted August 2, 2017 4:16 PM

MacIver News Service | Aug. 2, 2017

By M.D. Kittle

[Madison, Wis...] Much, understandably, has been made of Wisconsin's massive incentives package proposal to land the almost unfathomably massive Foxconn Technology Group manufacturing plant.

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While $3 billion in tax credits and other sweeteners certainly grabbed the attention of Foxconn brass, people, not incentives, ultimately make economic development deals, Wisconsin Department of Administration Secretary Scott Neitzel says.

And Neitzel, who has had a front-row seat to a "once-in-a-century" development project, asserts one Wisconsinite in particular sealed the Foxconn deal - or at least the memorandum of understanding.

"The key to what made this successful was the personal connection made between Gov. Scott Walker and (Foxconn chairman) Terry Gou," Neitzel said during an interview Wednesday with MacIver News Service.

"Terry was very impressed with the governor's work ethic. What he saw and recognized in the governor was what is represented in the Wisconsin work ethic, that heritage of people who know how to get up and work and take responsibility for their work," Neitzel added.

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The Administration secretary joined Walker and a small group of Wisconsin business and development leaders on a break-neck trip to Osaka, Japan, in early June. They traveled at the invitation of Gou, who had been dealing with at least seven different states, Wisconsin included, on a potential site for Foxconn's first U.S. manufacturing facility.

Tricia Braun, deputy secretary of the Wisconsin Economic Development Corp., told the Milwaukee Journal Sentinel that Walker and Gou formed a fast bond.

"We felt like just right here alone that relationship was incredibly valuable to Wisconsin," Braun said. "And so I think that was a key. It put us over the top, I think."

Neitzel said the fact that Walker was willing to make the whirlwind trip to Japan - over a weekend, on such short notice - sent a message to Foxconn officials.

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"I think the governor represented Wisconsin, really, really well, and that was very much a component of their decision," he said.

Wisconsin home-grown talent and its institutions of higher education also helped shape Foxconn's decision. Neitzel said Gou saw the potential of tapping into Wisconsin's "talent pipeline" of state and private universities, tech schools, training programs, apprenticeships, a "scalable pipeline" of human resources.

The Foxconn incentives bill, which has its first public hearing Thursday afternoon at the Capitol, includes provisions that have made environmentalists and regulators jumpy. The project would be exempt from certain permitting requirements, including those governing wetlands. But developers would have to add two acres of wetland to Wisconsin's ecosystem for every acre disrupted.

Neitzel said Foxconn officials appreciated what they saw as a "seamless face on state government," with a streamlined regulatory process and agencies working together to resolve problems.

As to the $3 billion in tax credits and other development benefits, Neitzel said the state's ability to come to the table with a workable financial package was key. While admittedly borrowing the term, the secrectary called the proposal a "pay-as-you-grow" incentives package.

The deal, as written, would include $1.5 billion in tax credits, in return for creating 13,000 jobs. Payroll tax credits would be distributed on full-time jobs paying between $30,000 and $100,000 per year. Another $1.35 billion in tax credits would help ease the company's capital costs. And $150 million in sales and use tax credits could be drawn on purchases of building materials, supplies and equipment used in the construction of the planned 20 million-square-foot LCD panel screen manufacturing campus. Neitzel said the plan is to build 12 to 15 buildings encompassing this small city of production.

At a press conference Tuesday, Speaker Robin Vos (R-Rochester) said the deal is structured on performance.

"Let's remember, not a single dollar is paid out until one of two things occurs," Vos said. "No. 1, a shovel is in the ground...They won't get a single dollar until they've actually spent money on construction."

And Foxconn can tap into the payroll tax credits only if it's paying people to work at the plant, jobs expected to pay on average north of $54,000 a year.

"What our objective was in this was to get a good deal, not to get a deal," Neitzel said.

Good deals come with good partners, economic development officials say.

Foxconn doesn't simply want to build a factory in Wisconsin, Neitzel said. The idea, the plan, is to create a "high tech manufacturing ecosystem."

That ecosystem is anticipated to include a host of suppliers serving the variegated component part needs of Taiwan-based Foxconn - and the thousands of ancillary jobs that would come with them.

Foxconn already has inked partnership agreements with Rockwell Automation in its quest to establish production in the United States. And the company recently signed a letter of intent with the Wisconsin Ginseng Board, a deal expected to open up more markets in the Asian-Pacific region for Badger State ginseng growers.

Neitzel said this transformational economic development project will go a long way in stopping Wisconsin's "brain drain," the exodus of college grads for opportunities elsewhere.

"When you are talking about Foxconn and about 150 suppliers, there's no reason why a graduate from an institution in Wisconsin, whether it's a tech school or a college with an advanced degree, shouldn't have opportunities to stay in Wisconsin," the secretary said.

"Think about the next 50, 75, 100 years, that's a great legacy to leave our state: Wisconsin students stay in Wisconsin."