Foxconn contract adds jobs benchmarks, puts company CEO on hook if promises fall short

The state added more detailed job creation benchmarks to its proposed contract with Foxconn along with a provision that would make company Chairman and CEO Terry Gou personally responsible if the Taiwanese manufacturer fell short of some promises.

The contract includes an annual jobs requirement to qualify for tax credits and establishes a series of possible violations that would trigger clawback provisions. If the state sought to recoup taxpayer money for a violation, Gou would be on the hook for one quarter of the total clawback amount.

A draft copy of the contract was released this afternoon after the Wisconsin Economic Development Corp. in closed session approved the agency’s staff’s work on the deal on an 8-2 vote. That vote cleared the way for the finalized contract to be signed later this week.

The guv’s office announced late Wednesday Scott Walker and Gou will sign the contract Friday at SC Johnson in Racine. House Speaker Paul Ryan, R-Janesville, also is expected to attend the event.

After the vote, WEDC Secretary and CEO Mark Hogan touted the agreement, saying the document provides Foxconn the flexibility and latitude it needs while creating certainty for taxpayers.

And he highlighted Gou’s own guarantee — saying the pledge represented “a very significant” commitment.

“It really speaks to the level of commitment and confidence he has that this will be a great investment,” Hogan said.

Of the $2.85 billion total Foxconn can earn from the state in tax benefits, $1.35 billion would be paid out in capital investment credits, while the remaining $1.5 billion would be allocated in jobs tax credits.

The $1.35 billion would be paid out to the company over a seven-year period from 2019 to 2025 — and would be contingent on Foxconn spending $9 billion and hiring a minimum amount of workers each year.

Those benchmarks start at 520 in 2019 and hit 8,450 in 2025. If they’re reached each year, Foxconn would get $193 million annually in tax credits, assuming they make the full capital investment.

If the company fell short of the job targets, it could still receive a prorated amount of the credits.

Under the deal, Foxconn would have to pay an average salary of $53,875 to qualify, and maintain the number of jobs it creates for 15 years, or through 2032, the final year of the contract.

If Foxconn only creates and maintains the minimum number of jobs over the next 15 years — 10,400, versus the 13,000 it’s pledged to create — it would receive $1.06 billion, rather than the $1.5 billion it would get if it met its target job creation numbers.

Overall, the jobs tax credits are equal to 17 percent of the wages for all full-time employees earning between $30,000 and $100,000 annually.

The contract also outlines a series of violations that would trigger clawback provisions.

These include: if Foxconn supplied false or misleading information to WEDC, left the enterprise zone or closed shop and didn’t restart operations within a year.

One further violation — if Foxconn would fail to maintain employment and capital investment levels through 2032 — wouldn’t kick in right away. In short, during the first five years of the contract, there would be no clawback ability surrounding this provision — although it would apply to the first three infractions. That’s because the construction phase is expected to last five years.

But after the first five years, the contract establishes a minimum job threshold that needs to be met to avoid the clawback provision kicking in. In 2023, that quota is 5,850 jobs, but increases to 6,500 jobs in 2024, where it stays for the remainder of the contract — through 2032.

Read the contract:
http://www.wispolitics.com/wp-content/uploads/2017/11/171108Foxconn3.pdf

See a handout outlining the contract:
http://www.wispolitics.com/wp-content/uploads/2017/11/171108Foxconn.pdf

 

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