The boost in income tax revenues Wisconsin would see from Foxconn and the indirect jobs the project could create would not exceed the state’s $3 billion investment in the Taiwanese company until at least 2042-43, according to new state projections.
At best, the state’s break-even point would be fiscal year 2042-43 if the electronics manufacturer creates 13,000 jobs and builds the $10 billion facility. But it would be “well past” 2044-45 if it only added about 3,000 jobs, the Legislative Fiscal Bureau wrote in an analysis released today.
Dems used the new analysis to demand Republicans slow down deliberations on the bill with the Assembly previously targeting next week for a floor vote. The Senate plans to send the bill to the Joint Finance Committee, while a committee exec in the Assembly is up in the air with dozens of amendments being considered.
“We need more time to thoroughly vet the specifics of this deal and to ensure more work for Wisconsin contractors, suppliers and small businesses, as well as new good-paying jobs for Wisconsin workers,” said Assembly Minority Leader Peter Barca, D-Kenosha.
The speaker’s office did not immediately respond to requests for comment.
Tom Evenson, a spokesman for Gov. Scott Walker, called the incentive package an “excellent investment” for the state with $3 billion in exchange for a $10 billion plant and $10.5 billion in new payroll.
“This is a once-in-a-lifetime opportunity that brings high-tech manufacturing back to America, right here in Wisconsin, and adds 13,000 good paying jobs,” Evenson said, adding the package results in $6.70 of private investment for every $1 of public funds.
Foxconn has said it will hire 3,000 people in Wisconsin and potentially grow that to 13,000 — a number that the Walker administration estimates will happen by 2021. Under its agreement with the state, Foxconn would get up to $1.5 billion in tax credits for the jobs it creates, along with up to $1.35 billion in tax credits for the capital expenditures it makes.
LFB, using figures from the Department of Administration for its analysis, cautioned in its analysis that any figures looking that far into the future “must be considered highly speculative.”
Still, it noted the state is projected to spend at most $312 million a year to encourage Foxconn to build a manufacturing campus in southeast Wisconsin. The payments to Foxconn would stop in 2033-34.
The amount of increased tax revenues the state would see annually would vary until 2022-23. That year, the state is projected to take in an additional $115 million in tax revenue annually through a mix of $44 million from taxes associated with Foxconn employees and $71 million from the indirect and induced jobs that stem from the project.
Under the DOA’s projected timeline, the state’s increased tax revenues would start to exceed the expenditures in 2033-34, when the payments to Foxconn would cease. But the revenue increase wouldn’t offset the $3 billion in state payments until 2042-43.
That year, the state would see a cumulative benefit of $113 million, which would grow to $228 million in 2043-44 and then $343 million in 2044-45.
Still, those projections assumed all of the new jobs would be filled by Wisconsinites. LFB noted a good chunk of the expected hires would likely come from Illinois, and if those worked filled 10 percent of the jobs, the break-even point would be pushed back to 2044-45.
LFB also pointed out that its analysis only looks at how the Foxconn project affects state budgets but “does not account for other benefits to the state’s economy and residents.”
For example, LFB said, Foxconn is projected to spend $10 billion on the manufacturing campus while getting $1.5 billion through capital investment tax credits and an exemption from sales tax on building supplies. That amounts to $6.70 in private investments leveraged from $1 in public dollars. The payroll credit for Foxconn has a leverage ratio of 5.9 to 1, LFB added, and that’s only accounting for Foxconn’s direct jobs and not the broader spillover effects on jobs.
“Most state expenditures do not result in private investments of this nature,” the LFB analysis said. “The project would also provide greater employment opportunities for the state’s present and future workforce, and add a new sector to the state’s manufacturing economy.”
The state would also need to spend $15.65 million in the next biennium under the agreement, according to the LFB analysis.
It would then need to spend about $307.6 million more in the 2019-21 biennium, as the state commitment of $511.8 million would be offset partly by $204.2 million in increased revenues.