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Foxconn's WI Tax Breaks Come Under Fire

Friday, December 20, 2019

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According to a letter released by Wisconsin Gov. Tony Evers’ administration earlier this month, Foxconn’s alleged $10 billion plant may not qualify for the agreed-upon $3 billion incentive package if the tech company decides to scale down the project as it has talked about.

According to the Associated Press, State Department of Administration Secretary Joel Brennan wrote to Foxconn Industrial Internet Chief Business Officer Richard Vincent on Nov. 4 warning that the new project doesn’t qualify for incentives under the existing contract.

Foxconn’s U.S. strategist, Alan Yeung, responded to Brennan’s letter by accusing Evers’ administration of wasting the company’s time with contract arguments.

Foxconn

According to a letter released by Wisconsin Gov. Tony Evers’ administration earlier this month, Foxconn’s alleged $10 billion plant may not qualify for the agreed-upon $3 billion incentive package if the tech company decides to scale down the project as it has talked about.

“Distractions like these leave job creators and job seekers wondering if doing business in our great state is welcomed by Governor Evers’ Administration (sic),” Yeung wrote in a Nov. 18 letter to Brennan.

Some Contract & Project History

In April 2018, Foxconn named Providence, Rhode Island-based Gilbane (which has a Milwaukee office) and global firm M+W Group (Stuttgart, Germany) as its lead contractors on the 20 million square feet of building space that will eventually employ 13,000 people.

Officials announced the first round of contracts that July, worth $14 million, that went toward a multi-purpose building on the site, which is now complete.

However, this year opened with a Jan. 17 letter in which the company disclosed that it would not make the threshold of job creation needed in order to receive about $9.5 million in tax credits.

Foxconn is under an agreement with jobs agency Wisconsin Economic Development Corp. to create up to 13,000 jobs over the course of construction, which would then qualify the company to be awarded up to $3 billion in tax credits.

The contract with WEDC extends well beyond the completion of construction, however. Over the first 15 years of the contract, which ends in 2027, the minimum hiring number dips to 10,400 and the company must continue employing that many people through 2032.

Shortly after, the company noted that it was no longer sure that the facility would be solely focused on making flat screens as originally pitched. According to a report by Reuters, which spoke to Louis Woo, special assistant to Foxconn Chief Executive Terry Gou, the company would now focus on creating a “technology hub” rather than LCD manufacturing.

While it promises to maintain the numbers in terms of job creation, the type of jobs that will now be up for grabs will reportedly be totally different, and will include more research and development and design positions rather than manufacturing jobs.

Woo cited the cost of labor in the United States for the shift.

Bid packages for the construction of the massive manufacturing facility began issuing in May and later that month Foxconn awarded $13 million in contracts for foundation-related work to C.D. Smith Construction Inc. Crews began pouring concrete in late June.

Foxconn

According to the Associated Press, State Department of Administration Secretary Joel Brennan wrote to Foxconn Industrial Internet Chief Business Officer Richard Vincent on Nov. 4 warning that the new project doesn’t qualify for incentives under the existing contract.

Also in early summer, officials awarded nearly 40 other contracts—the financial terms of which were not disclosed—and renderings for the property were released as well.

The area is designed by three Taiwanese companies that include JJP Taipei, Team Engineering Consulting and United Integrated Services, while the building shell is designed by Eppstein Uhen Architects in Milwaukee. Graef is the engineer of record and The Sigma Group is civil engineer. New York-based Exyte, which has specialization in clean rooms, is leading the design team.

In August, it was reported that walls were going up at the 1 million-square-foot plant. About 200 workers installed 400 precast concrete panels and structural steel work, led by general contractor Gilbane Building Co.

Echoing the shift in focus, in September, Foxconn announced that it had chosen Mortenson Construction (Minneapolis) to serve as construction manager for two facilities that were recently approved as part of the plan to support “smart manufacturing,” which include a Smart Manufacturing Center and a High-Performance Computing Data Center.

At the time, Mortenson announced an invitation to bid on the core and shell of the SMC, seeking contracts for: earthwork, site utilities, asphalt, site concrete, landscaping, concrete reinforcing materials, concrete reinforcing install, SOG concrete, precast, steel, metal panels, roofing, overhead doors, glazing, skylights, exterior sheathing and air barriers, loading dock equipment, elevators, temporary fencing, masonry, testing services and concrete Redi-Mix materials.

In October, the Milwaukee Journal Sentinel reported that Foxconn Technology Group awarded another $83 million in contracts for its $10 billion, 20 million-square-foot manufacturing complex in Mount Pleasant, Wisconsin.

Eppstein Uhen Architects

In the Nov. 4 letter from the administration to the company, Brennan told Vincent that the Wisconsin Economic Development Corporation hasn’t evaluated the plant project or properly contracted for it, and charges that the project is ineligible for tax credits under Wisconsin law.

That brought the total contracts awarded to more than $250 million.

In addition to the contract announcements, Patch also reported in October that installation had begun on the 1 million-square-foot factory’s roof. For the installation, 16,000 yards of concrete will be poured onto the metal deck and will reportedly be completed by three roofing crews.

Designs for the data center were also released, which include not only the 34,250-square-foot building but a 100-foot-tall “networks operations center globe,” which is set to include a 240-seat auditorium, board rooms and more office space. Both are also designed by Eppstein.

Both the LCD plant and the manufacturing center are still allegedly set to open in the fourth quarter of 2020.

Contract Dispute

In the Nov. 4 letter from the administration to the company, Brennan told Vincent that the Wisconsin Economic Development Corporation hasn’t evaluated the plant project or properly contracted for it, and charges that the project is ineligible for tax credits under Wisconsin law.

Yeung responded by accusing the administration of throwing up “red herrings,” but concluded by saying that Foxconn would evaluate “all available options related to the contract.”

Brennan responded by noting that Woo was the first to initiate the talks of a shifting focus of the project and stated:

“We want to work together with you to help make Foxconn’s new project as successful as possible. The ability to do that requires Foxconn to recognize that there are consequences arising from its unilateral decision to change projects well after the Contract was in place.”

   

Tagged categories: Contracts; Good Technical Practice; Manufacturing Plant; NA; North America; Ongoing projects

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