RACINE, Wis. –– Wisconsin Gov. Scott Walker and Foxconn Technology Group Chairman Terry Gou signed a contract Friday for the biggest development deal in Wisconsin history, which provides a once-unimaginable level of state financial aid for a manufacturing complex that backers say will transform the state's economy.
Walker and Gou, head of a $135 billion Taiwanese electronics manufacturer, put their names to a deal that promises to put an immense liquid crystal display panel factory on 1,000 acres in Mount Pleasant.
In the case of Gou, it's personal: The self-made multibillionaire is himself guaranteeing to pay as much as $500 million if Foxconn reneges on its contractual pledges.
The signing was a major step -- but not the final one -- in a months-long effort dating to last spring, when Wisconsin began courting Foxconn.
With competition from other states, Wisconsin increased its offers to the company, and Foxconn increased its job numbers. State and local delegations flew to Japan to see the company's LCD panel operations there, while hundreds of Foxconn employees combed Wisconsin for potential factory sites.
Ultimately, in July, Walker and Gou jointly committed to the project, signing a handwritten note on a single page of the governor's stationery. Scrawled on it were a few lines with the basic terms: a $10 billion investment by Foxconn, $3 billion in state incentives, 13,000 jobs to be created.
That left the task of preparing an actual contract, which took longer than envisioned. A Sept. 30 deadline came and went. The Wisconsin Economic Development Corp. board did not act on the deal at an Oct. 17 meeting.
WEDC CEO Mark Hogan repeatedly said he would take whatever time was needed "to get things right."
The final contract, approved by the WEDC board, 8-2, in closed session Wednesday (two Democratic members of the panel voted no) requires minimum job numbers for Foxconn to receive up to $2.85 billion in state tax credits. Because Wisconsin levies almost no tax on manufacturing profits, the company likely would be paid in cash.
To get the full payments, Foxconn's employment here must rise to 5,200 by 2022, to 10,400 by 2027, and to 13,000 by 2032. Workers must be paid at least $30,000 a year, and the average annual salary must be at least $53,900.
The company would have to spend at least $9 billion on its production complex. It also would be eligible for $150 million in sales tax savings.
Through 2022, Wisconsin could recoup all of the tax credit money if Foxconn lies to the state, shuts down its manufacturing operations, or moves them elsewhere. Beginning in 2023, those potential penalties are capped at $965 million, and fall to $386 million by 2032.
Wisconsin also could claw back additional money -- up to $500 million beginning in 2023 and then steadily decreasing -- if Foxconn doesn't hit minimum jobs numbers.
Hon Hai Precision Industries -- the overarching corporate entity informally known Foxconn -- would cover 75 percent of any penalties Gou himself would cover 25 percent.
Still left to be executed is a contract between the company and two local government entities, the Village of Mount Pleasant and Racine County, on another $764 million in incentives. The parties have signed a memorandum of understanding describing the general terms.
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