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Wednesday, August 16, 2017

Transformative: Walker's Foxconn Deal Pays To Create Fewer Jobs

On Foxconn deal, "3,000 jobs cost #WI taxpayers more than $3 billion in tax giveaways. Break it down: more than $1 million in taxpayer dollars per job."
— Rep. Melissa Sargent, Aug. 2, 2017 tweet

Given what little facts we knew about Gov. Scott Walker's deal with Foxconn at that point, I was amazed to see Politifact fall over themselves in their zeal to argue against basic math when they tackled Sargent's profoundly accurate statement.

Yet despite the good math, Politifact gave Sargent a "false" rating for that one based on a third party analysis showing the amount paid per job is riding on an inverted sliding scale.

Politifact Excerpt:
An analysis projects the per-job cost at $219,000 per job if 13,000 jobs are created and $587,000 per job if 3,000 jobs are created.

Only $587,000 per job? Well that's comforting.

I don't know the formula they used or how it relates to the $10B capital investment Foxconn promised to make, so I won't dispute their numbers. Apparently however, Wisconsin taxpayers will pay Foxconn $1.761 B for 3,000 jobs or $2.847 B for 13,000 jobs. That of course means Walker's program to incentivize the creation of more jobs actually pays less per job for anything above 3,000.

But isn't it about the jobs?

Again: If more jobs are created, the incentives paid per job is less. How crazy is that?

In a conventional sense, an incentive package for 3,000 jobs with a goal of encouraging 13,000 over a period of 15 years should read something like this: (values are example only)

For the first 3,000 jobs - $1,000 per job.

After 3,000 jobs. The next 1,000 jobs - $1,200 per job. (But only for those 1,000 jobs)

After 4,000 jobs. The next 1,000 jobs - $1,400 per job. (But only for those 1,000 jobs)

After 5,000 jobs. The next 1,000 jobs - $1,600 per job. (But only for those 1,000 jobs)
...and so on. If the employee pool shrinks. Simply reverse the order.

I'm not condoning our current system of economic development through market distorting capital incentives, but that in my opinion is how government should incentivize job creation - if it's government that must provide.

Obviously, as it currently reads, Wisconsin's Foxconn package is the exact opposite. It provides Foxconn a DISINCENTIVE for creating more jobs beyond the 3,000 baseline when its purpose (supposedly) is to foster the development of more jobs. In Walker's jobs program, it's simply more efficient and lucrative for Foxconn to hire as few employees as possible.

But things just got even worse.

Wisconsin state republicans have now offered an amendment that brings the 3,000 jobs floor down to only 1,000. According to Sen. Jennifer Shilling, state taxpayers could then be paying Foxconn as much as $1,500,000 per job!!

Wheeler Report Excerpt:
According to Substitute Amendment 1 introduced by Assembly Republicans, if Foxconn were to create 1,000 jobs and retain those positions over a 15 year period, the company could receive a check from the state for $1.49 billion – approximately $1.5 million per job created. Given the high volatility in the electronics industry, workforce shortage issues and the company’s stated desire to automate its manufacturing operation, it is unclear how many of the promised jobs will materialize.

Basic math strikes again.


American Prospect - Trump, Walker, and the Foxconn Con

Chris Rickert - Foxconn has GOP embracing government-run economy

Saturday, August 12, 2017

State Should Cover 100% Of Local's Tab For Foxconn

RACINE COUNTY — The state would cover up to 40 percent of local governments’ loans if the Foxconn project falls apart, under the deal legislators are considering.

But why only 40%? No confidence in Foxconn?

Let's not pretend it's something it's not. Truth is, Foxconn is a state mandate. It was thrust upon the state by Gov. Scott Walker with the help of Paul Ryan, Ron Johnson and President Trump. So, Foxconn IS a big government order. From the biggest.

With the state thrusting Foxconn on eager desperate locals and knocking down environmental protections along with local ordinances to grease the way for Foxconn, locals are powerless to defend or leverage their assets.

Because Wisconsin taxpayers are already at the mercy of Foxconn's demands thanks to Walker, there is no competition between Wisconsin communities, and if there is, there shouldn't be.

So what the deal means for either Kenosha or Racine (assuming the choice is between them) is they will start paying millions for pipes, wires, concrete and planning not for a factory on a simple 10 acre parcel of land, but for a 1,200 acre self-contained tax-free community within a community - BEFORE the state or Foxconn commit to spending a dime. Early estimates for the cost on locals range from $20 to $50 million. And that is only the beginning.

Now, getting back to that state mandate thing assuming the decision has already been made, if I were Kenosha, Racine or anyone else targeted by Foxconn - I would not offer a TID or TIF District to them at all. Locals are under no "moral obligation" to commit themselves after they have been rendered powerless.

But Rep. Robin Vos said locals will have to step up and borrow from lenders to pay for Foxconn's infrastructure. How generous of him. But why?

Because it's a state mandate, locals would be forced to borrow with or without a TIF District anyways, but without a TIF, property tax payments from Foxconn can pay for the note with left-overs going to the General Fund. Wait, who am I kidding? Any TIF "surplus" is already accounted for and chances are high Foxconn won't be paying property taxes for decades and if they do, it will be small percentage of its true valuation. That's why the state legislature wants to extend TIF life terms to 30 years or more for Foxconn. It'll take locals that long to pay off their debt.

I also totally understand why many think the locals should have some skin in the game and don't want the state to cover any of the local's tab if Foxconn doesn't show. But it's a state mandate demanding locals ante up first ...and what's another $50 million in a $3B deal to Gov. Scott Walker?

Besides, if the state doesn't have the confidence or can't afford to back the ante 100%, it shouldn't be in the game.

Thursday, August 10, 2017

After Plugging $1M Budget Hole With $2.3M, Janesville Boasts $10K Surplus!

Wow. What a "story" from the Janesville Gazette and Janesville City Manager Mark Freitag on his administration reporting a $9,800 city surplus going into the next budget session.

According to Freitag, it's (his) the city's Foxconn-like sell-out-our-future economic development strategy that turned the budget around ...

JG Excerpt:
Much of the difference can be attributed to new construction, such as the $56 million Dollar General warehouse. Such projects increase the tax base and give the city more property tax revenue, City Manager Mark Freitag said.

How stupid does he think us chumps are? Apparently. Very.

Because the city does not collect one penny in income tax or property tax from Dollar General and ...because the $56M warehouse is in a TIF District, its assessed value is not tax payable in Janesville's assessed value of $4.6 billion. That's right. And, because the city keeps information on their TIF Districts closely guarded, it's a good guess Freitag will be close to 80 years old by the time DG finally contributes to Janesville's assessed value and the General Fund.

Even DG's building permit fees totaling $232K have been kicked back to them. So, Dollar General's direct contributions to the city's budget is closer to a big fat zero.

JG Excerpt:
Janesville's projected assessed value for 2017 is $4.6 billion. That's an 11 percent increase from last year and the biggest increase since 1996, Freitag said.

An 11% increase from last year. That comes to about $500M in assessed value. And, that growth is largely responsible for only $9,800 in surplus?

But $500M in assessed value growth? Whoa! Did all of Janesville's TIF Districts suddenly retire and go on the assessment tax rolls? Did someone suddenly build 2,500 homes for DG employees in Janesville valued at $200K each over the last twelve months?

No? Why not?

Because that's what it would take if we believed Freitag's gimmicky self-aggrandizing statements giving credit to the city's economic development strategy by equating growth in assessed value to the budget surplus. That's his accounting of it ...not mine.

Freitag's and the Gazette's fairy tale about where the $9,800 surplus came from is just another story in a long line of corporate-establishment media propaganda being fed to the local consuming masses.

The truth for the surplus is closer to city fee hikes totaling $2.3M to fill Freitag's 2016 $1M budget deficit AND last year's snow plow budget in a city that saw light snow and very few plowing events for the budget season. The question should be why doesn't Janesville have at least a $500,000 surplus to celebrate at this point instead of a feeble $9,800.

The second question should be why do we have a political ideologue for a city manager who spins up trickle-down corporate economic development schemes when there's a city surplus, and blames unions when there's a city deficit.

RNR - So Predictable. Soon After Downtown TIF District Approval, Janesville Fees Set To ARISE

RNR - Top Local Story 2016: The Janesville Kleptocracy Is Strong

Tuesday, August 08, 2017

Monday, August 07, 2017

Conservative Group AFP Opposition To Foxconn's Scott Walker: Empty, Toothless

I couldn't help rolling my eyes while reading the story about the Koch brothers political machine, Americans For Prosperity, purported opposition to Gov. Scott Walker and his crony capitalist deal with the Taiwanese sweat shop, Foxconn.

WDIO Excerpt:
MADISON, Wis. (AP) - The Wisconsin chapter of the conservative group Americans for Prosperity is making a rare break with Republican Gov. Scott Walker and coming out against a $3 billion tax incentive package that's part of a deal for Foxconn Technology Group to build a plant in the state.

Let's be clear. What Gov. Scott Walker is proposing, with full support from Rep. Paul Ryan and Sen. Ron Johnson (all AFP endorsed), in the Foxconn deal runs right against the core of everything the Koch brothers "free market small government" group stands for ...if you can believe them.

Of course I think their statement of opposition to Scott Walker is strictly for optics. Politically and on principle, it's empty and toothless. Here's why.

Remember the recent op-ed rants written by Charles Koch imploring his support base of millionaires and billionaires to steer clear of taxpayer funded capital incentives?

USA Today Excerpt:
Companies should earn profits by creating value for customers and acting with integrity, the opposite of today's rampant cronyism.

Too many businesses focus on getting subsidies and mandates from government rather than creating value for customers. According to George Mason University's Mercatus Center, such favors cost us more than $11,000 per person in lost GDP every year, a $3.6 trillion economic hit.

Charles Koch, and this is important, was very careful not to point his criticism at political candidates they've anointed and bought.

Instead, Koch laughably asked other wealthy elite capitalists to stop capitalizing on desperate taxpayers. He asked for the impossible knowing it sounds good to his legions of sheeple while giving their political candidates, the Scott Walkers, Paul Ryans and Ron Johnsons, the key enablers of everything they publicly oppose, a free pass.

So, who will the Koch brothers ultimately blame if the Foxconn deal is approved? The concept of government and the need for tax reform. Of course! That's who.

Paul Ryan called the Foxconn boondoggle a potential "game changer." He's right.

In my view, until the Wisconsin chapter of Americans For Prosperity come out publicly with a game changing full-throated condemnation of Scott Walker, Paul Ryan and Ron Johnson, Foxconn will have proved the Koch brothers phonies on principle and toothless on bite.

Wednesday, August 02, 2017

Walker's Small Government Reforms: Forced "Dues" From Taxpayers As a Condition Of Employment

“No one should be forced to dues as a condition of employment." -- Rep. Robin Vos, April 2016

Newsflash: Last year, Wisconsin became the 25th state to pass Right to Work legislation, freeing taxpayers from being forced by government through automatic deductions to pay dues to unions Foxconn as a condition of employment.

Their rules. Ironic, isn't it?

Because, Wisconsin residents will have to do more than just forgo taxes from the Taiwanese electronics sweat shop giant. We will be forced to pay cash to Foxconn by writing checks for up to $200 million a year. We can call it a fee or dues, but it's a forced payment by any other name. "Free market" think tanks say we have the conservative reforms pushed by Gov. Scott Walker to thank. Honest.

Make no mistake. According to the contract, state government will be confiscating up to $200 million annually, through automatic deductions from Wisconsin paychecks and other tax collections, and transfer a set amount for as long as 15 years, to Foxconn for each employee hired. The money will not be paid to Foxconn if those employment conditions are not met.

Although all Wisconsinites qualify as "dues" paying members, the vast majority will not be hired by Foxconn. There is no provision in the bill allowing taxpayers the freedom to opt out.

Thanks to Walker, there is no right to work at Foxconn - only the right to pay.

Tuesday, August 01, 2017