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Home / Innovative / Foxconn and the Village: The $ 10 Billion deal that turned a small town in Wisconsin upside down

Foxconn and the Village: The $ 10 Billion deal that turned a small town in Wisconsin upside down

Much of Foxconn's trip to Wisconsin took place on the national stage. President Trump and Governor have been canceled. Scott Walker took the deal, while critics attacked him as an example of extravagant corporate welfare. However, the fight for Foxconn also played out on the much smaller stage of Mount Pleasant, Wisconsin, the 26,000-plus city where the company plans to build its factory. There, a politician extended his budgets to court the tech giant, and came under fire from watchdogs for completing a secret deal that will have a big impact on the community. Apart from Mount Pleasant, Foxconn's champion and his main critic live in the same neighborhood, and they quarreled at community hall meetings and on Facebook.

This week from Reply All Sruthi Pinnamaneni tells the story of what happened when a small town pledged the promise of a $ 1

0 billion investment and the tensions that arose in Mount Pleasant. You can listen to the episode here, and below is an interview about their story, condensed and compiled for clarity.

Can you tell me something about Mount Pleasant? What kind of city is that and how is it?

It's quite surprising, because I spoke to people from Mount Pleasant for the first time and listened to the village village meeting cassettes and read all the articles and Facebook groups that were in the village when I was in New York. I had an idea of ​​what the village would look like and what Racine would look like. I imagined this kind of post-industrial, easily abandoned city. And when I got there, it was not at all what I expected. Racine herself is very beautiful. It is a very charming town on the beach. If you drive from Racine to Mount Pleasant, there is no village. It's just this sprawling suburb of Racine. There is no heart of the village. It's like a series of enclave neighborhoods separated by freeways, big cabbages and shopping malls. You could say the village house is the heart of the village.

And the people there – I mean, you can hear it. It's something that immediately intrigued me. It's just such a microcosm of all these other groups and personalities you see at the national level, right? Because Kelly Gallaher, a local activist, is obviously the type of local progressive Democrat, and village president Dave DeGroot came out of this boot camp for tea party people who want to go into politics.

It's interesting because so much of the coverage has been at the national and state levels, with Walker and Trump. And here you have similar incentive offers and similar conflicts over them that took place in this smaller town where the factory was supposed to be built. Dave DeGroot is a kind of local master of the Foxconn factory. What do you think has interested him in this deal, and what is his background?

I think Dave … he went through this bootcamp, so he comes from a certain kind of thinking on these topics, which I did not do. I have a word for the time, but now I think the camp is the "belief economy" – that it's going to happen because I think it's going to happen or it's going to happen because the place I live in is awesome and you have to believe it works. I think he's grown up in this part of Wisconsin, like so many other people I talk to, and they're very proud that it's this city of inventors and land of factories where people made things.

It was only last year, a few weeks before the prospect, village president This deal came on the market, so is he's new to the job, and then what's fallen in his lap is really the biggest thing that ever happened in the area – all over the state. I talk to people, not just at the village level, but also with the financial architects of the state-level deal, and they had the same reaction: "We have never seen such a thing". And they all looked at the zeroes to see if that was right. For Dave, it was like, "Oh my God, that's the opportunity of your life, and of course we have to do anything to get it."

A Foxconn Innovation Center near the Foxconn manufacturing site in Mt. Pleasant, Wisconsin. Joshua Lott / The Verge
Photo by Joshua Lott for The Verge

You have mentioned that this is an unprecedented deal even for Wisconsin, but especially for a village like Mount Pleasant. What burdens has burdening the local government by examining the deal and assessing its potential impact and on the basic civil processes as they are to be approved?

I would say, an unimaginable burden. That's what really drew me to the story. I've been interested in Foxconn for a long time, so I've been watching the Brazil deal for months. And while I did that, the whole project really came to a standstill. And then this deal was announced in Wisconsin, and I said, "Well, I should just see what happens here."

I expected it to stand like it did in so many other countries. The deal was announced in July within six months, it has shifted so far. They had a signed agreement, they brought people from the countryside, and I listened to those meetings, and I'd never heard of them. I work on the radio, I listen to cassettes all the time, and it was quite extraordinary, because these people are trying to talk about this thing in a place where no one recognizes that the thing is happening. It is a strange combination of democracy in action, but at the same time democracy is closed. So I think the process … I do not think they could ever have done a deal of this size. And I think that this was almost an experiment that proves the limits of this style of government.

How transparent was that? When did people realize that Foxconn is coming?

The rumors started last summer. If you follow Kelly's Facebook group, the first post with rumors that Foxconn is coming is in July, when President Trump makes his big White House announcement with Paul Ryan, Scott Walker, and Terry Gou. As soon as this happened, everyone in the village who was attentive put two and two together. They said, "Oh, they've just announced a big deal in Wisconsin, and everyone here knows from rumors and whispers coming from the local government that this huge, huge thing is coming to us, so it must be Foxconn." [19659018] But there was no actual announcement?

No. That's the crazy part, right? The announcement by President Trump took place in July, and the village government would not say the word "Foxconn" until December, which is almost six months. And if they confirm that Foxconn is coming, the deal is mostly complete. You already know this huge property they are giving to Foxconn. And they also know roughly how big the incentive package is, but they bargained for another two months before signing the deal. And so the villagers did not even see what was promised, which land was given away, almost eight months after Trump's announcement, basically it was a closed deal.

And what was your answer?

It's really very varied, the people who were the most upset were the Kelly guys who said, "This is not the way to do things." We have We should try to work together to find the way for it. "And it's not as if they think the village has done such a great deal for them, it's not as if the village has so much If you look at the conditions, the village will buy part of the land and it will be paid for with the money it lends to give Foxconn, which is for Kelly and a few other people I talked to There were some things that they thought were very unfair, and on the other hand, of course, there are those who envision the end result, a thriving tech hub many people, the old W saw cubes, there's something about technology that feels shiny and durable. And for them, the idea that Foxconn is coming is obviously very exciting.

It ranged from DeGroot's optimism to Kelly's skepticism. Can you tell me something about Kelly and her background and concerns?

Kelly Gallaher has been living in Mount Pleasant for about 30 years. She and her husband are from Illinois and live very close together with DeGroot in the same neighborhood. And she is just the opposite: she is very questioning, almost an annoying person. As I listened to village village meetings, I immediately thought, "I need to talk to that person." You can see why it helps because it forces the village board to be transparent. She always harasses her to record her minutes. They did not film the board meetings, so she started filming them, and finally, to stop them, they also began filming and posting them on their website. She does things.

And she was worried about the transparency of the approval process?

Now, before Foxconn, she said that she had even come to the village politics was that about five years ago, the village board tried to eliminate the public comment. This is part of the village board meeting where people come and just say what comes to their minds. In three minutes you can talk about it. She has never done that before. She had never attended these board meetings, but her friends said to her, "Hey, they're trying to take that away, and we think that's an important part of our local democracy." So she fought for it and you had to keep it, and then she just went to meetings. I think transparency is the cause that led them to it.

Workers drive their construction vehicles at the Foxconn construction site in Mt. Pleasant, Wisconsin. Joshua Lott / The Verge
Photo by Joshua Lott for The Verge

And the Foxconn process was extremely opaque, especially in Mount Pleasant?

It was just inscrutable.

What is your impression of the negotiation process? The village gives them a lot of money and promises to buy land for Foxconn. Do you have any sense of how that came about and how the village judged whether this factory was a good idea or even feasible?

I think they took off much of the assumptions. If you ask them, hey, the size of this incentive package you offer is very large, and you have a village whose budget is usually between $ 18 and $ 20 million, and you offer a $ 760 million incentive package on. They have to change the law of the state to allow the village because it goes beyond the prudent loan rate – they say it is justified because the size of the business was so great.

That is, Foxconn offers them $ 10 billion, which is so much money, so we obviously had to come back with an equally sweet deal to get them here. I mean, the problem is, when you talk to people who study Foxconn, or if you just look at the way Foxconn works in other countries, they often have a very big deal and go back on the deal a place that seems to be comfortable for them.

I'm not sure if their basic assumption is correct, but it was the basis for their negotiations. And people on the county level signed NDAs, so they did not know what other states offer or what other cities offer, and it's this classic blind beauty contest, right? Everyone goes as high as his state allows, and in this case, Scott Walker really wanted the deal, and so many laws were changed just to make that deal, everything from financial regulation laws to environmental laws. 19659038] It's not really part of this story, but I worked a lot on the negotiation process, and it's really weird. As far as I could tell, they had no technical advisor. As far as I could tell, they did not have a consultant for Asia. It was only a few bankers who understood it only abstractly. what they could offer in terms of subsidies and tax cuts to get Foxconn there. However, this is based on numbers, as opposed to a fixed idea of ​​what would happen in the end.

How was the fallout local? Walker has lost his re-election bid – is there also DeGroot and others?

Sruthi: DeGroot will be available for re-election in April. He says he is very confident. Kelly, of course, fights against him and she is just as confident that he will not survive the race. I do not know, there are no surveys. Most of the people I've talked to are not very pro Dave DeGroot, but they do assume they take a risk to possibly make a very exciting project, which is why they thought Foxconn would make sense.

I talked to a few people who lived on the Foxconn factory site and were dropped off, and they were gone the deal. They gladly accepted the money and made room for progress, as they put it. But they were like the Village handled it very strangely, it was very unstructured and they picked up something that was just too big for them. They promised Foxconn that within months they would get 60 different homeowners out of this very large property. It was not the smoothest operation. Therefore, the people I believe are not enthusiastic about the leadership of the board.

And the critics, they are upset about the business in general or the implementation of the city in terms of things like the resettlement of people

It is a mixed bag. There are people who do not believe that it will be good for the community. They believe that it will be a disaster. And they are very dissatisfied with the way the village dealt with the whole thing. And then there are people who say you know that the village was bad at it, that it could have given better information and just better PR. I think people do not want to be pessimistic. I'm not from here, I'm from India, and it's the thing that I find most appealing, that feeling, I do not want to be the complainant – I want to believe in this thing.

  President Trump participates in breaking ground at the Foxconn Wisconsin plant

Terry Gou, chairman of Foxconn, speaks at a groundbreaking ceremony in Mt. Pleasant, Wisconsin.
Photo by Scott Olson / Getty Images

What do you think is Foxconn from Mount Pleasant? Why did you choose Wisconsin and especially this city and not elsewhere?

I think it made sense for her to come to the US because I'm sure Trump was putting pressure. People from the Trump side held talks with various investors and Foxconn's people. The deal took place before the tariffs, but I think they got wind of something that might and could affect them, and I think it was like, okay, how would it take to open a factory in the US? ? [19659050IchbatsiemitmirzuredenundoffensichtlichtatensieesnichtSiesprechennichtwirklichmitjemandemSiehabenmirinderTateineErklärunggeschicktinderesgegenunserePolitikverstößtmitjemandemüberlaufendeProjektezusprechenAlsohabeichesnichtpersönlichgenommenAberichverstehebeieinerReihevonBeraternvonTech-BeraternundLeutendieFoxconnstudierendassihrProzessdarinbestehteineRFPeinzureichennichtunserenNamenzunennensondernherauszufindenwasdasGrößteistwaswiranbietenkönnenundsehenwerbeißtsehenweramhärtestenbeißtundwaswirvonihnenbekommenunddannwerdenwirrückwärtsarbeitenundherausfindenwaswirdortmachenkönnenwievieleLeuteeingestelltwerdenwürdenundzwarsodassdieZahlenklappenwürden

So I just went for fishing, let the planned investment in the amount of $ 10 billion swim, and Wisconsin and then Mount Pleasant bite hardest and offered all that stuff, and so the factory had landed there.

You've definitely bitten the hardest. What was confusing to me was my impression when talking to Dave DeGroot that there were several other cities in the race. He specifically wanted to beat Kenosha, another nearby town that was currently running, and Kenosha had defeated Mount Pleasant due to various developments, so he really believed that we would not let them go to Kenosha. But Kenosha fell out. In the end, only Mount Pleasant was in the race. Local government chief Kenosha said the things Foxconn demanded made it economically impossible. They were like: We will not offer these things. And so Mount Pleasant certainly went the furthest to win Foxconn.

So it's not just about playing states against each other in the bidding process, but playing off the communities where the state won the treaty against each other?

Yes, and then, at one point, a historian I've talked to about economic development deals, he called it a race down. He said it was getting worse and I do not understand why no changes were made. It is a very strange way to play states and localities against each other, and there is no taxpayer in the best possible deal. I do not know how we chose this model.

So people were moved to make way for the factory, and construction has begun. What changes are people on Mount Pleasant seeing on the ground?

I was there in October, keeping in touch with everyone on the phone, and of course I also read A Better Mount Pleasant, Kelly's Facebook group, and the Journal Times Foxconn and everything that happens in the village. It seems they are building on the first part of the land where Foxconn will build. They've built the first building, which in five to seven years' time will not be close to what's going to happen there. The first building is a warehouse where only TV components for Sharp are installed. It's just one thing they want to raise because the village wants to start paying some taxes out of Foxconn because they have those huge interest payments they have to pay for all the municipal bonds they have released to pay for the money Purchase the land to receive for Foxconn. I think they will be building TVs until next year.

Regarding local politics, Dave DeGroot stands for election, Kelly is currently in full swing trying to change the local government. I think they are very excited about the change at the state level, and they at least hope that the new governor will change some of the environmental regulations that have been bypassed for Foxconn and really address the water problem. And no one answered that question: producing LCD screens there creates a huge amount of toxic mud. There was never a plan for what they will do with this mud, because the factory is located in wetlands, and so people hope that they will move in a certain direction with the new state government. They will end up with a factory owned by Foxconn was originally promised.

The analyst I spoke to said he believed Foxconn was going to build something. Whatever they build, it makes economic sense for them. And he said he felt like everyone left a bad taste in his mouth. He says I do not think this will be the future people imagined when they gave away this huge, huge, large incentive package.

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