Here and Now #1605

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Premiere Date: 
August 4, 2017

Here and Now #1605

On today's show, we examine: the proposed Foxconn deal with state assembly leaders; the environmental impact Foxconn may have on Wisconsin; the budding relationship between Foxconn and the ginseng industry; the possibility of a second Foxconn plant in Dane County; and the U.S. Army backing out of an agreement to build a public drinking water system near a contaminated former Army ammunition plant.

Episode Transcript

Zac Schultz:

Good evening. I'm Zac Schultz filling in for Frederica Freyberg. Tonight on "Here and Now", a first look at the proposed Foxconn deal with the state. State Assembly leaders are here. Then a look ahead to the environmental components within the bill. A closer look at Foxconn’s budding relationship with the Wisconsin ginseng industry. It's "Here and Now" for August 4th.

Announcer:

Funding for “Here and Now" is provided in part by Friends of Wisconsin Public Television.

Zac Schultz:

In our first look tonight, we're learning more about just how and when Foxconn can earn their $3 billion from taxpayers for building a manufacturing plant in southeastern Wisconsin.

Zac Schultz:

The Assembly held a public hearing Thursday on a bill that creates a manufacturing zone for Foxconn. Six of Governor Walker's cabinet secretaries took questions from lawmakers explaining how the tax credits work and what protections are in place for workers and taxpayers. Under this bill they won't have to pay sales tax on materials and supplies, saving them up to $150 million. Foxconn will receive cash pay-outs from the state for 15% of their capital expenditures, up to $1.35 billion over 7 years. Foxconn is expected to start with 3,000 workers and could employ up to 13,000. According to testimony the entry level wages should be $20 an hour plus benefits. Wisconsin taxpayers will subsidize those wages. Foxconn will receive cash pay-outs from the state equal to 17% of payroll for every job that pays between $30,000 and $100,000. That will earn Foxconn $1.5 billion over 15 years. Scott Neitzel is the secretary of the Department of Administration and helped negotiate the deal. He says another 20,000 jobs will be created in the supply chain to support Foxconn and you have to look at the big picture.

Scott Neitzel:

Here again, you have to look at it very broadly. The potential for the positive economic impacts go well out for years and years and years. In the short term as these incentives pay out, yes, there will be an effect on the state budget in the short-term. But over the long haul, this is a net win for Wisconsin for the long-term.

Zac Schultz:

Republicans at the capitol have different ideas on how to address the special session bill. Senate Republicans want to pass the stalled state budget first and deal with the Foxconn bill in the Joint Finance Committee. Assembly Republicans decided to hold a public hearing before the Assembly Jobs and Economy Committee, which is chaired by Representative Adam Neylon who joins us now from Milwaukee. Thanks for being here.

Adam Neylon:

My pleasure.

Zac Schultz:

This bill would provide Foxconn with $3 billion in taxpayer money and yet they only sent a statement to be read at the hearing. Isn't it a little concerning they weren't there to answer questions about this proposal?

Adam Neylon:

No, it wasn't concerning at all. I think we covered almost every single issue you can cover on this bill. It was a very lively, good discussion. I think it was a productive discussion. I think that now that we've had that first hearing, I would imagine at some point Foxconn will be available and will be in Wisconsin to discuss this specific piece of legislation.  But this is a long process. And this is only the first step. You know, I wouldn't make anything of it at this point.

Zac Schultz:

There were a lot of questions about protections for workers and taxpayers making sure Foxconn lives up to their promises. Do you think stronger language needs to be written into the bill in that regard? Are you open to amendments?

Adam Neylon:

I’m absolutely open to amendments. I think there are ways we can improve this piece of legislation. To start, I think it is actually very good legislation. And for where we are in the process, I’m very happy. But I think there are certain things specifically targeted at making sure this investment best benefits the people of Wisconsin. Some sort of Wisconsin-first provision to make sure if all things equal, Wisconsin vendors and Wisconsin workers are the ones seeing these benefits flow to them.

Zac Schultz:

Because of the Manufacturing and Ag Tax Credit, Foxconn’s corporate tax rate eventually will be .4%. Most of the $3 billion in incentives will be straight cash paid from the state to Foxconn. Do you consider that corporate welfare as others are calling it?

Adam Neylon:

I believe that it is an incentive that's necessary to bring one of the top manufacturers in the world into a market that can support it. And we can thrive. And it's too good an opportunity to pass up. I wouldn't label it as corporate welfare. What I would say is that it's targeted economic development specifically to benefit our state. Taking advantage of resources and our strengths as a state, such as manufacturing, the strength of our work force, our skilled labor force. Taking advantage of these strengths and investing in our future.

Zac Schultz:

Now the conservative group Americans for Prosperity released a statement yesterday opposing the deal, saying they can't endorse the tax credits in this package. Are they misguided in what they are looking at?

Adam Neylon:

No, they've long said they don't believe in using these types of tax credits for economic development. That's always been their position. I tend to disagree with them. I think economic development should be done in a targeted beneficial way. And I think when you have an opportunity to bring in jobs to Wisconsin, thousands of jobs, millions of dollars in construction, you have to take advantage of that opportunity. The people of Wisconsin deserve it. When you knock on doors when you go to communities throughout Wisconsin people want jobs. People want economic development. They want opportunities for them and their families. It's up to us to seize this opportunity so we can provide them with things like jobs, opportunity, more skilled workers into our work force. This is going to bring -- I heard a good line the other day -- this is going to be a brain gain, not a brain drain. We've been losing workers for years. They're going to other states. Here's an opportunity to bring workers into Wisconsin instead of losing them on the other end.

Zac Schultz:

The last time Wisconsin did some of these major packages it was back with Mercury Marine around 2010 and it wasn't long after that Harley-Davidson and some other manufacturers came looking for some of those same incentives. Do you imagine something like that happening again? Are other large manufacturers either in the state or looking to come in are going to ask for something on this scale?

Adam Neylon:

Of course. I believe of course people going to ask for it. And those conversations are already taking place. My phone's been ringing literally non-stop since the public hearing was scheduled in the jobs and the economy. And a lot of people are already business owners or companies in Wisconsin that are saying yeah, this would be great but what about this benefit for us? Why can't we change the climate to benefit all? And I think these are worthy discussions.  And I’m willing to participate in them moving forward to see what more we could do to help the people of Wisconsin that are already here and already creating jobs and already working and providing for their families. I think these are good discussions. And I think we should continue to have them. But I will point out in this legislation, there are things like the enterprise zone that is expanded five more zones than WEDC can designate for different types of benefits and incentives for growth in Wisconsin and hiring new employees that could be provided to any company in Wisconsin that applies through WEDC. What we like to do is look for clusters and zones in areas of opportunity to develop in the future. And those aren't going to Foxconn, but they will be going to companies in Wisconsin to help them grow here.

Zac Schultz:

Now, this bill calls for expedited environmental permitting and there's no environmental impact statement. Do you think we are going to be missing out on some of the potential environmental dangers ahead of time before this gets put through?

Adam Neylon:

That’s a good question. I think that--I want to establish first and foremost Foxconn will still have to comply to the Clear Air act, Clean Water Act. They'll still have to go by all the waste removal standards. They're not exempt from the law. What we are doing is expediting and streamlining the process at the beginning when you are applying for these permits and your application. Because quite frankly a project of this scale could be decades before it would be approved through traditional ways. So I think if we want to actually see Foxconn investing in Wisconsin, this is an area we have to be flexible in. However, I also want to point out this does not mean they are exempt from DNR oversight. DNR is still able to participate in the construction process. We are still able to have oversight to make sure that environmental protections are taking place. So, you know, while -- we should expedite this process or it could take decades to actually get implemented, I think there are protections in place.

Zac Schultz:

All right. We will have to leave it there. Thank you for your time. Representative Adam Neylon from Pewaukee.

Adam Neylon:

Thank you. Thanks for the invitation. I appreciate it.

Zac Schultz:

From Milwaukee over to Racine, that's where we find Democratic State Representative Cory Mason for his take on the Foxconn proposal. Thanks for your time today.

Cory Mason:

Pleasure to be here. Thanks for having me.

Zac Schultz:

You weren't on the committee but you did attend the hearing yesterday and testify. Did you get all of your questions answered about this bill?

Cory Mason:

I think there's a lot of questions that are still out there. I mean first and foremost, it's hard to overstate the economic impact this could have for southeast Wisconsin and Racine in particular. So I think people are very excited about what this could be. The bill's going to determine what it will be. And so I think people have some questions that are still out there in regards to environmental protection, in regards to the wages. And you know, we heard a lot of talk about the number of engineers they want to hire and brain gain and how great that would be. But there are a lot of discussions then about if we're going to invest a lot in Foxconn, that's one thing, but we should be investing in our work force too. And giving our colleges and universities and technical colleges the resources they need so people in this area can actually take advantage of this great opportunity.

Zac Schultz:

Essentially the way these credits and incentives are going to work is Wisconsin will be subsidizing the wages for 15 years, up to 17% of wages. Do you think we need to insure there's good wages being paid? For example, if there's an engineer being hired, $20 an hour probably isn't enough for them to pay off loans and raise a family.

Cory Mason:

Foxconn has said they believe the average wage will be around $53,000 a year plus benefits, which is a great marker to start at. They've also talked about starting salaries being $20 an hour. And that's great but it would be nice to know if we are going to offer $3 billion in incentives to this company to come here and potentially start a real economic cluster, the wages have much stronger protections and people know taxpayers are going to put $3 billion in. It's not too much to ask that the people working there would be paid a living wage.

Zac Schultz:

We've heard the site announcement is going to come in the next couple of weeks. Are you confident it will be in your area?

Cory Mason:

If they're going to make the right decision, it will definitely be in Racine. That would definitely be the right decision. But regardless of where it is in southeast Wisconsin, there's a lot of benefit for the region. So many jobs, so many opportunities that we need to be poised to take advantage of it. The other thing I will say about Racine and its work force, people here work hard. They want to do well. They've been longing for the lost manufacturing jobs of decades past. If you give them the skills and opportunity to do this work, they will proudly do it and succeed. So we're really optimistic about it coming to Racine and being in our own backyard.

Zac Schultz:

Now besides being in the legislature, you're also running for mayor of Racine. Does that change how you approach this bill?

Cory Mason:

No, I don't think so. What I hear from my constituents over and over again is they want me to fight to make sure we have good middle class jobs for Wisconsin. That's been true to the 11 years I've been in the legislature. I’m sure that'll be true when I’m mayor. People also want to know you're going to do everything you can to protect the natural resources. That Lake Michigan's not being to be threatened. That we're going to protect their water resources. That's my job, whether that's as mayor or as a state legislator is make sure that workers are protected and the environment is protected as well. We can do really both while taking advantage of the enormous historic opportunity.

Zac Schultz:

Now speaking of the environment, are you concerned about the lack of an environmental impact statement? That would tell us a lot about what we can expect from Foxconn.

Cory Mason:

Yeah, I think there's a number of questions out there about why about the environmental exemptions were given and why exactly they would need that.  And I think there's some big questions that will be underway about the necessity of all the exemptions that were given. And certainly it is my hope -- certainly at the hearing yesterday I brought this up, and the chairman of the committee who you interviewed previously, said he was opened to amendments around some of this language. It's my hope we can have some good bipartisan consensus around tightening up that language to make sure our water is protected and still give Wisconsin this great economic opportunity with Foxconn.

Zac Schultz:

We've got just a few seconds left but I want to talk about the amount of water Foxconn will use. Estimates range from 10 to 15 million gallons a day, and not all of that can be treated and returned. Is that sustainable for your area?

Cory Mason:

So one of the great things the Great Lakes compact did is it basically insured that they're weren't going to be large scale diversions outside of the basin. But it also ensured if you wanted to do that kind of consumptive use, you need to come near Lake Michigan to be able do it. I would argue that compact language is part of the reason Foxconn is looking at the sites that it has because we have access to Great Lakes water within the basin. It's been a real opportunity for us.

Zac Schultz:

Cory Mason from Racine, that's all we have time for today. Thank you.

Cory Mason:

Thank you.

Zac Schultz:

In tonight's look ahead, there are still a lot of unanswered questions about the Foxconn deal, including what it means for the environment. Sarah Geers is staff attorney for Midwest Environmental Advocates. Thanks for joining us today.

Sarah Geers:

Thanks for having me.

Zac Schultz:

The special session bill is eliminating a lot of the upfront environmental reporting like the agency environmental impact statements. What do we learn from an impact statement?

Sarah Geers:

They're critically important. They're the main tool in the Wisconsin Environmental Policy Act that the agencies use to insure that their decisions fulfill the mandate that the state put environmental protection at the forefront of government decisions. They put all of the information about potential environmental impacts in one place for agency decision makers who may be siloed into narrow permitting programs themselves. And also make that information digestible for the public.

Zac Schultz:

Is it a big loss not to have one?

Sarah Geers:

It certainly is. We've seen erosions to the Wisconsin Environmental Policy Act and environmental impact statements over the years, but we've never seen this type of exemption.

Zac Schultz:

What do we know about Foxconn’s environmental practices overseas? Are they able, ready and willing to follow Wisconsin and U.S. law?

Sarah Geers:

They've certainly stated they are willing to follow state laws. But I’m not sure if they have experienced complying with the environmental laws in the United States. In their plants in China, they have had extensive environmental pollution issues, regarding pollution of China's rivers as well as air pollution. And we certainly have higher environmental standards than they've been used to in China.

Zac Schultz:

Even though Foxconn is getting this expedited permitting and being allowed to fill in state wetlands, DNR says they'll still enforce Wisconsin’s pollution laws. Do you have faith in the DNR’s ability and willingness to do that?

Sarah Geers:

I certainly have faith in the DNR staff that we work with frequently. They're very dedicated professionals. But we've seen the DNR’s funding and staff authority eroded over the years. And they are currently underfunded and not given the authority they need to do their jobs. So it'll be critically important for the public to watch dog the permitting processes that haven't been touched by this bill, which include the air quality and water quality programs.

Zac Schultz:

You mentioned DNR staff. What about the political appointees that run the agency and determine how they respond, whether they prosecute a violation or a warning?

Sarah Geers:

I’m glad you caught on to that distinction because it's one that I make often. We've certainly seen a lot of political influence by the top levels of DNR. We're concerned that the type of influence that lead to the environmental exemptions in the Foxconn bill would be carried through other environmental decisions at the DNR level.

Zac Schultz:

Do you expect any third party testing or monitoring, independent groups deciding we're going to put our money and effort to make sure that they're following the law?

Sarah Geers:

Certainly we see that all over the state. There are citizen monitors trained by the DNR that do water quality testing to supplement the state's program. We also urge individuals that get drinking water from private wells to do their own essentially groundwater quality testing.

Zac Schultz:

You described Midwest Environmental Advocates as an environmental law firm. Do you expect lawsuits to be filed ahead of this process?

Sarah Geers:

There are certainly some potential constitutional issues associated with this bill. I can't say for certain we or another organization would bring a challenge to the bill before we even know where the site is going to be located. But there's certainly that possibility. And it's something we're looking into. Additionally the exemptions that this bill creates have really made a more complicated and burdensome process for the company to follow by making divergent federal and state programs.  And there again, it's another opportunity for litigation.

Zac Schultz:

Now, do you have to have harm done before you can have cause to file a suit? Could you file a suit and a judge throws it out saying they haven't done anything wrong yet? How can you sue them?

Sarah Geers:

Yeah, that’s always a balance. And so that would be one of the issues we would look at in terms of when a challenge to the bill could be brought forward. However once the legislature acts to take away these environmental protections, that may have serious implications for constitutional protections under the public trust doctrine.

Zac Schultz:

Once a place this big, with this many employees, is up and running, is that too late to do much to change how they act?

Sarah Geers:

It certainly would be difficult for example at that point to get a court to reverse a decision on a wetland fill permit, for example. That would be something that likely concerned citizens or environmental organizations would have to pursue shortly after that permit was issued.

Zac Schultz:

Only less than a minute left. In your opinion, can this type of manufacturing be done environmentally friendly or are there issues with all manufacturing of this type?

Sarah Geers:

I don't know enough about LCD manufacturing to say they would all have environmental compliance problems. I do know there are issues that this industry like others have to contend with. One of them is water usage.  Another is the use of heavy metals in its processing that can cause water pollution. And those are some of the issues we've seen in China. Certainly just like any other industry, they have the capacity to comply but there are certainly some challenges and hurdles they'd have to overcome.

Zac Schultz:

Sarah Geers, thank you for your time. You'll keep watching it. So will we.

Sarah Geers:

Thank you.

Zac Schultz:

Governor Walker says the impact of Foxconn’s investment will be felt across the state. There's already some evidence of that happening. During last week's signing ceremony in Milwaukee, Foxconn Chairman Terry Gou also signed a memorandum of understanding with the state's ginseng growers and received an honorary gift of ginseng roots. Joining us from Wausau to talk about this relationship is Bob Kaldunski, a grower of ginseng and the president of the Ginseng Board of Wisconsin. Thanks for your time today.

Bob Kaldunski:

You're welcome.

Zac Schultz:

At the event Chairman Gou said he and his family had been using Wisconsin ginseng for decades. Other than the personal connection, why would a high tech company like Foxconn get involved in the production of an ancient herbal remedy like ginseng?

Bob Kaldunski:

Caught us off guard a little bit, too, why they were interested. Terry, as you mentioned, he's very passionate about the Wisconsin ginseng. I think what he wants to do--his first wife has passed from cancer. And he himself has put forth over half a billion dollars, they said, just for cancer research. He values the Wisconsin ginseng product as something pure and wholesome and healthy. And his goal is to market this across the country, value added-wise. He just feels there's value there. And that it is a product that would fit in part of their health and bio-science division.

Zac Schultz:

Would this create access to new markets for Wisconsin growers or increase prices or increase production?

Bob Kaldunski:

Potentially, yes. What they're looking at, from my understanding with the communication that we have talking with them, is they're looking at value-added products. Reaching that millennial out there, that marketplace. That consumer now, we hear quite often, that millennial is wanting the Wisconsin ginseng might be bitter. They want a little sweetness with it. So maybe they're putting honey or something like that to offset the bitterness. And what they're looking at doing with their technologies, making that value-added product more appealing. And with their distribution that they have, with their electronics, would be a natural fit for them to go into the health market or value-added product, convenience product.

Zac Schultz:

A lot of Wisconsin ginseng already goes overseas to places especially in Asia. Do you expect that to increase or do you think there's a growing the market in the United States as a possibility as well?

Bob Kaldunski:

I expect both. The export market will probably increase. There's a couple things behind that. Some of that is the China government. Their new laws on residue levels in products. Our product falls into in the pharmaceutical grade so that the Chinese government or pharmaceutical companies are looking for a product. The other thing in this country, we'll also I believe have the potential for the value-added product. The convenience, as your parents, our parents, went to the grocery store, bought chunks of cheese, bought things in balk. That's changing. Now shredded cheese, sliced cheese. Same thing with ginseng. The market now is wanting chips. They're wanting slices, kind of convenience things. So yes, it definitely will increase market.

Zac Schultz:

Just under a minute left, do you expect to increase the size of your farm? Have you spoken to other farmers that think this will mean a difference for them?

Bob Kaldunski:

Everybody's excited about it. It's very rare for a company to come seek us. We spend a lot of money, a lot of time overseas in the Asia countries, looking and prospecting customer, companies. And for a company to come to us and wanting to invest in our industry is pretty special. And will I increase? Probably not. As our industry is, our industry is older. We are, just like most agriculture, we are all five to 10 years from retirement. We hope as it does bring excitement and it brings the younger generation into the market. It's too early to tell yet. We don't have the communication. We haven't had a dialogue on where, what they want to do, but it potentially could, yes.

Zac Schultz:

Bob Kaldunski from Wausau, thanks for your time today.

Bob Kaldunski:

Thank you very much.

Zac Schultz:

Now for an update away from the state capitol. The U.S. Army is backing out of its agreement to build an estimated $20 million public drinking water system in the town of Merrimac. The water system was supposed to protect private well owners from the nearby Badger Army Ammunition Plant leaking chemicals into the water supply. An Army spokesperson said providing a water system would be inconsistent with the Army's authority under the Defense Environmental Restoration Program. Also this week, Foxconn is considering building a second Wisconsin plant. This time in Dane County. It's not official yet but experts say it wouldn't be surprising given that Foxconn executives have already met with UW-Madison researchers and start-up companies from the University Research Park. In addition many Foxconn scientists and executives are alumni of UW-Madison. And finally tonight a look ahead to next week, when together with our partners at WisContext, we look into the potential impact of a Foxconn plant on the Great Lakes Water Use Compact. Reporting on that topic is posted now at WisContext.org. And we want to say good-bye and thank you to our student news intern Scott Behrens. He leaves us after a brief but productive stretch of time. Good luck, Scott. Next week Frederica Freyberg will return. I'm Zac Schultz. Have a great weekend.

Announcer:

Funding for "Here and Now" is provided in part by Friends of Wisconsin Public Television.

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