Here and Now #1606

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Premiere Date: 
August 11, 2017

Here and Now #1606

On today's show, we examine: the potential impact of the Foxconn deal on local governments; the types of pollutants tech manufactures create; the implications of Foxconn regarding the Great Lakes compact; and the friction between the State Assembly and Senate over the Foxconn process.

Episode Transcript

Frederica Freyberg:

I'm Frederica Freyberg. Tonight on "Here and Now", a first look at the fiscal markup on the Foxconn deal. After that a closer look at specific pollutants that tech manufacturing creates. Then, in our WisContext segment, “What impact will a Foxconn plant have on Lake Michigan?” A look ahead to what's in store for local government if the state Foxconn deal is struck. Shawn Johnson joins me for Capitol Insight into the politics of the deal. It's "Here and Now" for August 11th. 

Frederica Freyberg:

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

Frederica Freyberg:

A first look tonight at the Legislative Fiscal Bureau's markup on the Foxconn bill. The nonpartisan bureau issued a report about the long-term costs of the state's $3 billion incentive deal with Foxconn. A special session bill that would clear the way for the Taiwanese electronics manufacturer is now making its way through the legislature. The Fiscal Bureau report detailed the incentive package under which the state would pay Foxconn up to $2.85 billion over the next 15 years, while also giving a $150 million tax break on construction materials. It would also loosen environmental regulations for Foxconn. The report finds state taxpayers would not break even on the $3 billion incentive package until the year 2043 under best case scenarios. The Assembly plans to vote on the special session bill next week, and the Senate has referred the bill to the Joint Finance Committee. With so much talk about the dollars and cents of the Foxconn deal, we wondered what the manufacture of electronics and LCD screens entails. It's a far cry from rust belt smoke stack-type industry. But is it clean? What by-products could result? For that we turn to the University of Michigan. UW-Madison experts pointed us to Peter Adriaens, professor of civil and environmental engineering. He joins us from Ann Arbor, and thanks very much for doing so. 

Peter Adriaens:

Thanks for having me. 

Frederica Freyberg:

This Foxconn plant will produce LCD screens as we've said. And you say heavy metals are key components of tech manufacturing of this sort. How so? 

Peter Adriaens:

Yes, that's correct. So LCD screens are liquid crystal displays essentially are liquid crystals that are encased between two glass plates. The liquid crystals themselves have organic solvents in them. Then, there is back lighting that is required for a screen like that. That has mercury in it, and there's a power supply which has heavy metals like cadmium, chromium, zinc and copper. So there's quite a few heavy metals used in this.

Frederica Freyberg:

How would those heavy metals be contained or discarded? 

Peter Adriaens:

During the manufacturing process, the excess materials that are not used in the manufacturing would be stored into waste bins or waste drums and ultimately be processed off plant.

Frederica Freyberg:

What happens if they are released into the soil or water and is that a possibility?  

Peter Adriaens:

That is definitely a distinct possibility. The waste materials essentially are liquid materials. They usually get boiled down into what we call a "waste cake" of materials, so like a sludge that has heavy metals in it. The question is what Foxconn plans on doing with that. Is that going to get stored in a storage facility? Or where are they going to take this? But yes, leakage out of drums is a fairly common occurrence.

Frederica Freyberg:

Are these dangerous pollutants? 

Peter Adriaens:

It depends on which one you are talking about. The Benzene definitely has long-term health effects including birth defects, cancer and other types of effects, breathing impacts. The heavy metals, once they get into your body, once they get into the environmental ecosystem are there to stay for a very long time so they are what we call bio-accumulative. They accumulate in the body and they stay there pretty much for the rest of your life. Basically, you can't get rid of them. 

Frederica Freyberg:

Can the water used in the process be cleaned and returned to the lake where it will be drawn from? 

Peter Adriaens:

There are definitely processes by which you can try to clean them to some sort of cleanup standards where you can clean the manufacturing waters to a standard where they can be discharged again, but I'm not sure what processes are actually in place, and the bill seems to indicate there is no monitoring required on the water quality. 

Frederica Freyberg:

Speaking of that, there are these relaxations of environmental rules in this bill. What is your overall reaction to the relaxation of those rules in this bill that is now being ushered through our legislature? 

Peter Adriaens:

Almost seems a little excessive here, and I'm very used to seeing what states do to try to attract businesses-- anything from changing zoning laws and what not. I've never seen them relax the environmental regulations on the manufacturing operations. Definitely they would be required to do less than U.S. operations in the same state. 

Frederica Freyberg:

There's specific language in the bill that says our Department of Natural Resources would not require a permit for Foxconn to do things including, as I understand it, depositing material into navigable water, changing the course of streams, and enlarging an artificial water body that connects to a navigable waterway. What does all that mean to you? 

Peter Adriaens:

In normal business operations you have to seek permits. Permits for any kind of discharge. There's conditions around these discharge. It seems like this bill is essentially completely getting rid of all state required legislative permitting. They argue the federal permits apply, but essentially, they're getting a free ride on all the state permits. It's very unusual. 

Frederica Freyberg:

So you say it's unusual, but what about that fact that federal rules would still apply? Do those not protect the citizens? 

Peter Adriaens:

Federal rules definitely do protect the citizens, but the reason why we have state specific laws from DNR or DEQ is to adapt the federal rules to the location or geographic specific conditions such as Wisconsin having Great Lakes, the different kinds of industries that operate in the different states. So we need to adapt any kind of rule that exists out there to the local business and industrial operations. That's why we do need state laws in addition to the federal laws. 

Frederica Freyberg:

All of this discussion of heavy metals, and other kinds of materials and storage of those, should we be concerned when you see the language in this bill that is going through the legislature and the relaxations in it? 

Peter Adriaens:

I think there's definitely cause for concern for a couple of different reasons. One you look at Foxconn's track record in China, and definitely have been major discharges both in air and in water from the manufacturing operations. So precautionary principle would say yes, we do need rules. So I think there's cause for concern. The second cause for concern is it really opens up and becomes a slippery slope. It opens up the opportunity of other electronics manufacturing industries or other industries that even do a minor portion of electronics manufacturing to say look, there's a precedent, and we do not need environmental regulations. We want to move to the state of Wisconsin. So there's definitely cause for concern. 

Frederica Freyberg:

Professor Peter Adriaens, University of Michigan. Thanks for joining us with your expertise. 

Peter Adriaens:

Thank you very much. 

Frederica Freyberg:

Wherever Foxconn locates, proximity to a vast water source would be key. Our partners at WisContext did some digging on just what's required and just what the rules are for where the company would most easily get the water. We went to the shores of Lake Michigan in Racine to talk with journalist Scott Gordon. Scott, how much water do expects think this kind of manufacturing process would take? 

Scott Gordon:

I've seen estimates of up to 15.8 million gallons of water per day. Manufacturing electronics is a pretty water-intensive process, and to manufacture LCD screens is pretty water-intensive, too. 

Frederica Freyberg:

What are the specific rules under the Great Lakes Compact for who can take Lake Michigan water? 

Scott Gordon:

The terms under which they do that are going to depend in large part on location. Basically the line of the Great Lakes basin sort of dictates a lot of how that works. If you are within this sort of borderline of the Great Lakes basin, then you have access to that. If you are in a straddling community where part of your city boundaries or whatever are inside the basin and part are out, then you can get access to that. If you are in a county that straddles, but the community itself is outside the line, then you can ask the Great Lakes Compact Council for a diversion and go through the process that the City of Waukesha recently went through to get its access to water. But it really all does depend on location. So if they want to use Lake Michigan water, chances are they are going to work for a location in the community that straddles the Great Lakes basin where you have access of that. 

Frederica Freyberg:

Because even if you are not fully within the Great Lakes basin, if you are in an area that as you say straddles that basin dividing line, then you can take this water and use as much of it as you need? 

Scott Gordon:

Not necessarily as much of it as you need. If you create a consumptive use of the water, meaning you can't restore that resource back into the basin over a certain threshold, then that triggers a review of what you're doing under the Great Lakes Compact which isn't necessarily a binding thing, but it certainly invites a bit more scrutiny. 

Frederica Freyberg:

It triggers a review but not necessarily a vote of all the Great Lakes governors as did the Waukesha water diversion. 

Scott Gordon:

Exactly. 

Frederica Freyberg:

Under the special session bill that's going through the legislature right now, written into that legislation is a streamlining of environmental protections at the very least. Is that right? 

Scott Gordon:

Yes, to say the least. The plan in any case would have to comply with federal environmental regulations and it would still have to comply with state environmental regulations technically but under this bill they're waiving a bunch of requirements for all kinds of permits, to alter streams and wetlands and other things. They're waiving the requirement for Foxconn to submit an environmental impact statement before beginning construction which as people have said is one of the main tools that the state uses to kind of get ahead of environmental problems at a given project site. The Great Lakes Compact does give states some discretion as to how they implement the compact within their borders. And the special session bill is essentially streamlining that as well.

Frederica Freyberg:

Is there ever any danger of sucking too much water out of Lake Michigan? 

Scott Gordon:

That's kind of a hard question to answer. People are supposed to be putting back, to a large extent, the water they are using from the Great Lakes basin. But they are permitted a bit of consumptive use so again, it's not like they're replenishing every single drop. And the natural recharge of the lakes is about 1% of their volume per year. That's why people have these agreements in place to try to sustain that resource. And there is some concern that more and more companies will be attracted to the Midwest by this resource, especially as they look around the world and see parts of the world and parts of the United States that are really struggling with the sustainability of their water resources. The analyst who gave that 15.8 million-gallon estimate also said that he anticipates more electronics manufacturers will be drawn to this region in part because of this. 

Frederica Freyberg:

Obviously that's a very good thing for economic development but a very fragile thing given the resource that is here on just off this shore. 

Scott Gordon:

Right. It's interesting because a lot of the agreements and regulations that people have around the Great Lakes like the Great Lakes Compact were kind of born in part out of this fear that outsiders would come into the region and, you know, divert these resources. There was a great outrage in the late '90s about a company in Canada that wanted to take millions of gallons of Great Lakes water and ship it to Asia. And now we have possibly a lot more interest in foreign, or at least out of the region, companies coming in establishing a footprint here, in part to take advantage of those resources. 

Frederica Freyberg:

I was joined by Scott Gordon of WisContext. You can find his and other in-depth reporting by going to WisContext.org. Just what impact would the Foxconn project have on local government? In tonight's Closer Look, we dive into that with Todd Berry from the Wisconsin Taxpayers Alliance, who has been asking that question in recent days. Todd, thank you very much for being here. 

Todd Berry:

Thank you. Yes and we have a little blog post on our website on this subject. 

Frederica Freyberg:

Right. In fact I read it. That's why we invite you here today to talk about this really important stuff. But I wanted to ask you ahead of that local discussion about your overall reaction to this $3 billion incentive package and specifically the part of it that at its peak would cost the state of Wisconsin $600 million over a two year budget cycle in 2022. What does that do to state budget writers?

Todd Berry:

First of all you have this long Fiscal Bureau memo that talks about all this. And when you get into it, you find out that it's all based on assumptions that the Fiscal Bureau accepted from other outside parties. So it really is questionable. That's not meant to be a criticism of the Fiscal Bureau. As far as the impact, we get $1.5 billion, $2 billion dollars a year in a biennium of new revenue. $600 million is manageable, but how do they manage it? I would look back to 2014-15 when the state threw a lot of money at technical college property taxes. And it was actually more money than this Foxconn thing. What happened? They basically just screwed down the entire state budget and all the new money went there or to Medicaid. And that's probably what would happen. 

Frederica Freyberg:

Let's move along to the local impact. Wherever Foxconn locates, it would be inside a local Tax Incremental Finance district. What does that afford the company? 

Todd Berry:

The idea behind TIF, and it was originally meant for disturbed, blighted urban areas-- and this would probably be on farmland-- but what it does is it says the municipality can issue debt in order to cover the costs of improvements like roads and sewer and so forth. And because of the scale of this thing, when we're talking about roads, we may be talking about four-lane highways for miles. Just the whole--parking lots, whatever. It's just huge. 

Frederica Freyberg:

The Fiscal Bureau, though, says these public service costs, like that of which you speak, would not be recouped from Foxconn because of this TIF district, but instead shifted to other property outside the TIF district. 

Todd Berry:

There's a couple things going on there. Foxconn is going to pay property taxes. And because the increment, the amount of increased property taxes will be because of all this borrowing and development, Foxconn will share in those costs. And because it will be such a large part of the tax base of the community, they are going to pay something. They are not going to be exempt from property taxes. 

Frederica Freyberg:

How complicated is it for local governments to implement a TIF district? What concerns are there, considering the fast track nature of this whole thing?

Todd Berry:

I think that's a great question. And it's part of what was on our website. There's a certain due diligence and process to all of this. Local governments probably hire a consultant. They have to design the district. And there are hearings and meetings and local government boards have to do the approval and so forth. If the state is assuming they can get this through the legislature in the next 30 to 60 days, nobody really has given much thought to how fast can local governments do this. And besides just the normal TIF process, if this is done in a rural town that has limited TIF authority, you probably will have part of the town and next to a village or city, and so then you have all the annexation issues. And there's nothing like local annexation issues to stir up the troops. 

Frederica Freyberg:

Does this whole thing, bottom line, help or hurt local governments? 

Todd Berry:

Well, long run, if the TIF works the way it is and Foxconn works the way it's supposed to, you end up with a lot more property value to tax whatever the TIF has done. And that windfall will fall to not only the municipality but the schools and the counties. Perfect example is Epic in the Madison area, where their TIF ended and suddenly there's a lot of new value to tax by the local governments. 

Frederica Freyberg:

Thirty years out, though, in this one, right? 

Todd Berry:

That's another great question because rhetorically the way to answer that is suppose we had decided to build a manufacturing plant to make landline phones 30 years ago. Technology changes. 

Frederica Freyberg:

Thirty years is a long time.

Todd Berry:

Yeah.

Frederica Freyberg:

Todd Berry, thanks very much. 

Todd Berry:

You're very welcome. 

Frederica Freyberg:

The special session bill that would approve the incentive package for Foxconn is steaming through the legislature. The Assembly is scheduled to vote on it next week. The Senate will hear the bill before the Joint Finance Committee. In tonight's Capitol Insight, we check in with Capitol Bureau Chief at Wisconsin Public Radio, Shawn Johnson, on the latest. Thanks for being here, Shawn. 

Shawn Johnson:

Hey, Fred. 

Frederica Freyberg:

Between now and that floor action, lawmakers are working on amendments. Do we know how many and what they're about? 

Shawn Johnson:

In terms of the amendments that are being worked on by Adam Neylon, who chairs that committee-- the Republican lawmaker who chairs the committee that's hearing the Foxconn bill. He said there's going to be about 7 to 10 amendments that will get rolled into one. He's looking for bipartisan support on those. And at least what we've heard from Neylon, those would have some language in there about having a Wisconsin first priority when it comes to giving Wisconsin business first priority for some of this stuff but that would not be a mandate. There would be some language in there so that it would make clear this was not just letting the Department of Natural Resources do whatever it wants to in terms of permitting for this Foxconn plant but the devil is always in the details on that stuff. There would be no benchmarks on job creation. And I think one of the most significant things that we learned is that that committee is making an effort to make sure whatever they do with amendments doesn't change this memorandum of understanding that was signed by Governor Scott Walker and the Chairman of Foxconn. Essentially whatever the legislature does through this committee they want to make sure it's not big enough that it changes that. 

Frederica Freyberg:

So that Terry Gou of Foxconn does not walk away from it? 

Shawn Johnson:

Right. If they are not going to make changes significant enough to change that memorandum of understanding, they're working around the edges at that point. 

Frederica Freyberg:

Senate Majority Leader Scott Fitzgerald late this week says he wants the bill to go before Joint Finance for a hearing. He has expressed concerns about these benchmarks of which you speak. Let's take a listen to some of what he told WPR Capitol Reporter Laurel White earlier this week. 

Scott Fitzgerald:

If Foxconn comes, locals make the investments, the state makes the investment and then the jobs aren't coming as quickly as anticipated or forecasted, we would like to see some type of protection there or some type of assurance that the jobs are going to happen. 

Frederica Freyberg:

It looks like late this week he will settle for those benchmarks not being baked into this bill. What kind of assurances has he gotten? 

Shawn Johnson:

You did at least see his--maybe if not all of his positions on Foxconn, his tone did evolve on it this week. He went from wanting those in law where it would be an ironclad guarantee to after he talked with Representatives from the Wisconsin Economic Development Corporation - WEDC - which is administering the contract with Foxconn. They said we could put those guarantees in the contract. And so you don't need to deal with those in state law. So it wouldn't carry the strength of putting job guarantees in state law, but Senator Fitzgerald says they'd be taken care of in the contract with WEDC and that'd be okay with him. 

Frederica Freyberg:

What about this Fiscal Bureau memo that came out earlier in the week talking about how the breakeven year on this deal with Foxconn would be 2043. Is that giving pause to lawmakers on both sides? 

Shawn Johnson:

So that was another one where Fitzgerald said, when that came out, that it was pretty striking stuff in there. And just to put that in some more context, the memo was saying that if Foxconn creates 13,000 jobs, which is the ceiling for what they've said they could create and if it spins off and creates another 22,000 jobs elsewhere, all of that tax revenue compared to all the tax revenue the state is giving Foxconn would balance out in 2043, 26 years from now. Fitzgerald is the one that talked about this so far, but he's got some push-back from conservative talk radio on that. And they essentially said get this done fast. They're not on-board with any kind of trepidation on that. 

Frederica Freyberg:

Meanwhile, Scott Fitzgerald wants to do the state budget at the same time as the Foxconn bill or roughly at the same time? What kind of a heavy lift is that? 

Shawn Johnson:

It is a heavy lift. Usually the budget would be done by now, especially with single party control but that's hanging out there. You do have a lot of interplay between the Foxconn bill and the budget bill, because in the Foxconn bill there is $252 million in borrowing for this I-94 expansion between Milwaukee and Chicago near where this Foxconn plant would be built. By the way, a huge priority for Assembly Speaker Robin Vos. Essentially they put part of the transportation budget into the Foxconn bill already. And you know, through that lens it does kind of make sense they deal with them around the same time. 

Frederica Freyberg:

There are going to be a lot of long nights I think in the Joint Finance Committee. 

Shawn Johnson:

Pretty good prediction, yes. 

Frederica Freyberg:

Shawn Johnson, thanks very much. 

Frederica Freyberg:

You're welcome. 

Frederica Freyberg:

Now for a Wisconsin Look at election news and a ‘who's who’ index of people making noise about running for governor in 2018. The Democratic race for Wisconsin governor has seen new additions this past week. Declaring their interest to enter the race this week are Representative Dana Wachs of Eau Claire and businesswoman Michele Doolan of Cross Plains. They join Andy Gronik and Bob Harlow, who announced their intent to jump into the Democratic primary earlier this year. Next we have a slate of candidates who filed paperwork to run but have yet to declare. These are newly-reelected State Superintendent of Schools, Tony Evers, former Representative Brett Hulsey, political activist Mike McCabe and Senator Kathleen Vinehout. Joining them are two lesser-known figures, Ramona Whittaker and Jeffrey Rumbaugh. Finally, there are a group of individuals who have not filed paperwork to run, but whose names have been floated as potential contenders. Among these are Madison Mayor Democrat Paul Soglin and former Democratic State Party Chair Matt Flynn. That is our program for tonight. I'm Frederica Freyberg. Have a great weekend.   

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

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