Cities Grow Skeptical of the Promises of Big Tech

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Each year, local officials shell out up to an estimated $90 billion to lure tech giants and other corporations to settle within their borders. They’re usually buying into a dream of well-paying jobs, transformative economic investment, and at least one high-profile ribbon cutting ceremony. The reality is often quite different.

Case in point: Foxconn Technology Group. In 2017, the Taiwanese company announced plans to build a $10 billion plant to make liquid-crystal-display panels in southeastern Wisconsin in exchange for $3 billion in financial incentives. The total amount of subsidies eventually ballooned to a jaw-dropping $4.1 billion including incentives from the town of Mount Pleasant and Racine County—where the 20-million-square-foot factory was to be built—and additional state funding to revamp nearby infrastructure. Foxconn promised the complex would create 13,000 jobs, prompting praise from President Donald Trump, who hailed the move as a sign of his ability to bring manufacturing jobs back to America.

On Wednesday, however, Foxconn walked back its plans to build a factory, saying it would instead hire engineers and researchers as part of some sort of tech hub, citing the high cost of labor in the US, according to Reuters. “In Wisconsin we’re not building a factory,” special assistant to Foxconn Chief Executive Terry Gou, Louis Woo, told Reuters. “You can’t use a factory to view our Wisconsin investment.”

That’s a problem for the village of Mount Pleasant and Racine County, which agreed to give Foxconn $764 million in incentives and more than 3,000 acres of land in exchange for the promise of factory jobs. After some homeowners refused to sell their land to the city, Mount Pleasant officials declared the land blighted. After the original deal had been struck, Todd Taves, Mount Pleasant’s lead adviser on the project, told Reply All’s Sruthi Pinnamaneni that it didn’t matter whether Foxconn ended up making TV screens or iPhones or something else entirely, as long as there is a factory making something, the city’s investment would be worthwhile. Foxconn did not respond to a request for comment Wednesday.

“This news is devastating for the taxpayers of Wisconsin,” said state Representative Gordon Hintz in a statement. “We were promised a game-changing economic opportunity for our state. And now, it appears Foxconn is living up to their failed track record in the US—leaving another state and community high and dry.”

Wisconsin taxpayers will still be on the hook for much of the incentive money. The incentives offered by city, county, and state officials were not tied to the development of a specific type of manufacturing plant, but rather to related factors including investments in equipment, construction costs, job creation, and offsetting Foxconn’s payroll costs. According to an analysis by Tamarine Cornelius of the Wisconsin Budget Project, an independent nonprofit group, an estimated $1.6 billion of the Foxconn incentives are unrelated to job creation. Racine County and the Village of Mount Pleasant have reportedly already spent $190 million on infrastructure, land acquisition, and other expenses related to the project, bringing the total estimated cost for the two areas to $912 million.

“Would you have come here without the $3 billion? Why do you need our money?”

New York City Council Speaker Corey Johnson

Such disappointments are prompting local officials elsewhere to look more critically at lofty subsidy packages. In a Wednesday hearing on Amazon’s proposed Long Island City HQ2, New York City councilmembers expressed skepticism and, at times, rage over the size of tax incentives city and state officials had promised the company.

“Would you have come here without the $3 billion? Why do you need our money? We have 63,000 people who are sleeping in homeless shelters,” City Council Speaker Corey Johnson asked Amazon representatives. “Don’t you think there is a better way for us to spend $3 billion? This seems like vulture monopolistic capitalism at its worst.”

An Amazon representative conceded that the incentive package played a key role in the company’s decision to settle in Queens. “Labor was the primary driver,” noted the representative. “The cost of doing business was also a driver.” When asked if the company would consider remaining neutral if employees wanted to unionize, Amazon Vice President of Public Policy Brian Huseman responded “No sir.”

Amazon says its new campus will cover 4 million square feet and create at least 25,000 jobs with an average salary of $150,000 by 2029. However, Amazon representatives could not say what the median salary would be, prompting accusations from Councilmember Adrienne Adams that the company could ostensibly be planning to pay some employees millions while leaving others with low hourly wages.

Councilmembers expressed frustration over the benefits that could be given to the company, which for a time last year was valued at more than $1 trillion. “There is just so much that you are getting and there is so little that you are giving,” said Councilmember Jimmy Van Bramer. “You are just not listening. You are not hearing us.”

Amazon did not immediately return a request for comment.

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