Foxconn and the village: the $10B factory deal that turned one small Wisconsin town upside down

Much of Foxconn’s journey to Wisconsin played out on the national stage, with President Trump and ousted Gov. Scott Walker touting the deal while critics attacked it as an example of extravagant corporate welfare. But the battle over Foxconn also played out on the far smaller stage of Mount Pleasant, Wisconsin, the town of 26,000 people where the company plans to build its factory. There, a politician stretched budgets to woo the tech giant and came under fire from watchdogs for cutting a secretive deal that will have vast implications for the community. Except in Mount Pleasant, Foxconn’s champion and its chief critic live in the same neighborhood, and they quarreled at village hall meetings and on Facebook.

In this week’s episode of Reply All, Sruthi Pinnamaneni tells the story of what happened when a small town landed the promise of a $10 billion investment and the tensions that arose in Mount Pleasant. You can listen to the episode here, and below is an interview about her story, condensed and edited for clarity.

Can you tell me a bit about Mount Pleasant? What sort of town is it and what’s it like?

It’s pretty surprising because I first started talking to people from Mount Pleasant and listening to the village board meeting tapes and reading all of these articles and Facebook groups that were based in the village when I was in New York. I had this idea of what the village would look like and what Racine would look like. I was imagining this kind of post-industrial, slightly desolate town. And when I got there, it was not at all what I was expecting. Racine itself is very beautiful. It’s a very charming beachside town. When you drive out of Racine to Mount Pleasant, there’s no actual village. It’s just this sprawling suburb of Racine. There’s no heart of the village. It’s like a series of enclave neighborhoods separated by freeways and big cabbage fields and strip malls. The village hall, you could say, is the heart of the village.

And the people there — I mean, you can hear it. It’s a thing that I immediately found fascinating about the place. It’s just such a microcosm of all of these other groups and personalities you see playing out at a national level, right? Because Kelly Gallaher, a local activist, is obviously the local progressive Democrat type, and village president Dave DeGroot came out of this bootcamp for tea party folks who want to go into politics.

It’s interesting because so much of the coverage has been focused on the national and state level, with Walker and Trump. And here, you have similar incentive deals and similar conflicts over them playing out in this smaller town where the factory was actually going to be built. Dave DeGroot is sort of the local champion of the Foxconn factory. What do you think appealed to him about the deal, and what’s his background?

So I think Dave... he went through this bootcamp, so he comes from a particular type of thinking around these subjects, which I didn’t have a word for at the time, but now I feel is the camp of “faith-based economics” — that it’s going to happen because I believe it’s going to happen, or it’s going to happen because the place where I live is just great and you’ve got to believe it will work out. I think he, like a lot of the other people I spoke to, they grew up in this part of Wisconsin, and they have a lot of pride in the place, in the fact that it’s this city of inventors and land of factories, a place where people made things.

“It’s just such a microcosm of all these other groups and personalities you see playing out at a national level.”

He became village president just last year, just a couple weeks before the prospect of this deal appeared, so he’s new to the job and then the thing that dropped into his lap is really the biggest thing that’s ever happened in the area — in the whole state. I talk to people, not just at the village level, but the financial architects of the deal at the state level, and they had the same reaction, which was, “We’ve never seen anything like this.” And they were all looking at the zeroes, trying to figure out if this was right. So for Dave, it was like, “Oh my gosh, this is the opportunity of a lifetime, and obviously we need to do whatever it takes to get it.”

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

You mentioned that this is an unprecedented deal even for Wisconsin, but especially for a village like Mount Pleasant. What kind of strains did that put on the local government in terms of vetting the deal and figuring out its potential impact and on the basic civic processes of how to go about approving it?

I would say just unimaginable strain. That’s the thing that really drew me to the story. I’ve been interested in Foxconn for a long time, so I was looking at their Brazil deal for months. And while I was doing that, the whole project really stalled. And then this deal was announced in Wisconsin, and I was like, “Well, I should just look at what’s happening here.”

I expected it to be stalled the way it happened in so many other countries, but the moment the deal was announced in July, within six months, it moved so far down the line. They had a signed agreement, they were getting people off the land, and I was listening to these village board meetings, and I’d never heard anything like this. I work in radio, I listen to tape all the time, and it was pretty extraordinary because you have these people trying to have a conversation about this thing in a place where nobody’s acknowledging that the thing is even happening. It’s a weird combination of democracy in action, but also democracy being shut down at the same time. And so, I think the process... I don’t think they could have ever handled a deal of this size. And I feel like this was almost an experiment that just proved the limitations of that kind of government style.

“It’s a weird combination of democracy in action but also democracy being shut down.”

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

The rumors started last summer. If you follow Kelly’s Facebook group, the first post where it’s actually rumors about Foxconn coming is in July right around the time President Trump does his big White House announcement with Paul Ryan and Scott Walker and Terry Gou. As soon as that happened, everybody in the village who was paying attention put two and two together. They were like, “Oh, they just announced a big deal in Wisconsin, and everybody here knows from rumors and whispers coming out of the local government that this huge, huge thing is coming to us, so it must be Foxconn.”

But there was no actual announcement?

No. That’s the crazy part, right? The President Trump announcement happened in July, and the village government would not say the word “Foxconn” until December, so almost six months. And by the time they confirm that, yes, Foxconn is coming, most of the deal is done. They already know this huge six-square-mile parcel of land that they’re going to give away to Foxconn. And they also know approximately the size of the incentive package, but they still negotiated, I think, another two months before they signed the deal. And so the village people didn’t even see what was being promised, what land was being given away, until almost eight months after the Trump announcement, basically once it was a done deal.

“By the time they confirm that yes, Foxconn is coming, most of the deal is done.”

And what was their response?

It’s really varied. The people who were most upset were the Kelly types, people who were like, “This isn’t the way to do things. We have an actual system in place. We’re supposed to try to work together to figure out the way to do this.” And also, it’s not as if, in their opinion, the village had done this great negotiation on their behalf. It’s not as if the village got that much. When you look at the terms, the village is going to acquire a chunk of the land, and it’s going to pay with money it’s borrowing to give to Foxconn, which, to Kelly and a few other people I talked to, was very strange.

So, there are things like that, that they thought sounded very unfair. And then, of course, there are people on the other side who are imagining the end result of this, which is a flourishing tech hub. For a lot of people who saw the old manufacturing die, there’s something about tech that feels shiny and permanent. And so for them, the idea that Foxconn is coming is obviously very exciting.

So it ranged from DeGroot’s optimism to Kelly’s skepticism. Can you tell me a bit about Kelly and her background and what her concerns were?

Kelly Gallaher has been living in Mount Pleasant for about 30 years. She and her husband moved from Illinois, and she and DeGroot live very close to each other in the same neighborhood. And she is just the opposite: she is very questioning, almost an annoyingly questioning person. And so, when I would be listening to the village board meetings, I immediately thought, “I have to talk to this person.” You can see why she’s helpful because she forces the village board to be transparent. She’s always haranguing them to get their minutes up. They wouldn’t film the board meetings, so she started filming them, and then eventually, just to stop her, they started filming them too and putting them up on their website. She does get things done.

“She does get things done.”

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

Well, before Foxconn, she said that the reason she even got into village politics was that about five years ago, the village board was trying to do away with public comment, which is a part of the village board meeting where people come and just say what’s on their mind — three minutes, you can talk about whatever. She’d never done that. She’d never even been to those board meetings, but her friends told her, “Hey, they’re trying to take this away, and we feel this is an important part of our local democracy.” So she fought for it, and they got to keep it, and then she just started going to meetings. I think transparency is the cause that got her involved.

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

And the Foxconn process was extremely un-transparent, particularly in Mount Pleasant?

It was just beyond opaque.

What’s your sense of the negotiation process? The village is giving them quite a lot of money and promising to buy land for Foxconn. Do you have a sense of how that came about and how the village assessed whether this factory was a good idea, or even feasible?

I think that they were basing a lot of the deal on assumptions. When you ask them, hey, the size of this incentive package that you’re offering is so very large, and you have a Village whose budget is usually between $18 to $20 million, and you guys are offering an incentive package of $760 million, something you have to change the state law to allow the village to do, because it’s considered beyond the prudent borrowing ratio — they say it was justified, because the size of the deal was so large.

Meaning, Foxconn is offering them $10 billion, which is so much money, and so we obviously had to come back with an equally sweet deal to get them here. I mean, the problem with that is, when you talk to people who study Foxconn, or you just look at the way Foxconn has operated in other countries, is that they often come with a very large deal, and they walk back the deal to a place that seems comfortable for them.

“It was just beyond opaque.”

So I’m not sure their base assumption is correct, but it was the basis for their negotiation. And people at the county level signed NDA’s, so they didn’t know what other states were offering, or what other towns were offering, and it’s this classic blind beauty pageant, right? Everybody goes as high as their state allows them to, and in this case Scott Walker really, really, really wanted the deal, and so many laws were changed just to make this deal happen, everything from financial regulation laws, to environmental laws.

It’s not really part of this story, but I did a lot of work on the negotiation process, and it’s really weird. They didn’t have a tech consultant, as far as I can tell, they didn’t have an Asia consultant, as far as I could tell — it was just a few bankers, who are just figuring out, in an abstract way, what they could offer, in terms of subsidies and tax cuts, just to get Foxconn there. But this is based on numbers, as opposed to a solid idea of what would be happening in the end.

What has fallout been like locally? Walker lost his reelection bid — are DeGroot and others seeing a backlash too?

Sruthi: DeGroot is up for reelection in April. He says he’s very confident. Kelly, of course is heavily campaigning against him, and she feels equally confident that he’s not going to survive the race. SoI don’t know, there’s no polling. Most people that I spoke to are not very pro Dave DeGroot, but they are pro the idea of taking a risk to do potentially a very exciting project, which is why they thought Foxconn would make sense.

“This is based on numbers, as opposed to a solid idea of what would be happening in the end.”

I talked to a few people who lived on the Foxconn factory land and were moved off, and they were pro the deal. They were happy to take the money, and go and make way for progress, as they put it. But they were like, the Village handled this very weirdly, it was very disorganized, and they took on something that was just too big for them. They promised Foxconn that they would get 60 different homeowners out of this very large parcel of land within months. It was not the most smooth operation. And so people I think are not thrilled about the leadership of the board for that reason.

And the critics, are they are they upset about the deal in general, or the implementation by the city when it comes to things like relocating people?

It’s a mixed bag. There are people who don’t feel it’s going to be good for the community, in fact they think it’s going to be a disaster. And they’re very unhappy with the way the village handled the whole thing. And then there’s people who say, you know the village handled it poorly, that there could have been a lot better information and just better PR. I think the people don’t want to be pessimistic. I’m not from here, I’m from India, and it’s the thing that I find most charming, this feeling of, I don’t want to be the complainer — I want to believe in this thing.

President Trump Attends Groundbreaking Of Foxconn Factory In Wisconsin Photo by Scott Olson/Getty Images Terry Gou, chairman of Foxconn, speaks at a groundbreaking ceremony in Mt. Pleasant, Wisconsin.

What do you think Foxconn wanted from Mount Pleasant? Why did they pick Wisconsin, and this town in particular, rather than somewhere else?

I think it made sense for them to come to the U.S. because I’m sure Trump was putting pressure, folks from the Trump side were in talks with different investors and people at Foxconn. The deal happened before the tariffs but I think they might have gotten wind that something like that might come up and might affect them, and so I think it was like, okay, what would it take to open a factory in the U.S.?

I asked them to talk to me, and obviously they didn’t. They don’t really talk to anyone. They in fact sent me a statement that was like, it’s against our policy to speak to anybody about any ongoing projects. So I didn’t take it personally. But my understanding from a number of tech consultants consultants and people who study Foxconn is that their process is, let’s put in an RFP, let’s not attach our name to it, let’s figure out the biggest thing that we can offer, see who bites, see who bites the hardest and what we get from them, and then we’ll work backwards and figure out what we can make there, how many people would be employed, in a way that the numbers would work out.

So they just went fishing, floating this proposed $10 billion investment, and Wisconsin and then Mount Pleasant bit the hardest and offered all this stuff and that’s how the factory ended up there?

“He was really like, we’re not going to let this one go to Kenosha.”

They definitely bit the hardest. What was confusing to me was my impression talking with Dave DeGroot is that there were a number of other towns in the running. He in particular really wanted to beat out Kenosha, which is another nearby town that was in the running, and Kenosha had beat out Mount Pleasant on a few different developments, and so he was really like, we’re not going to let this one go to Kenosha. But Kenosha dropped out. By the end it was only Mount Pleasant that was in the running. The head of the local government in Kenosha said that the things that Foxconn was asking for just made it economically unfeasible. They were like, we’re not going to offer those things. And so Mount Pleasant certainly went the furthest in getting Foxconn.

So it’s not just pitting states against each other in the bidding process, but then pitting the municipalities within whichever state won the contract against each other?

Yeah and then at one point, a historian that I spoke to who studies economic development deals, he called it a race to the bottom. He said it’s really becoming worse and worse, and I don’t understand why changes haven’t been made. It’s a very strange cutthroat way to pit states and localities against each other, and it doesn’t give any tax payers the best possible deal. I don’t know how we decided on this model.

“It’s a very strange cutthroat way to pit states and localities against each other.”

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

I was there in October and I keep in touch with everybody over the phone, and of course I’m an avid reader of A Better Mount Pleasant, the Facebook group that Kelly has, and the Journal Times is doing good coverage of Foxconn and everything that’s happening in the village. It seems that they’re constructing on the first part of land that Foxconn is going to build on. They got the first building up, which is not anything close to whatever is going to be there in five to seven years. The first building is a warehouse where they’re just going to assemble TV components for Sharp. It’s just a thing they want to put up because the village wants to start getting some property tax payments out of Foxconn, because they have these giant interest payments they need to make on all the municipal bonds they released to get the money to buy the land for Foxconn. I think they’re going to be assembling TVs by next year.

“It’s just a thing they want to put up because the village wants to start getting some property tax payments out of Foxconn, because they have these giant interest payments.”

In terms of just the local politics, Dave DeGroot is up for election, Kelly is just in full swing trying to change the local government. I think they’re very excited about the change at the state level and they’re hoping at the very least that the new governor is going to change some of the environmental regulations that were bypassed for Foxconn, really looking into the water issue. And nobody has answered this question of, if they’re going to make LCD screens over there, that creates a huge amount of toxic sludge. There’s never been a plan for what they’re going to do with that sludge, because the factory sits on wetland, and so that’s a thing that people are hoping will move in some direction with the new state government.

Do you think they’re going to end up with a factory that’s anything like Foxconn initially promised?

The analyst I talked to said he thinks that Foxconn is going to build something. Whatever they build, it’ll make economic sense for them. And he said he feels as if it’s going to leave a bad taste in everybody’s mouths. He’s like, I don’t think it’s going to be the kind of future thing that the people were imagining when they gave away that huge, huge, huge incentive package.

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New York Post
HQ Trivia's fourth season starts at 9 PM ET
About a year and a half after it first popped up on our mobile screens, HQ Trivia is launching "season four" tonight at 9 PM ET with several gameplay tweaks and a refreshed cast of hosts. The trivia game streams live to player's phones and offers rea...
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Engadget | Technology News, Advice and Features
Kevin Durant Rumors: Clippers, Knicks 'Equally Dangerous' to Sign Warriors Star
While there has been plenty of speculation linking Kevin Durant to the New York Knicks in free agency this summer, a new contender reportedly has emerged for the Golden State Warriors star...
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HP Memorial Day sale: Spectre x360 Laptops, Omen gaming PCs, and printers
Memorial Day is a time for relaxation and remembrance, but it's also a huge season for yearly sales. The HP Memorial Day sale has deep discounts on laptops, desktop, printers, and more, and we’ve rounded up the best deals right here. The post HP Memorial Day sale: Spectre x360 Laptops, Omen gaming PCs, and printers appeared first on Digital Trends.
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Digital Trends | Technology News and Product Reviews