States all over the country are watching the ever-changing economic development deal between Foxconn Technology Group and the state of Wisconsin.
Touted as one of the nation's biggest economic impact deals, Foxconn committed to building a new $10 billion display screen manufacturing facility and hiring 13,000 people in southeast Wisconsin. State and local governments committed to about $4 billion in tax credits in incentives.
Almost immediately after the deal was announced, there was uncertainty about the project, with concerns about whether it would happen at all or change substantially.
Groundbreaking took place last summer, but construction was halted in the fall. Foxconn later said they stopped construction because of weather, but most observers feel uncertainty around the project was the primary factor.
All states, including South Dakota, have economic development staffs who work to recruit jobs and investment. Academic studies show that final results range from working out extremely well to outright disasters.
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Companies love being recruited, of course, and states love the boost in jobs, property taxes, sales taxes and other economic benefits. Part of the challenge is that the companies want or need the financial incentives right away to build and hire, while the economic benefits usually come over a long stretch of time.
So if a company doesn't do well, or the market for its products changes, or if there is unscrupulous management, the state could lose a lot of taxpayer money.
The bigger the project, like Foxconn, the bigger the risk. An appropriate adage might be "don't put all your eggs in one basket."
South Dakota, and Madison as well, has typically made more deals of modest size, and that strategy has paid off. There isn't the huge splash like a big deal, but the diversification and risk control has worked very well.
If the Foxconn project succeeds, states may be willing to do more large-scale deals. If it fails, it may put a damper on similar undertakings all across the country.