Michigan steps up new trade incentives after losing Ford factories

0


LANSING – Michigan cannot afford to lose manufacturing jobs to other states, supporters argued Wednesday as the State House approved fast-track bills to create a new program for tax incentive designed to facilitate large-scale economic development projects.

Democratic Gov. Gretchen Whitmer and other Republican-led Legislature incentive supporters highlight Ford Motor Co.’s decision this fall to open massive EV and battery development centers in Kentucky and Tennessee instead of Michigan.

“We have our lunch regularly taken away by other states that are better equipped to retain and attract business,” John Walsh, president and CEO of the Michigan Manufacturers Association, told lawmakers ahead of a round of 83 votes. -21 in the Lodge.

Related:

The legislation, introduced last week and now heading to the Senate for consideration next week, would create new “strategic site selection” and “critical industry” incentive programs to provide loans, grants or other incentives. aid to help local governments and business entities prepare Michigan lands. for redevelopment and the conclusion of large-scale transactions.

Supporters call the package – which is yet to be priced – a rare opportunity to transform Michigan’s economy, but the state’s mixed record with tax incentive programs has prompted many detractors.

Representative Yousef Rabhi, D-Ann Arbor, denounced what he called an escalation of the war between states to see who can give the most taxpayer dollars to profitable businesses.

“It looks like an arms race, with each state offering more and more in a downward spiral,” Rabhi said. “Where does it end if each state offers more credits? “

The push comes as Michigan officials debate how to spend nearly $ 6 billion in “fiscal adjustment” funds granted to the state by Congress and President Joe Biden under US federal law. on the rescue plan.

The incentive legislation would force the governor and the legislature to agree on future allocations, potentially in the weeks to come.

Biparty cooperation on fast-track bills would send a strong signal to companies currently considering doing business here, and time is running out, said the CEO of Michigan Economic Development Corp. Quentin Messer Jr. to lawmakers earlier Wednesday.

The state is pursuing 11 projects that could bring $ 74 billion in investment and more than 27,000 jobs to the state, but reaching these deals “will require significant additions to (Michigan’s) economic development toolkit “, he said during a presentation to the committee.

MEDC, the state’s quasi-governmental development agency, does not disclose any details about these projects, which are usually negotiated behind closed doors.

Manufacturing employs at least 600,000 people in the state, and the industry “has been strong and robust,” said Walsh of the Michigan Manufacturers Association.

“But it has been declining for decades,” he warned. “And other states know it. Other countries know this. They regularly compete with us for investments.

The bills, if approved by the Senate as early as next week, would represent the first major upgrade in years to economic development incentive options available in the state.

The legislation would create a new strategic reserve fund for outreach and attraction within the Ministry of Labor and Economic Opportunities.

Under the proposal, Whitmer and the legislature would have to agree on how much money to invest in that fund, and then they would generally have to agree again on how to allocate it between the separate site selection and critical industry incentive programs.

The legislation would create a financial assistance program to help businesses, local governments or economic organizations prepare “strategic sites” for future development, including land acquisition, infrastructure improvement and demolition or construction.

The proposal also contemplates a separate incentive program for “critical industry” that would provide grants, loans, investments or other forms of economic assistance to help secure development agreements, including funding for development. short term to meet immediate needs.

A third bill, already approved by the Republican-led Senate, would extend an existing program of tax-capture “transformational brownfields” until 2027 and relax some requirements to encourage smaller developments and affordable housing projects, among others.

Whitmer didn’t weigh in on the specific proposal now rushing to his office.

But in October, the first-term Democrat urged Michigan lawmakers to work with her on new business incentives after Ford Motor Co. announced an $ 11.4 billion plan for new manufacturing campuses in Tennessee. and Kentucky.

“We have a unique opportunity to expand our economic development toolbox to ensure the state is in a strong position to compete for unprecedented jobs and investment,” Whitmer spokesman said Wednesday, Bobby Leddy.

“The next 10 months will determine the future of our state’s economy for the next 10, 20 and 30 years.”

Michigan competes with other states, including a southern alliance whose members have explicitly said they hope to make Michigan “irrelevant as the mobility capital,” said Messer, the director of MEDC .

He read lawmakers a series of headlines about recent manufacturing investments in other states: GM to build $ 2.3 billion battery plan for electric vehicles in Tennessee. Toyota is going to bring a billion dollar “megasite” to North Carolina. Samsung is planning a $ 17 billion Texas chip factory.

Wendy Block, vice president of corporate advocacy for the Michigan Chamber of Commerce, told a committee hearing that the state appears to be pursuing “three big projects that are on the table.” Details are scarce, she said, due to nondisclosure agreements.

“A lot of them seem to have to do with electric vehicles (electric vehicles) and the next-gen types of automotive jobs,” Block said.

The Detroit News reported that a potential target of the incentive program is one or more battery cell manufacturing plants planned by General Motors Corp. and LG Energy Solutions.

Critics have noted that Michigan has a difficult track record with incentive programs, including a controversial Michigan Economic Growth Authority tax credit program that was started in the 1990s to stem massive job losses. during the Great Recession, but dropped out in 2011 amid skyrocketing costs.

The new proposal includes transparency and accountability provisions that improve on past programs, but the incentive bills approved by State House on Wednesday would likely end up being a bad deal for Michigan taxpayers, Mackinac’s Michael LaFaive said. Center for Public Policy.

“Incentive programs all seem to have a similar pattern in that they are ineffective, costly and fundamentally unfair to those who don’t get them,” LaFaive told Bridge Michigan.

The Mackinac Center, a free market think tank, published a study last year on the incentive programs Michigan has implemented since the 1980s. While some have created jobs, they did so at a significant cost to taxpayers: in total, Michigan offered nearly $ 600,000 in incentives per job created, according to the Mackinac Center analysis.

The old programs continue to weigh on the state budget. Last year, GM remained eligible for $ 2.27 billion in tax credits under the Michigan Economic Growth Authority’s dismantled program. Fiat Chrysler Automotive restructured its deal in 2015, agreeing to cap its potential tax credits at $ 1.7 billion until 2029.

The Michigan Strategic Fund recently estimated that current MEGA tax credits will cost the state more than $ 5 billion by 2030.

“We have given our automakers half a billion dollars, on an annual basis, through the MEGA tax credit program, and yet they continue to move factories to other states,” said Rabhi, the Democrat of Ann Arbor.

“Does that sound fair to you?” “

The MEGA program is “a cloud that seems to hang over us,” acknowledged Bob Trezise of the Lansing Area Economic Partnership and the Economic Development Leaders of Michigan.

But Trezise and other development officials pushing the new incentive program say it includes unique guarantees to protect taxpayer investments.

As part of the proposal, the Michigan Strategic Fund is expected to consider a series of eligibility criteria for applicants, including their financial needs, the expected return on the state’s investment, and the risk that products manufactured on the site become obsolete in the future.

Written agreements should include specific dates and references for the eligible applicant, as well as specific recovery and reimbursement arrangements to ensure that the state is able to recover the funds awarded if the applicant does not comply with the terms of the agreement. ‘OK.

An entity that violates the terms of the agreement will have to repay any state aid within 30 days or face a financial penalty of one percent per month. And if the entity were to file for bankruptcy, the state would have “first priority” over other creditors seeking recovery.

“Gone are the days of blank checks and handing out cash to anyone who wants it,” said Block, a Michigan Chamber lobbyist who backs the incentive plan.


Share.

Comments are closed.