Incentive funds should help Michigan compete for jobs

If Michigan has to get back in the corporate welfare game, the approach moving through the state Legislature is better than past efforts, which spent a lot of taxpayer money but didn’t produce much in terms of jobs and other spin-off benefits.

Lawmakers, in consult with Gov. Gretchen Whitmer’s office and the Michigan Economic Development Corp., have passed bills that would provide the state with more incentives to offer businesses seeking to locate or expand here.

The three-bill package would create the Strategic Outreach and Attraction Reserve (SOAR) fund in the Department of Labor and Economic Opportunity. SOAR would feed two other new funds, the Strategic Site Readiness Fund and the Critical Industry Fund, to pay for site preparation for new developments and to offer the final sweeteners needed to close the deals.

All grants from the funds would have to be vetted and approved by the Legislature and be included in the state’s annual budget.

That makes them different than past incentive programs, which relied mostly on tax credits that remained in place even if a project failed to deliver its promised benefits, with the true cost almost impossible to predict.

Tax breaks to incoming or expanding businesses also helped create a crazy-quilt tax environment in which competing companies might face vastly different levies from the state.

These bills would make incentives part of the annual appropriations process, to be debated while the budget is being put together. That means they’ll have to compete each year against other spending priorities, and they won’t commit future generations to paying for hand-outs delivered today.

The package, passed by both chambers on a hurry-up schedule, is directly aimed at capturing massive investments in electric vehicle and battery production expected to be announced shortly by General Motors Corp. Friday it was learned the automaker is eyeing a $2.5 billion battery cell plant near Lansing.

The state began scrambling to become more competitive for such projects after Ford Motor Co. announced earlier this fall it is building $11.4 billion in new EV facilities in Kentucky and Tennessee, rather than in its home state.

“It only makes sense that automotive projects will be the first to be presented to the Legislature,” says Senate Majority Leader Mike Shirkey, whose chamber approved the bills Thursday. “I think it gives us a chance for getting GM, and a better chance for getting many of the projects that have been mentioned.”

Shirkey says the site-preparation dollars will allow Michigan to create a mosaic of development-ready sites of varying sizes throughout the state that should help lure projects to Michigan. That’s one area where both Tennessee and Kentucky had a distinct advantage over Michigan in competing for the Ford plants.

The GOP senate leader says this approach is a big step toward creating a disciplined culture of economic development in Michigan based on purposefully budgeted actions whose full costs are known upfront.

Additional work is needed on regulations, business taxes and workforce development.

The package has detractors on both sides of the aisle who question whether the state should be using any tax dollars to subsidize profit-rich corporations such as the domestic automakers. We share some of those concerns.

But the reality is Michigan has to protect its automotive jobs base. Incentives are now deeply rooted in the economic development process, and one state’s resistance isn’t going to change that.

Ford’s decision to bypass Michigan was a tremendous wake-up call. Lawmakers and the governor had little choice but to answer it.

No secrets for this legislation

While we support the incentive package, we object to the secrecy that surrounded the deliberations over the bills.

Some of the lawmakers at the center of the discussions with the Michigan Economic Development Corp. acknowledge they were asked to sign non-disclosure agreements preventing them from discussing details of the talks.

We understand the sensitivity of dealing with corporations that are weighing multi-billion dollar investments.

But lawmakers do the public’s business. They should not bind themselves to agreements that prevent them from sharing public information with the public.


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