Michigan lawmakers on Wednesday advanced legislation that would create a large state incentive program in an end-of-session push to attract and retain more businesses in an increasingly competitive climate.
The House pushed the legislation out of committee Wednesday morning and voted 83-21 on the chamber floor Wednesday afternoon amid a mix of concerns and support from both sides of the aisle. Five Democrats and 16 Republicans voted in opposition.
The legislation prompted heavy debate on the House floor ahead the votes Wednesday evening. Rep. Angela Witwer, D-Delta Township, said they represented “a beginning of a new era for Michigan’s economy.”
Michigan had “fallen into complacency,” Witwer said. The state has to adapt or die, she argued.
“It’s time we adapt,” Witwer said.
But Rep. Yousef Rabhi, D-Ann Arbor, said they were a “regressive policy that has been proven not to work.”
Rep. Steve Johnson, R-Wayland, described the proposal as anti-free market and as taking money from taxpayers to give to corporations.
“This is big business getting into bed with big government,” Johnson said.
The Strategic Outreach and Attraction Reserve — which would be funded by the Legislature — would distribute money to the proposed Michigan Strategic Site Readiness Fund and the Critical Industry Fund to aid in the development of manufacturing and commercial sites and the creation of jobs.
Should the proposals become law, the Legislature likely would use federal American Rescue Plan dollars for the fund to start. Some officials have speculated the program could receive millions of dollars in funding, and that one of its initial targets is General Motors Co.
Asked what prompted the votes, House Speaker Jason Wentworth, R-Farwell, immediately referenced Ford Motor Co.’s decision in September to partner with SK Innovation to invest $11.4 billion and create 11,000 jobs in an electric truck plant, three battery plants and a supplier park to be divvied between Kentucky and Tennessee.
“I think that sent shock waves through our state, and we need to make sure that we have the resources and the tools available to be competitive,” Wentworth said.
The speaker said he wasn’t certain how much money would be put in a separate supplemental spending bill to fund the new effort. But he acknowledged he hoped the spending bill would pass the Legislature by the end of the year.
Wentworth wouldn’t directly say whether he signed a non-disclosure agreement, preventing him from discussing a potential project that could benefit from the new incentive. Sen. Ken Horn, R-Frankenmuth, said Tuesday he signed a non-disclosure agreement.
“I won’t get into exactly what I signed or didn’t sign,” Wentworth said.
Gov. Gretchen Whitmer’s office, in response to the legislation, said the next 10 months “will determine the future of our state’s economy for the next 10, 20 and 30 years.”
“We have a once-in-a-lifetime opportunity to expand our economic development toolkit to ensure that the state is in a strong position to compete for unprecedented jobs and investment,” Whitmer spokesman Bobby Leddy said.
“Gov. Whitmer’s top priority is working with leaders in the Legislature and anyone else who wants to work with us to strengthen our state’s economy and put Michiganders first.”
Business leader support
Several officials have speculated the push for the package’s passage is tied to GM’s upcoming decision on where the Detroit automaker will locate its next battery cell manufacturing site.
But people testifying on the bill Wednesday declined to specify which companies could benefit, noting some lawmakers had signed non-disclosure agreements regarding potential beneficiaries.
But business leaders were clear Wednesday about the types of business the state could lose without such incentive programs and they did so with a sense of urgency.
Business leaders told lawmakers in a more than two-hour hearing that the new funding was sorely needed as other states offering bigger incentives sought to steal away Michigan’s manufacturing base.
“We are getting our lunch taken away on a regular basis by other states that are more equipped to attract and retain more businesses,” said John Walsh, president and CEO of the Michigan Manufacturing Association.
Recently announced electric vehicle projects in Tennessee, Kentucky and North Carolina were only secured after each state offered a minimum of a half a billion doolars in incentives, said Bob Trezise, of Economic Development Leaders for Michigan.
Additionally, the Southern Auto Alliance is clearly seeking to edge in on Michigan’s auto and manufacturing base by making Michigan “irrelevant as a mobility capital,” said Quentin Messer Jr., Michigan Economic Development Corporation’s chief.
Messer told lawmakers the state currently has 11 projects in its pipeline worth $74 billion, but it needed more incentives to land those and other projects. Some of the opportunities “will be decided in the next 60-90 days,” he said.
“I had a CEO recently tell me that money goes where it can be fed,” Messer said “We need to make sure Michigan remains one of the most attractive buffets.”
Rep. John Cherry, D-Flint, spoke in support of the package on the House floor Wednesday, saying the world is facing a period of “rapid technological change.” There will be winners and losers as the “pieces on the board get mixed up,” the Democrat added, referencing the shift to electric vehicles and Michigan’s past dominance in auto manufacturing.
Cherry said he doesn’t want to see other areas of the state deal with what he’s seen occur in Flint as it’s lost auto jobs.
“Other states know that when there’s technological change and we have to totally rebuild our manufacturing base to reflect where we’re going technologically, they have an opportunity to grab that market,” he said.
How funds would work
Under the legislation, the Strategic Outreach and Attraction Reserve Fund would be housed in the state Department of Labor and Economic Opportunity. That fund would receive appropriations from the Legislature and funnel money into two new accounts called the Michigan Strategic Site Readiness Fund and Critical Industry Fund in the Michigan Strategic Fund.
The Michigan Strategic Site Readiness Fund would provide aid to businesses for items such as land acquisition, site preparation, infrastructure improvements, demolition or rehabilitation of a site, environmental remediation and some fees related to engineering, surveying or architecture.
The Critical Industry Fund would help to pay for costs such as gap financing, deal-closing or workforce training.
“This allows for a healthy process between the branches of government and it’s performance based, measurable and accountable,” said Rep. Ben Frederick, R-Owosso, a sponsor of the bills.
“We’re not looking at trying to play a shell game here. This is actual growth for our state.”
When considering an application, the Michigan Strategic Fund has to consider several criteria, including the number of new jobs, risks of the project, the community impact, any local matching support, any other state or federal aid for the project, a project’s need for the investment, impact on other existing businesses and its use or rehabilitation of historic sites.
Each program will have claw-back and audit provisions to ensure the companies meet and maintain promises in their grant or loan agreements, including project dates and benchmarks. Any requests for changes to an agreement would have to be noticed to the governor, all lawmakers, and the House and Senate fiscal agencies.
On March 15 of every year, a report would have to be prepared for the Legislature and governor on the activities of the fund.
“The bill adds several layers of transparency,” said Rep. Julie Calley, R-Portland, a sponsor of the bills. “Gone are the days in which we are making deals shrouded in shadows.”
House Appropriations Chairman Thomas Albert, R-Lowell, said the details of funding for the program were still being negotiated.
“The thing that was the most important to me personally was legislative oversight,” Albert said. “And it looks like they’ve done a good job with that.”
Several members of the Legislature supported the idea of lawmakers holding the purse strings for the projects in an arrangement that appears to give them more financial oversight than other business incentive programs handled by the Michigan Economic Development Corp.
The bills are tie-barred to two separate bills that would limit avenues to get around the Legislature’s appropriation duties.
One would limit administrative transfers as they apply to money for the funds in question. And another, passed through the House earlier this year, would limit Whitmer’s ability to transfer any funds between agencies, a tool she used in 2019 to alter appropriations made by the Legislature during a budget stalemate.