Michigan offers tax incentives worth five times the competition's
Editor's Note: Michigan Economic Development Corporation spokesman Michael Shore has emailed a response to this story. That response is posted here.
In August, the state of Kentucky announced Mountain Valley Recycling was opening a 215,000-square-foot facility that would generate 360 jobs within two years. That state’s economic development arm was giving a $1 million performance-based tax incentive over a 5-year period through corporate income tax credits and wage assessments.
Two months later, that same company brokered a deal with Michigan for a 280,000-square-foot facility that would generate 396 jobs. But Michigan offered a tax-incentive five times that of Kentucky's, paying $5.1 million over seven years.
The question of whether the Michigan Economic Development Corporation’s incentives are overly generous has been raised before by the Mackinac Center for Public Policy.
For example, GlobalWatt Inc. was awarded a $42 million incentive plan earlier this year to set up its new solar modular plant in Saginaw. At the time, the MEDC stated that GlobalWatt was being courted in Texas. The Corpus Christi Regional Economic Development Corp. had offered a $2.8 million incentive package to GlobalWatt, but that offer was pulled off the table before the MEDC offered its incentives.
“My gut tells me that the Granholm administration and the MEDC is desperate for any good news and is probably over-incentivizing these deals to ensure public relations victories,” Mackinac Center Fiscal Policy Director Michael LaFaive said.
The MEDC knows their press releases get lots of attention but their failures get little notice, LaFaive said.
LaFaive said there were instances where the MEDC took largely cut-and-pasted information submitted by the applicants as fact in the MEDC briefing memos. That suggests, LaFaive said, there is no "intense examination" of the tax-incentive deals.
MEDC spokesman Michael Shore didn’t respond to e-mails seeking comment. The MEDC has stopped responding to questions from Michigan Capitol Confidential. It does respond to Freedom of Information requests, as required by law, but can take up to three weeks or more to process those. (Updated: Response is here)
Mountain Valley Recycling CEO Ronald Whaley didn’t return a message left at his office in Florida. But the CEO has spoken to other outlets about the MEDC’s deal.
"I was looking to expand on the West Coast, but Michigan was very, very proactive and put together an attractive package," Whaley told plasticnews.com. "Michigan was extremely aggressive about getting us there."
Whaley told plasticnews.com the Sterling Heights plant would be a $20 million investment, while the Frankfort, Ky., plant would be a $9.5 million investment. Whaley said the difference between the two plants was the cost of equipment. He said the company could move equipment from its closed Morristown, Tenn., plant to the Frankfort, Ky. operation.
The city of Frankfort also awarded Mountain Valley Recycling a $1 million grant. It’s unclear if the Michigan facility received any local tax incentives, as the MEDC didn’t respond and the city of Sterling Heights couldn’t be reached for comment.
Liz Boyd, spokeswoman for Gov. Jennifer Granholm, also didn’t respond to an e-mail seeking comment.