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State Government Wants to Subsidize a Theme Park in Grayling Township

Overextended state government would provide $25M

rollar coaster

On Jan. 24, 2007, Republican state Sen. Tony Stamas of Midland introduced Senate Bill 26, legislation that would authorize a "tax increment financing authority" in Grayling Township to subsidize the construction of an amusement park project. A TIFA "captures" the increment of extra local property tax revenue that would supposedly result from the economic growth which might be generated by the amusement park. The "captured" tax revenue is used to pay off the debt incurred by borrowing to subsidize the project and is thus diverted from financing other local government services.

The bill is part of a larger state effort to attract the theme park. As noted below by Diane S. Katz and James M. Hohman in a Mackinac Center Viewpoint published in April, this private park, which is seeking $25 million in infrastructure spending from the state of Michigan, would likely continue a tradition of dubious government investment in entertainment projects that didn’t work as planned.

Senate Bill 26 has been referred to the state Senate Appropriations Committee, chaired by state Sen. Ron Jelinek, R-Three Oaks.

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Taken for a Ride

By Diane S. Katz and James M. Hohman

Gov. Jennifer Granholm and other proponents of higher taxes claim there’s no fat left to cut from Michigan’s budget to resolve a deficit of $800 million. If that’s indeed the case, taxpayers should expect that the administration won’t gamble a penny of scarce funds on yet another amusement park subsidy.

The Bay City Times first reported that the Rochester-based firm of Axiom Entertainment is eyeing 1,800 acres of state-owned land near Grayling for a $160 million theme park. A letter of intent to purchase the oak and pine woodlands along Interstate 75 reportedly has been signed by David E. Freed, who oversees land sales for the Michigan Department of Natural Resources.

Axiom is also reportedly seeking $25 million in infrastructure improvements from the state. The Crawford County site currently lacks sewer and water service, and would likely require improved highway access.

Amusement parks can be loads of fun, but that doesn’t justify the use of tax dollars to build one. As it is, Michigan has an abysmal record of park subsidies.

  • Some $35 million in local, state and federal funds was invested in AutoWorld, a seven-acre theme park in downtown Flint. The park, which opened in 1984, was supposed to draw 900,000 visitors annually and revive the beleaguered city. It closed after only two years.

  • Construction of Cereal City USA, in downtown Battle Creek, was made possible by a loan of $900,000 from the state that was secured by the city. The attraction, which opened in 1998, was billed as "a land of wonderful, interactive experiences and entertainment for the entire family, as they explore the birth, development and global impact of the cereal industry." Officials estimated that the park would draw 400,000 visitors annually, but it was shuttered in January 2007 after years of dismal attendance.

  • The Kalamazoo Aviation History Museum secured a $3 million state grant to launch construction of an aviation theme park. The attraction was touted as "a centerpiece for economic development and tourism in southwestern Michigan," and local officials hoped that the state would finance half of the $80 million construction cost. A 25 percent hike in the local hotel tax also was considered. Ultimately, the grant money was returned to the state after the project was scaled back for lack of support.

  • The city of Pontiac invested $55.7 million to build the Silverdome in 1975. The Detroit Lions relocated to Detroit’s Ford Field in 2002. Although the team paid the city $26 million for breaking its contract, Pontiac continues to incur a hefty deficit in maintaining the 127-acre site.

It’s not as if Michigan would lack recreation in the absence of park subsidies. The state already is home to several theme parks and water parks, including Michigan’s Adventure in Muskegon, which attracts hundreds of thousands of visitors annually — without corporate welfare.

Indeed, it bears noting that any park or other amusement facility that must rely on tax dollars, rather than private investment, is by definition not viable and thus unworthy of taxpayer support.

By no means is Axiom Entertainment alone in seeking economic favors from state government. The Mackinac Center’s Michael D. LaFaive has calculated that state and local governments have pledged in excess of $3 billion worth of tax incentives to some 200 firms over the past two decades under the Michigan Economic Growth Authority. A slew of other subsidies has also been granted. Nationwide, such targeted subsidies are estimated to exceed $50 billion annually.

While officials justify this "investment" as necessary to job creation, the fact is that such deals rarely make good on the promised returns. The tax credits offered by MEGA in its first 10 years generated at best 13,541 jobs, or 2.3 percent of a single year’s worth of job creation in the state.

More than just tax dollars are at stake. When government nurtures economic dependence, the spirit of free enterprise — the underpinning of American innovation and empowerment — is undermined.

In this context, the supposed benefits of yet more amusement park subsidies pale in comparison to the true costs. The Granholm administration should not consider negotiating such subsidies, especially while demanding that Michigan families surrender more of their hard-earned wages to the state.

Meet James Hohman, Assistant Director of Fiscal Policy at the Mackinac Center. James discusses his latest project, an analysis of Proposal 1, the proposal on personal property tax reform that will appear on the August 5th ballot. Read more about Proposal 1 here: http://www.mackinac.org/20246


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