An 'Expensive Game' Providing the 'Illusion of Creating Jobs'
State economic development czars trusted the job projections provided by horse race track seeking special tax treatment
Editor's note: The Michigan Economic Development Corporation has been no stranger to controversy during this year, with perhaps the most exceptional case being its attempt to give a special tax deal to a company run by a convicted felon. This week, MichCapCon.com will be reviewing another MEDC project that has become mired in controversy.
In 2008, the newly built Pinnacle Race Course in Huron Township was eligible for more than $48 million in tax incentives over 30 years. The MEDC trumpeted this project as "the beginning of a world-class commercial and industrial complex and transportation hub that will mark the entry of western Wayne County into the global economy."
But today, county officials say the track has liens on it and has unpaid property taxes for 2009 and 2010. One horse racing organization says it has given more than $1 million to keep it operating.
Using a Freedom of Information Act request, MichCapCon.com has acquired more than 500 pages of documents that show a rare inside look at the policy and politics of how a state-subsidized economic development deal doesn't pan out as expected.
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Prior to issuing millions of dollars in special tax favors to a race course, the state's flagship economic development corporation "sweetened" its offer to Post It Stables because of all the jobs the project was projected to create.
Job projections that companies submit to the Michigan Economic Development Corporation are seldom on target, causing one state senator to say the job creation numbers are "an absolute disconnect with reality."
Is the MEDC giving away taxpayers' dollars to companies based on bloated job estimates? The MEDC didn't respond to e-mails seeking comment.
An e-mail obtained involving the negotiations between the MEDC and Post It Stables for the Pinnacle Race Course in Huron Township shows that state officials may have believed the hype about job creation. That's problematic because a state Auditor General report and a Mackinac Center study found that only about 3 of 10 new jobs that companies project will be created actually come to fruition.
The Mackinac Center received more than 500 pages of documents involving the Pinnacle Race Course in a Freedom Of Information Act request. The track is eligible for up to $48 million in tax incentives over 30 years.
The documents in the FOIA give a rare glimpse into the inside workings of tax breaks many companies from Michigan are receiving. The e-mails show that the MEDC relies on the company to provide job projections.
On Aug. 12, 2008, MEDC official Mark Morante wrote: "Mr. Epolito, in consultation with the Leadership Team, has decided to sweeten our offer to Post-It in recognition of it being a really good tourism deal but that our tourism mega credit cannot accurately reflect all the jobs that the project will be directly creating."
James Epolito was then the CEO of the MEDC.
It's not clear how the deal was sweetened or how much money the track got via its job creation estimates. The MEDC considers tax information private and the amount of money the company received in tax credits was blocked out in the documents.
Pinnacle Race Course has struggled financially. Wayne County officials say it has liens against it. Huron Township officials say the track hasn't paid it taxes for all of 2009 and the summer of 2010. An official for a lobbying organization for horse racing said they have spent more than $1 million to keep the track open.
The MEDC press release stated the project would create 71 new jobs at the race track. Huron Township Supervisor Elke Doom said she thinks there may be as few as 30 full time jobs at the track from her observations. Track officials and the MEDC haven't released how many jobs projects create after the projections are trumpeted in press releases.
"This is really an expensive game used by the political class to create an illusion they are creating jobs," said Michael LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center.
LaFaive said the MEDC doesn't seem to understand incentives they have created for a company to inflate its job creations projections when dealing with an organization looking to subsidize it.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.