MEDC Is a Moth to a Failure Flame

Suniva bankruptcy lights up program shortcomings

In 2014 Michigan Capitol Confidential published an article titled “Solar Subsidy Part Two: Will the promises come to fruition this time?” The story involved a company that was awarded a grant of up to $2.5 million through the Michigan Business Development Program, and the answer turned out to be a resounding “no.” But this wasn’t the only case of an exercise in corporate welfare that failed; research shows that this program likely destroys, rather than creates, net new jobs. It should be closed before it does any more damage.

Suniva Inc. of Georgia was approved for a MBDP grant in July 2014 in a deal that was supposed to bring new and permanent jobs to Saginaw. At the time, Gov. Rick Snyder heralded this and other deals as “new investments in our state [that] will strengthen our communities, spur new commercial investment in our cities and fuel new opportunities for our talented workforce.”

It didn’t work out that way. Suniva filed for bankruptcy in 2017, and the building it briefly inhabited now sits unused, save for storing some solar panels and manufacturing equipment. According to the state, Suniva collected more than $1 million in taxpayer subsidies through March 2015. The company was also given real and personal property tax abatements by Saginaw Township. (As an aside, three of the five MBDP deals the governor praised back in 2014 have created and maintained zero permanent new jobs. The fourth was in default on its grant agreement, at least for a time, late last year.

The Suniva deal is yet another example of government’s inability to pick winners from losers in the business marketplace. In recent weeks, I have highlighted two other companies that received an MBDP grant: Cherry Growers Inc. and Spiech Farms, both of which filed for bankruptcy after state bureaucrats had approved them as winners. Each was able to collect taxpayer subsidies.

Officials at the Michigan Economic Development Corporation and Michigan Strategic Fund, to which it gives administrative support and recommendations, frequently waste taxpayer money on corporate welfare deals under the MBDP. They frequently pick the wrong company to receive financial incentives. But in Suniva’s case, the state has done so twice. Remarkably, after Suniva failed to meet the targets under a different program, it circled back around and secured an approval for MBDP subsidies.

In 2009 the Michigan Economic Growth Authority — the state’s chief business incentive program at the time — approved, with the recommendation of the MEDC, a “photovoltaic credit” subsidy to Suniva. The company, in turn, was supposed to create a new facility and 500 new jobs in Saginaw County. Then-Gov. Jennifer Granholm said in a press release, “Today we welcome Suniva to our growing list of world-class green manufacturing leaders that are establishing operations here.”

Nothing came of that deal. Even so, the newly installed Snyder administration gave Suniva a new deal in 2011. Administrators estimated that the new facility “will generate a total of 3,229 jobs in the state by the year 2020.” The facility was never built, and the company does not appear to have collected on its MEGA incentives.

Both programs Suniva participated in — the MEGA and the program that replaced it, the MBDP — are demonstrable failures. Five rigorous studies of the MEGA program have been performed and four found a zero to negative impact. The Mackinac Center for Public Policy released a study of the MBDP in February.

By our count, roughly one in three MBDP deals approved between March, 2012, and the end of September 2016 either had been or were in some stage of default or had been dismissed outright. Our statistical analysis found that for every $500,000 in subsidies disbursed, the average county that had an MBDP project within its borders saw a loss of 600 jobs. That is an awful result and one that should lead to a major change in the approach Lansing takes toward incentive programs.

A better approach would be to eliminate the state’s failed economic development apparatus and do something that will more effectively develop the economy: Redirect the money toward higher priorities, such as fixing Michigan’s roads or cutting taxes across-the-board.

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.