Michigan taxpayers foot $1 million bill for an imaginary job threat

The Michigan Economic Development Corporation gave $1 million to OVD Insurance, a Kent County firm, to keep it from doing more business out-of-state, according to documents obtained through a Freedom of Information Act request.

More than 100 pages of documents obtained by Michigan Capitol Confidential show that 80% of OVD’s clients are in Michigan. The documents did not include evidence that other states or economic development agencies were actively courting the company with incentives to expand elsewhere.

The $1 million taxpayer subsidy will help OVD but hurt competitors who are also based in Michigan, Robert L. Hughes, founder and president of Grand Rapids-based Advantage Benefits Group, told CapCon.

“Where does the MEDC draw the line?” Hughes asked. “Are they giving million-dollar handouts of taxpayer money to every Michigan insurance agency, law firm, and accounting firm that asks to fund a new office?”

The state agency is already under intense scrutiny over alleged secrecy and misuse of taxpayer money.

MEDC OVD FOIA by mcclallen

In its evaluation of the grant application, the economic development agency gave OVD a 69% score for the potential that the company would expand in another state.

But the review appears to rely largely on the company’s assertions rather than independent verification. Records state that OVD has offices or joint ventures in Pittsburgh, Raleigh, Nashville and Dallas.

The documents also say that employees in these offices are remote and mostly serve Michigan clients.

“Approximately 80% of OVD Insurance’s client base is located within Michigan,” the records say.

Yet the insurance company said it was being pressured by out-of-state partners to “add physical space” in other states. No MEDC documents included in the FOIA show the agency followed up on these claims or requested supporting documentation. OVD’s leadership said in the documents that the company has doubled its revenue and workforce over the past five years and expects to double them again over the next five years.

OVD confirmed to CapCon for a previous story that it anticipated job creation under the grant — estimated at 131 positions — but it would include a combination of new hires and reallocation of current employees.

A Dec. 13, 2024, email exchange included in the document CapCon obtained clarifies the company’s workforce numbers.

When the MEDC asked OVD about a recent decrease in the number of its Michigan employees from 120 to 106, Josh VanVels, the company’s chief growth officer, said that the initial figures included remote employees outside Michigan who serve Michigan clients.

The MEDC cautioned against reading too much into the documents.

“There seems to be a broad assumption here that the responsive documents to this single FOIA request represent every bit of due diligence that we do when considering how to develop potential offers and administer grants to best support job creation and retention in Michigan, and that’s not the case,” Danielle Emerson, public relations manager at the organization, wrote in an email to CapCon.

She added that the MEDC balances the need to be competitive with fiscal responsibility when it spends taxpayer dollars.

Michael LaFaive, senior director of fiscal policy at the Mackinac Center for Public Policy, told CapCon that more than three-quarters of corporate expansions would happen without incentives.

“Research shows that 75% to 98% of corporate expansions, relocations and retentions would have happened without incentives,” LaFaive said.

The threat of moving jobs elsewhere if the state fails to provide subsidies has a long tradition dating back to fabled Chrysler head Lee Iacocca.

“In Michigan, Lee Iacocca once bragged about his use of that threat around the world to wrest fiscal favors from government,” said LaFaive. “He said he did it so often he got tired of it.”

“The business subsidy program in question is not required to get company officials to do anything they wouldn’t otherwise do without taxpayer funding,” James Hohman, fiscal policy expert at the Mackinac Center for Public Policy, told CapCon.

“Its purpose is to try to make it seem like administrators are winning jobs,” Hohman added.

OVD Insurance did not respond to an email seeking comment for this story.