News Story

Project Gets $100,000 Taxpayer Subsidy, Creates Zero Jobs, Firm Returns Just $26,000

Officials had boasted ‘additional good-paying jobs for years to come’

In spring 2014, XanEdu, an Ann Arbor-area firm specializing in custom educational content, was awarded a grant under the Michigan Business Development Program. The program is administered by the Michigan Economic Development Corporation, the agency in charge of the state’s business incentive programs.

The initial award was for $325,000 and was premised on the company’s decision to consolidate its operations in Michigan, invest $1 million in headquarter renovations and add 65 new employees.

The MEDC’s then-CEO Michael Finney said in a March 2014 statement that XanEdu’s “commitment to Michigan will mean additional good-paying jobs for years to come …(and) underscores Michigan’s business-friendly environment and talented workforce.”

It didn’t quite work out that way.

According to MEDC’s 2017 annual report to the Legislature on the taxpayer-funded grant program, XanEdu was unable to meet the performance milestones contained in its agreement. Instead, it was in default and had initiated a repayment of the $100,000 portion of the grant that had already been disbursed. The same report for 2018, released in March, describes the agreement as terminated and records $26,000 in repayments made by the company.

The 2018 report also lists as “zero” the number of new, permanent jobs that resulted.

The MEDC, responding to an email request for information on XanEdu and eight other unsuccessful projects, declined to provide any additional information about what happened without a formal Freedom of Information Act request.

But XanEdu CEO Rick DeBoer said in an interview it would be a mistake to regard the state’s involvement as a failure.

“I wouldn’t say that it didn’t work out. I think it worked out halfway,” DeBoer said.

The state grant was designed to offset the high cost of unemployment insurance in Michigan, he said.

And while XanEdu did not meet the employment targets contained in the agreement, the company has enjoyed robust growth since 2014, he said.

“I think overall it’s a win for Michigan.”

This is part of a series of stories that Michigan Capitol Confidential will be doing reviewing projects subsidized by the Michigan Economic Development Corporation. From its inception in 2011 through May 2017, the MEDC awarded nearly $400 million in taxpayer funds to several hundred prospective recipients.