News Story

State’s Business Subsidy Cherry-Pickers Failed In Handout To Cherry Picker

Picking corporate subsidy winners and losers not like choosing fruit

In summer 2012, Cherry Growers Inc., a fruit farming cooperative in Grand Traverse County, looked like a harbinger of growth in the state’s agribusiness sector, according to Michigan’s economic development agency.

In June of that year, the Michigan Strategic Fund approved a $2.5 million loan to Cherry Growers, which planned to expand its apple and cherry processing operation in Grawn, just outside Traverse City, and add 250 full-time employees.

The loan commitment was “a clear example of economic gardening in action,” said Michigan Economic Development Corp. CEO Michael Finney, “leveraging state resources to foster private sector solutions.”

Less than a month later, the Michigan Strategic Fund gave a $2.5 million grant from the Michigan Business Development Program to Cherry Growers to aid in its expansion and newly inked partnership with Materne North America, an international food processing giant. (Materne got a $3 million grant the same day.) With the grants came more words of optimism from Finney. Cherry Growers was supposed to repay the award in profit-sharing installments beginning in 2015. But things didn’t go as planned.

By 2016, Cherry Growers was in default on its agreement, though the MSF approved a forbearance period, according to the agency’s annual report. In 2016 and 2017, the company paid $21,000 in forbearance fees.

That arrangement foundered as well, however. In August 2017, Cherry Growers filed for bankruptcy, issuing a statement that it had “fought to overcome setbacks due to a failure to recognize in a timely matter that a change in its core business model was necessary.”

The MSF filed a claim as a creditor in the bankruptcy proceedings, which have yet to be resolved. It remains unclear what recovery, if any, the state can expect from the grant, which was disbursed in full, or the loan, which has an outstanding balance of $2.6 million. That’s according to a notice the MSF gave to the Legislature in December 2017.

Cherry Growers’ physical assets were sold at auction in May 2018. Materne assumed control of the Grawn facility. The MSF annual report for 2018 says the agency is monitoring the Cherry Growers grant.

A spokesman for the MSF declined to comment on the prospects for recovering state funds absent the submission of a Freedom of Information Act request.

Michael LaFaive, the senior fiscal policy analyst at the Mackinac Center for Public Policy, wrote about Cherry Growers and state taxpayer-funded business incentives in 2018.

“Time and again, state bureaucrats brag about the jobs and other benefits they say their handouts will deliver. Research shows these programs tend to be ineffective. Each time one of its winners fails to perform as expected, the MEDC should issue a press release announcing as much.”