Michigan subsidizing private businesses with taxpayer money during budget crunch

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Michigan is facing a looming budget shortfall estimated between $1 billion and $2 billion for fiscal year 2022, but it’s still giving taxpayer-funded grants to corporations.

The Michigan Economic Development Corporation announced grants to three companies, which total $5.1 million.

John Mozena, president of the Center for Economic Accountability, a nonprofit organization for transparent economic development policy, told The Center Square that an overwhelming majority of the time, subsidies don’t change business decisions.

“If there’s a market, then people will build it,” Mozena said.

“Today’s actions will continue to ignite Michigan’s economic recovery, and demonstrate our ongoing support for the businesses and community projects that will secure the long-term economic health of our state,” MEDC CEO Mark Burton said in a statement.

“The projects approved today reflect our continued focus on supporting projects and initiatives that uphold our mission of enabling equitable economic prosperity for all Michigan residents.”

The Michigan Community Revitalization Program gave the Commongrounds Cooperative development in Traverse City a $1.5 million grant.

The planned four-story mixed-use development is expected to create 17 full-time jobs and generate a total capital investment of $15.9 million.

The Grand Traverse County Brownfield Redevelopment Authority also gave a $210,000 grant and approval of the local portion of the $440,593 in state tax capture for environmental cleanup.

Perrigo, a health and wellness solution company, is getting a $2 million taxpayer-funded grant to establish a Grand Rapids headquarters.

The project is expected to generate a total capital investment of $44.7 million and create 170 well-paying jobs.

Grand Rapids has offered to support the project with a property tax abatement valued at $1.5 million and a $140,000 one-year parking incentive for city-owned lots or ramps.

Kroger Company received a $1.6 million taxpayer-funded grant for constructing a new automated fulfillment center in Romulus. The Mackinac Center for Public Policy reported the company’s net earnings were $1.6 billion in 2019.

The project is expected to generate a total private investment of $94 million and create 270 jobs. The release said Michigan was chosen over a competing site in Toledo and was chosen over competing sites in Florida and Illinois for the Perrigo deal.

Mozena cited Amazon’s HQ2, which chose Alexandria, Va., as an example of the ineffective nature of such corporate giveaways. Mozena points out Bethesda, Md., offered roughly $5 billion more in subsidies, citing a better business climate.

“If $5 billion can’t convince Amazon to move 10 miles, then how are any of these subsidies that the MEDC are handing out going to make any difference in what these corporations do?” Mozena asked.

The Center Square previously reported Michigan’s business incentive programs increased a company’s employment and sales but cost taxpayers an average of $593,913 per job created per year.

According to an economic paper published in 2016, states that spend more on economic development subsidies spend less on public services.

“In particular, the main findings indicate that incentives expenditures are associated with decreases in expenditures on productive public goods such as education, health and human services, sanitation and utilities,” Wang Jia, the author of the paper, wrote.

“Empirical evidence shows that incentives do not seem to contribute to more spending on productive public goods and services after two years in the future. This contradicts the claims that incentives lead to beneficial growth in the economy. Or if growth occurs, it does not lead to expansion of spending on productive public goods and services.”

Mozena said these deals in a constrained fiscal environment could leave local taxpayers stuck with the bill.

“This is absolutely the wrong time to be making these sorts of deals,” Mozena said. “With all of the pressures on state and local budgets, this is absolutely the wrong time to be cutting some taxpayers special breaks or handing out money that states and local governments don’t need to.”

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